NOTICE OF THE 157TH
ORDINARY GENERAL MEETINGOF SHAREHOLDERS
Date and Time

Place

Thursday, June 28, 2018,at 10 a.m. Japan time

Toranomon Hills Forum Hall B
Toranomon Hills Mori Tower 4F
23-3, Toranomon 1-chome, Minato-ku, Tokyo, JapanCONTENTS‌NOTICE OF ORDINARY GENERAL MEETINGOF SHAREHOLDERS������������������������������������������������ 1‌Reference Documents for the General Meetingof Shareholders������������������������������������������������������������ 4

Proposal 1: Distribution of Surplus
Proposal 2: ‌Election of Two (2) Directors
Attached Documents

Business Report�������������������������������������������������������������� 7
Consolidated Financial Statements���������������������� 27
Non-consolidated Financial Statements������������� 30
Audit Report������������������������������������������������������������������� 33

Stock Exchange Code 8050

[Translation]
Note: This document has been translated from a part of the Japanese original for reference purposes
only. In the event of any discrepancy between this translated document and the Japanese original, theoriginal shall prevail.

(Stock Exchange Code 8050)
June 8, 2018

To Shareholders with Voting Rights:

Yoshinobu Nakamura
President

SEIKO HOLDINGS CORPORATION
5-11, Ginza 4-chome, Chuo-ku, TokyoNOTICE OF
THE 157TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
Dear Shareholders:
We would like to express our appreciation for your continued support and patronage.
You are cordially invited to attend the 157th Ordinary General Meeting of Shareholders of SEIKO HOLDINGSCORPORATION (the “Company”). The meeting will be held for the purposes described below.
If you are unable to attend the meeting, you can exercise your voting rights in writing, or via the Internet. Please
review the attached Reference Documents for the General Meeting of Shareholders, and exercise your voting rights ineither of the methods described on pages 2 and 3 by 6 p.m. on Wednesday, June 27, 2018, Japan time.
1. Date and Time: Thursday, June 28, 2018, at 10 a.m. Japan time
2. Place: ‌Toranomon Hills Forum Hall B
Toranomon Hills Mori Tower 4F 23-3, Toranomon 1-chome, Minato-ku, Tokyo, Japan
3. Meeting Agenda:
Matters to be reported:

The Business Report, Non-consolidated Financial Statements, Consolidated
Financial Statements and results of audits by the Accounting Auditor and the Boardof Corporate Auditors of the Consolidated Financial Statements, for the Company’s
Fiscal Year Ended on March 31, 2018 (from April 1, 2017 to March 31, 2018)

Proposals to be resolved: Proposal 1: Distribution of Surplus
Proposal 2: Election of Two (2) Directors
4. Decisions Concerning Convocation(1) Should you choose to exercise your voting rights via a proxy, you may designate a shareholder other thanyourself, who is entitled to vote with respect to the Company, as your proxy. In such case, please have theproxy submit a power of attorney together with your Voting Rights Exercise Form to the reception desk.
(2) Should you diversely exercise your voting rights, please notify the Company in writing to this effect, together
with the reason thereof, at least three days prior to the date of the General Meeting of Shareholders.

1

NOTICE OF THE 157TH ORDINARY GENERAL MEETING OF SHAREHOLDERSRegarding disclosures on the Internet
 mong the documents to be provided with this Notice, the following items are posted on the Company’s website (at the URL
Aprovided below) via the Internet pursuant to laws and regulations and Article 16 of the Articles of Incorporation of theCompany; therefore, they are not included in the documents attached hereto:(i) “Notes to Consolidated Financial Statements” for Consolidated Financial Statements(ii) “Notes to Non-Consolidated Financial Statements” for Non-Consolidated Financial Statements
The Consolidated Financial Statements and Non-Consolidated Financial Statements that the Board of Corporate Auditors andthe Accounting Auditor have audited contain the Notes to Consolidated Financial Statements and Notes to Non-Consolidated
Financial Statement as posted on the Company’s website.
Should any of the Reference Documents for the General Meeting of Shareholders, Business Report, Consolidated Financial
Statements or Non-consolidated Financial Statements require revisions, the revised versions will be posted on the Company’s
website (at the URL provided below).

The Company’s Website

English: https://www.seiko.co.jp/en/ir/, Japanese: https://www.seiko.co.jp/ir/

Notice regarding Exercise of Voting Rights
Voting rights may be exercised by any of the means described below. Shareholders are requested to review theReference Documents for the General Meeting of Shareholders before exercising voting rights.

Shareholders attending the meeting in person
Date and time of
the meeting

Thursday, June 28, 2018, at 10 a.m.,Japan time

When attending the meeting, please submit the enclosed Voting Rights Exercise Format the reception desk. Please also bring this convocation notice.

Shareholders not attending the meeting in person
Exercise of voting rights in writing (by mail)DeadlineMust reach the Company by 6 p.m. on Wednesday,June 27, 2018, Japan time

Please indicate your votes for or against the proposals on the enclosed Voting Rights
Exercise Form and return the same so that it is received by the deadline for exercising
voting rights.

Exercise of voting rights by electromagnetic means (via the Internet)
DeadlineBy 6 p.m. on Wednesday, June 27, 2018, Japan time

Please refer to the Notice regarding Exercise of Voting Rights through the Internet
provided on the next page, access the Company’s designated voting website (https://soukai.mizuho-tb.co.jp/), and enter your votes for or against the proposals inaccordance with the screen instructions.
NOTICE OF THE 157TH ORDINARY GENERAL MEETING OF SHAREHOLDERS

2

Notice regarding Exercise of Voting Rights via the Internet

1

Exercise of voting rights via the Internet(1)	‌Voting rights may be exercised through the Company’s designated voting website (at the URL provided below),in lieu of exercising voting rights in writing. When voting via the Internet, you should log in by using your voting
rights exercise code and password displayed on the right-hand side of the enclosed Voting Rights Exercise
Form, and enter your votes in accordance with the screen instructions. Please note that you will be required tochange your password when you log in for the first time to ensure security.

Voting Website

https://soukai.mizuho-tb.co.jp/(2)	‌The deadline for exercising voting rights is 6 p.m. on Wednesday, June 27, 2018, Japan time, and votes must
be entered by the above deadline. Please exercise your voting rights promptly.
(3)	‌If you exercise a voting right both in writing and via the Internet, the vote submitted through the Internet will betaken as the valid vote. If you exercise a voting right multiple times via the Internet, the vote last submitted will
be taken as the valid vote.
(4)	‌The password (including the password that may be changed by a shareholder) is valid only for this general
meeting of shareholders. A new password will be issued at the time of convocation of the next general meetingof shareholders.
(5) Please note that shareholders are responsible for any expenses incurred for accessing the Internet.
Notes The password is a means to verify the identification of the person casting the vote. Please note that the Company will not ask
for your password.
If a wrong password is entered a certain number of times, it will be locked and may no longer be used. If you have had yourpassword locked, please take the procedures in accordance with the screen instructions.
Although the operationability of the voting website is checked with a general Internet access device, you may not be able touse the voting website depending on the device you use to access the website.

2

Contact information
If you have any questions, please contact Stock Transfer Agent Department, Mizuho Trust & Banking Co., Ltd.,the shareholder register administrator.

Inquiries regarding the operation of the voting website:
Toll free, accessible only in Japan

0120-768-524 (9:00 - 21:00 on weekdays)

Other inquiries regarding administration of shares:
Toll free, accessible only in JapanFor
reference

30120-288-324 (9:00 - 17:00 on weekdays)

Institutional investors may use the electronic proxy voting platform operated by ICJ, Inc.

NOTICE OF THE 157TH ORDINARY GENERAL MEETING OF SHAREHOLDERS

Reference Documents for the General Meeting of Shareholders
Agenda of the Ordinary General Meeting of Shareholders
Proposal 1

Distribution of Surplus

The Company has a policy to provide consistent dividend payments while considering the consolidated business results
for the year under review and taking into account the enrichment of internal reserves to strengthen our managementfoundation. Based on this policy, with regard to the year-end dividend for the fiscal year under review, we hereby
propose to distribute the surplus as described below.

Matters related to the year-end dividend
Type of dividend assets
Cash
Allotment of dividend property to shareholders and its total amountAmount per common share: 37.5 yen
Total amount of dividends: 1,550,449,238 yen
Note: ‌The Company conducted a share consolidation by which five common shares have been consolidated into one share, effective
October 1, 2017. As the Company has already paid an interim dividend of 7.5 yen per share with a record date of September
30, 2017 prior to the share consolidation, when the annual dividend for the 157th fiscal year is converted on the basis prior to
the share consolidation, it is equivalent to 15 yen per share, consisting of an interim dividend of 7.5 yen and a year-end dividendof 7.5 yen. When the annual dividend for the 157th fiscal year is converted on the basis subsequent to the share consolidation,
it is equivalent to 75 yen per share, consisting of an interim dividend of 37.5 yen and a year-end dividend of 37.5 yen.

Effective date of distribution of surplus
June 29, 2018

Reference Documents for the General Meeting of Shareholders

4

Proposal 2

Election of Two (2) Directors

The Company proposes the election of two (2) Directors, consisting of one (1) Director to replace Mr. Akio Naito,
Director, who will retire from office by voluntary resignation at the closing of this General Meeting of Shareholders, andone (1) additional Director to increase the number of Directors to further enhance and reinforce the management system.
The terms of office of the newly elected Directors shall be coterminous with the expiration of the terms of office ofother incumbent Directors in accordance with the provisions of the Articles of Incorporation of the Company.
The candidates for Director are as follows.

1

Kazuhiko Sakamoto (November 6, 1965)

Newly Appointed

Number of shares of the Company held
100
Career, positions, responsibilities, and significant concurrent positions
April 1988
June 1994
April 2007
June 2010
July 2012
June 2015
March 2017

Joined the Company
Seconded to SEIKO Hong Kong Ltd.
General Manager, Finance & Accounting Department of WAKO Co., Ltd.
General Manager, Corporate Strategy & Planning Department of WAKO Co., Ltd.
Senior Vice President of WAKO Co., Ltd.
General Manager, Corporate Strategy & Planning Department of the Company
General Manager, Finance & Accounting Department of the Company (to present)

Reasons for nomination as candidate for director
The Company nominates Mr. Kazuhiko Sakamoto as a candidate for Director, expecting him to perform full functions as a Board memberin the decision-making to execute important business and supervise the other Directors’ execution of their duties by utilizing his wealth ofexperience and achievement, including the following: (i) having been engaged mainly in finance & accounting, and corporate strategy &planning as a member of the Company Group since joining the Company; and (ii) and currently serving as the General Manager, Finance &Accounting Department of the Company and being involved in the management of its group companies.

5

Reference Documents for the General Meeting of Shareholders

2

Tetsu Kobayashi (January 17, 1960)

Newly Appointed

Number of shares of the Company held
4,000
Career, positions, responsibilities, and significant concurrent positions
Joined Daini Seikosha Co., Ltd. (currently Seiko Instruments Inc.)
Executive General Manager, Corporate Strategy Division of Seiko Instruments Inc.
General Manager, Watch Movement Division of Seiko Instruments Inc.
Senior Vice President of Seiko Instruments Inc.
Executive General Manager, Watches Business Headquarters of Seiko Instruments
Inc.
October 2010 Director of Seiko Instruments Inc.
October 2014 President of Seiko Precision Inc.
November 2017 Executive General Manager, Corporate Technology Division of Seiko Instruments Inc.
(to present)
February 2018 Chief Executive Vice President of Seiko Instruments Inc.
April 2018
President of Seiko Instruments Inc. (to present);
Director of Seiko Precision Inc. (to present)
April 1982
March 2005
June 2007
March 2008
July 2009

Reasons for nomination as candidate for director
Mr. Tetsu Kobayashi has been engaged in planning, development, production, and sales in the Watches Business and the Electronic
Devices Business of Seiko Instruments Inc. as a member of the Company Group since joining the Company, and has a broad range ofknowledge and experience regarding its businesses. The Company nominates Mr. Kobayashi as a candidate for Director, expecting him
to perform full functions as a Board member in the decision-making to execute important business and supervise the other Directors’
execution of their duties by utilizing his wealth of experience and achievement, including currently being engaged in management direction
as President of Seiko Instruments Inc.
(Note) There is no special relationship of interest between the Company and each candidate for Director.

[For reference]<Decision process of the nomination of the Director candidates>
In order to procure the objectivity and transparency of the process to nominate officer candidates and to determine
compensation for officers, the Company established the Corporate Governance Committee, a majority of the membersof which are outside officers, as an advisory body for the Board of Directors.
The nomination of the Director candidates listed in Proposal 2 was determined by the Board of Directors after being
deliberated on by that committee.

Reference Documents for the General Meeting of Shareholders

6

Attached Documents

Business Report for the Fiscal Year Ended March 2018 (From April 1, 2017 To March 31, 2018)

Matters related to current status of the Corporate Group(1) Business developments and results
During the fiscal year ended March 31, 2018, in theaffected by the exclusion of the semiconductor businessworld economy, a balanced economic recovery

from the scope of consolidation. On an overall

continued in both developed and emerging countries,

consolidated basis, domestic net sales came to 143.0

due to factors including steady performance in the U.S.

billion yen (a year-on-year increase of 6.1%), andand European economies, continued stable growth ofoverseas net sales were 125.4 billion yen (a year-on-year

the Chinese economy, and accelerated growth in Asian

increase of 2.6%). Overseas net sales comprised 46.7%

economies. In the meantime, uncertainty is increasing inof net sales overall.

the global economic outlook stemming from higher

In terms of income, operating income increased byinterest rates and growing protectionism in the U.S. and3.3 billion yen compared to the previous fiscal year toother countries.

10.8 billion yen (a year-on-year increase of 44.7%), due

The Japanese economy is picking up gradually into an increase in net sales and other factors. Ordinary

response to a recovery in export and production

income increased by 4.2 billion yen from the previous

activities, followed by an improvement in personal

fiscal year to become 10.9 billion yen (a year-on-year

consumption and the employment and income situation.

increase of 63.5%), as a result of improvements in non-

However, there are grounds for concern regarding both

operating income and expenses due to the improved

future trends in an unstable stock market and foreign

investment profit and loss by application of the equity

exchange rates, and the impact of geopolitical risks suchmethod and a decrease in interest expenses. A gainas the situation in North Korea.

from the transfer of the semiconductor business of 9.3
billion yen was posted as extraordinary income, and7

For the fiscal year ended March 31, 2018, the Company

transfers to provision for loss on lease agreements of 2.1

reported consolidated net sales of 268.5 billion yen, abillion yen, business structure improvement expenses ofyear-on-year increase of 11.4 billion yen, or 4.4%. On a

1.9 billion yen and others were posted as extraordinary

per-segment basis, sales under the Watches Business,losses. As a result, profit attributable to owners of parent

the Systems Solutions Business and Others increased

minus income taxes and profit attributable to non-year on year, while sales under the Electronic Devices

controlling interests came to 11.5 billion yen (a year-on-

Business declined compared to the previous fiscal year

year increase of 6.1 billion yen, or 114.0%).

Business ReportResults for each segment are as follows.

Watches Business
Composition of net sales

Net sales (Billions of yen)

1,345

1,401

Operating income (Billions of yen)

76

79

P ro s p e x w e re a l s o u p y e a r- o n - y e a r d u e t o t h e
introduction of new products. On a distribution channel
basis, sales to independent stores, outlets and via theInternet rose compared to the previous fiscal year. On

51.7%

the overseas front, e-commerce sales were favorable in
China, and sales were strong for Asia and Europe, with
FY2016FY2017FY2016FY2017*The above ratio was calculated based on values after the adjustment of intersegment
sales or transfers.

Net sales under the Watches Business came to 140.1
billion yen, a year-on-year increase of 5.5 billion yen, or4.1%. In Japan, the independently branded Grand Seiko
performed strongly, and sales of the Presage andthe effects of foreign exchange rates being one of thefactors. Sales of watch movements were up year-onyear as market conditions began to recover for someproducts.
With regard to income, the increase in net sales
resulted in 7.9 billion yen in operating income (a year-onyear increase of 3.8%).

Electronic Devices Business
Composition of net sales

Net sales (Billions of yen)

840

Operating income (Billions of yen)

57

818
38

29.1%

Net sales under the Electronic Devices Business cameto 81.8 billion yen (a year-on-year decrease of 2.2 billion
yen, or 2.6%). This decline is partly because thesemiconductor business was excluded from the scopeof consolidation in January 2018. However, operating
income increased by 1.9 billion yen from the previous

FY2016FY2017FY2016FY2017*The above ratio was calculated based on values after the adjustment of intersegment
sales or transfers.

fiscal year to become 5.7 billion yen (a year-on-yearincrease of 52.1%), due to the strong performance of
products such as high performance metal products forsemiconductor manufacturing facilities and thermal
printers for POS terminals.
Business Report8Systems Solutions Business
Composition of net sales

Net sales (Billions of yen)

Operating income (Billions of yen)

16

274

to 27.4 billion yen (a year-on-year increase of 35.1%),
and operating income to 1.6 billion yen (a year-on-year

12

202

Net sales under the Systems Solutions Business cameincrease of 25.1%). In addition to the acquisition of IIM

10.0%

C o r p o r a t i o n t h a t o ff e r s c o m p u t e r- p e r f o r m a n c emanagement software, sales were favorable for some
FY2016FY2017FY2016FY2017*The above ratio was calculated based on values after the adjustment of intersegment
sales or transfers.

businesses such as mobile wireless telecommunications
devices for automobiles and for home security, andnetwork-related devices mainly for broadcasting andtelecommunications.

OthersComposition of net sales

Net sales (Billions of yen)

270

Operating income (Billions of yen)

5278

year-on-year increase of 3.0%), and operating income to
0.5 billion yen (a year-on-year increase of 81.0%).
Among segments included in Others, net sales grew

3

9.2%

Net sales under Others amounted to 27.8 billion yen (ayear-on-year for the Wako Business, while those for the
Clock Business were down from the previous fiscal year.
FY2016FY2017FY2016FY2017*The above ratio was calculated based on values after the adjustment of intersegment
sales or transfers.

9

Business Report(2) Issues that need to be addressed by the Corporate Group
Sixth Medium-Term Management Plan (from the fiscal year ended March 31, 2017 through the fiscal year ending March 31, 2019)
The Company formulated and is promoting the Sixth Medium-Term Management Plan beginning in the fiscal year ended
March 31, 2017, as described below.

Long-term vision

Reinforcing profitability and investment for growth

The Seiko Holdings Group has established its long-term(i) The Watches segment will be steered toward further

vision of what the Group aims to be 10 years in theg ro w t h a s t h e G ro u p ’s c o re b u s i n e s s ( p ro f i t

future, based on the Group slogan, ‘SEIKO Moving

expansion)

Ahead, Touching Hearts’.

(ii) The Electronic Devices segment will generate profits
by focusing management resources on core businessWe aim to be a trend-setting and innovative global

sectors (profitability improvement)

g ro u p t h a t s h a re s e x c i t e m e n t w i t h a l l i t s(iii) The Systems Solutions Business will reinforce its

stakeholders around the world by providing

business foundation as a third mainstay businessproducts and services that exceed the highest
expectations of our customers.

(profitability reinforcement)(iv) Other businesses will maintain their stable profit
constitution (stabilization of profitability)

Basic policy

Reinforcing the management foundation

The Company will “reinforce profitability and investment(i) Reinforcing corporate communication

for growth,” and “reinforce the management foundation”(ii) Continuing the basic policy for capital and financial

to become a highly profitable group centered on the
Watches segment.

measures(iii) Reinforcing corporate governance(iv) Reinforcing organizational and group functions, andcontinuing the basic policy for personnel measures

Business Report10Target figures under the Sixth Medium-Term Management Plan(i) Consolidated income forecast(Billions of yen)

ActualActualMedium-Term Management Plan

FY2016FY2017FY2018

257.1

268.5

310

Operating income

7.4

10.8

17

Ordinary income

6.6

10.9

18

Net income attributable to owners of parent

5.3

11.5

12.5

Net sales(ii) Net sales by segment

(Billions of yen)

ActualActualMedium-Term Management Plan

FY2016FY2017FY2018

134.5

140.1

190

Electronic Devices Business

84

81.8

75

Systems Solutions Business

20.2

27.4

25

27

27.8

30

257.1

268.5

310

Watches Business

OthersConsolidated total(iii) Operating income by segment

11(Billions of yen)

ActualActualMedium-Term Management Plan

FY2016FY2017FY2018Watches Business

7.6

7.9

17

Electronic Devices Business

3.8

5.7

2.5

Systems Solutions Business

1.2

1.6

1.5

Others

0.3

0.5

1

Consolidated total

7.4

10.8

17

Business Report

(iv) Balance sheet items

(Billions of yen)

ActualActualMedium-Term Management Plan

FY2016FY2017FY2018

Total assets

328.8

307.5

340

Net assets

107.1

105.1

120

Equity capital ratio

29.8%

33.8%

35%

Net interest-bearing liabilities

101.2

79.1

75

‌
Developmentsin the fiscal year ended March
31, 2018(i) Reinforcing profitability and investment for growth
In the Watches Business, the Company worked toincrease profit aiming for further growth as a corebusiness of the Group. In Japan, the policy to makethe Grand Seiko an independent brand and the effort
to expand high-end products proceeded successfully,
resulting in a further increase in sales; also, thePresage and PROSPEX brands significantly grew
supported by the strategy to intensify the global
brands and the expanded market demand formechanical watches. On the overseas front, theCompany focused on the sale of global brands andsuccessfully increased the sales thereof. Particular in
China, the awareness of and expectations for SEIKO
were raised thanks to favorable e-commerce sales,and sales for European and Asian markets also
remained strong. The Company will continue
investments to improve the value of brands centeredon the global brands with a goal of “developing
SEIKO to be a true global brand aiming for 2020 andbecoming the leading company in the global watch
market”, and strongly promote measures to achieve
the target figures for the last year of the Medium-Term
Management Plan.

In the Electronic Devices segment, the Company
sought to generate profit and improve profitability by
distributing its management resources mainly to thecore business. As a result of the organization andimprovement of unprofitable businesses that theCompany has been working on for several years, theprofitability of not only the semiconductor businessbut also other businesses has increased. For the last
fiscal year, the equity method will apply to thesemiconductor business and the said business will be
excluded from the scope of consolidation; however,
the Company will ensure stable profitability from highperformance metal products for semiconductor
manufacturing facilities, thermal printers for POS
terminals and ink-jet printer head products and aim toachieve the target figures for the last year of the plan.
In the Systems Solutions Business, the Company
reinforced the business foundation as the third corebusiness and made efforts to reinforce profitability. In
addition to the steady performance of the existing
businesses such as mobile wirelesstelecommunications devices for automobiles and forBusiness Report12home security, and network-related devices mainly forbroadcasting and telecommunications, due to theacquisition of IIM Corporation that offers computerperformance management software, net sales in thisbusiness are increasing. The sales of Stock-type
Business with potential for sustainable profitability
such as maintenance of devices and systems, andsoftware services mainly for payment-relay centers or
performance management also increased, and bothsales and operating income achieved the target
figures for the last year of the plan ahead of schedule.
In the businesses included in Others, the Company
made efforts to ensure stable profitability in order tocontinue stable corporate earnings. The Clocks
Business, the Wako Business and the System Clocks
Business all became profitable. The Company will
work to stabilize profitability and cope with issues toachieve the target figures for the last year of the plan.
(ii) Reinforcing the management foundation
In order to reinforce corporate communication, theCompany continuously engaged in PR and CSR
activities through sports and music based on theGroup slogan “SEIKO Moving Ahead, Touching
Hearts”. The Company intensified IR activities andenriched constructive dialogue with its shareholders
and investors, positively aiming at sustainable growthand mid- and long-term improvement of corporate
value.
Regarding the policy for capital measures, theCompany will distribute an interim dividend of 7.5 yen

and a year-end dividend of 37.5 yen per share(corresponding to an annual dividend of 15 yen before
the share consolidation) aiming for continuous andstable dividends, which is a basic policy. While thecapital adequacy ratio improved to 33.8%, theCompany will further improve the equity capital toreach 35%, the target figure for the last year of theplan. Regarding the policy for financial measures, theCompany made efforts to reduce interest-bearing
liabilities, and as a result, net interest-bearing liabilitiesof 79.1 billion yen were recorded. The Company will
advance further reduction efforts aiming at 75.0 billion
yen, which is the target figure for the last year.
In order to reinforce corporate governance, theCompany strived to build an effective corporate
governance system through a corporate governancecommittee a majority of whose members are outside
officers, to reinforce its internal systems.
In order to reinforce organizational and groupfunctions, the Company led the planning for theGroup’s management policies or implementation
strategies, and reinforced their support for theoperating companies, resulting in an improvement of
profitability for the businesses at issue, and structuralreform within the Group. In order to develop various
human resources, which is a basic personnel policy,
the Company will raise global human resources andexecutive candidates who will lead the next
generation and aggressively promote measures tofurther all employees’ active participation and provide
a working environment that enables employees towork in very diverse ways.

(3) Financing
There are no matters of special note.

(4) Capital expenditures
The Company invested 768 million yen in the Watches Business and 3,976 million yen in the Electronic Devices
Business primarily to reinforce and renew manufacturing and other facilities, and 987 million yen in the Systems
Solutions Business primarily to acquire software for marketing purposes, respectively.
13

Business Report(5) Trends in assets and profit/loss
The operating results and assets in the fiscal year ended March 31, 2018 and the past three years are as follows.
(i) Consolidated 
Item

FY2014

Net sales(Millions of yen)

Ordinary income(Millions of yen)

Net income attributable toowners of parent (Millions of yen)
Net income per share(Yen)

Total assets(Millions of yen)

Net assets(Millions of yen)

Net assets per share(Yen)

Net sales(Billions of yen)

FY2015

2,967

2,571

FY2017

293,472

296,705

257,115

268,529

12,373

11,8796,671

10,911

21,77812,142

5,392

11,541

105

59

26

280

333,701

329,115

328,857

307,590

92,589102,692

107,161

105,170

438

457

476

2,524

Ordinary income

123
2,934

FY2016(Billions of yen)

118

109

Profit attributable to owners of parent(Billions of yen)

217

2,685
66

115

121
53

FY2014FY2015FY2016

Total assets

FY2017(Billions of yen)

3,337

3,291

3,288

3,075

FY2014FY2015FY2016FY2017FY2014FY2015FY2016

Net assets

925

FY2014FY2017FY2014FY2015FY2016FY2017(Billions of yen)

1,026

FY2015

1,071

1,051

FY2016FY2017

Business Report14

(ii) Non-consolidated
Item

FY2014

Operating revenue(Millions of yen)

Ordinary income(Millions of yen)

Net income(Millions of yen)

Net income per share(Yen)

Total assets(Millions of yen)

Net assets(Millions of yen)

Net assets per share(Yen)

FY2015FY2016FY2017

9,972

11,984

10,361

11,237

1,730

4,393

2,324

3,308

14,953

3,370

3,271

3,763

72

16

16

91

158,703

147,145

161,853

179,469

56,26754,964

59,34656,036

272

266

288

1,359

Note 1 Net income per share is calculated on the basis of the average number of shares during the fiscal year.
Note 2 ‌Treasury shares are indicated as a deduction item on net assets, and the values of net income per share and of net assets are calculated bydeducting the number of treasury shares from the average number of shares during the fiscal year and the total number of issued shares, respectively.
Note 3 ‌The Company conducted a share consolidation by which five common shares have been consolidated into one share as of October 1, 2017. Net
income per share and net assets per share are calculated as if said share consolidation was performed at the beginning of the current fiscal year.

Operating income(Billions of yen)

119
103

99

Ordinary income(Billions of yen)

Net income(Billions of yen)

149

112

43

33
23
17

FY2014FY2015FY2016

Total assets

1,587

FY201415

Business Report

FY2017(Billions of yen)

1,471

FY20151,618

FY2016FY2014FY2015FY2016

Net assets

FY2017(Billions of yen)

1,794

562

549

FY2017FY2014FY2015593

560

FY2016FY2017FY201433

32

37

FY2015FY2016FY2017

(6) Status of major parent companies and subsidiaries(i) Relationship with parent companies
Not applicable.
(ii) Status of major subsidiaries
Company Name

Paid-in Capital

Capital Contribution Ratio

SEIKO WATCH CORPORATION

5,000 million yen

100.0%

Sales of watches

Details of Major Business Activities

CRONOS INC.

200 million yen

100.0%(*)

Sales of watches and other products

SEIKO Corporation of America

US$111,000

100.0%(*)

Sales of watches and other products

SEIKO Hong Kong Ltd.

HK$129,300,000

100.0%(*)

Sales of watches and other products

Seiko Instruments Inc.

9,756 million yen

100.0%

Manufacturing and sales of precision instruments,
electronic devices, and other products

Morioka Seiko Instruments Inc.

1,000 million yen

100.0%(*)

Manufacturing watches

Seiko Instruments (H.K.) Ltd.

HK$128,700,000

100.0%(*)

Manufacturing and sales of precision instruments,
electronic devices, and other products

Seiko Instruments Singapore Pte. Ltd.

S$32,288,000

100.0%(*)

Manufacturing and sales of precision instruments,
electronic devices, and other products

SEIKO Solutions Inc.

500 million yen

100.0%Development, sales, etc. of informationand telecommunication systems, etc.

Note: Asterisked ratios in the “Capital Contribution Ratio” column include indirect holdings.

(7) Major business segments of the Corporate GroupThe Company is a holding company. The details of business activities, main merchandise and finished goods of eachbusiness are as follows:Business Segment
Watches BusinessElectronic Devices Business

Details of Business Activities

Main merchandise and products

Manufacturing and sales

Watches, watch movements

Manufacturing and sales

Quartz crystals, micro batteries and materials, printers, hard disk drive
components

Systems Solutions Business

Manufacturing and sales

Wireless communication equipment, information network systems, data services

OthersManufacturing, sales andother activities

Clocks, high-end jewelry, apparel, fashion accessories, systems clocks,
othersBusiness Report16

(8) Major business locations of the Corporate GroupThe Company has its headquarters in Chuo-ku, Tokyo, and the major location of each business is as follows:Business Segment

Location

Watches Business

Chuo-ku, Tokyo

Electronic Devices Business

Mihama-ku, Chiba-shi, Chiba

Systems Solutions Business

Mihama-ku, Chiba-shi, Chiba

OthersChuo-ku, Tokyo(9) Status of employees of the Corporate GroupThe number of employees of the Company and its consolidated subsidiaries is 12,033 (a decrease of 1,032 from theprevious fiscal year-end).

(10) Major lenders and amounts borrowed(Millions of yen)

Lenders

17

Outstanding Balance of Loans

Mizuho Bank, Ltd.

40,574

Sumitomo Mitsui Banking Corporation

20,778

Aozora Bank, Ltd.

12,842Business ReportMatters related to the Company shares

Breakdown by type of shareholder
Securities companies(1.3%)(1) Total number of shares authorized to be issued
		
149,200,000 shares(2) Total number of shares issued and outstanding				Financial institutions(19.4%)

Other domestic corporations(18.1%)(including 58,948 treasury shares)

41,404,261 shares

Foreign corporations, etc.
(19.6%)(3) ‌Number of shareholders at the end of the
fiscal year ended March 31, 2018		

12,916

Individuals and others(41.6%)(4) Major shareholders (top 10)
Name

Number of shares held

Percentage of shares held

(shares)(%)

Sanko Kigyo K.K.

4,735,500

11.5

Etsuko Hattori

3,613,908

8.7

Shinji Hattori

2,279,289

5.5

The Dai-ichi Life Insurance Company, Limited

1,800,000

4.4

Hideo Hattori

1,620,855

3.9

The Master Trust Bank of Japan, Ltd. (Trust Account)

1,029,400

2.5Japan Trustee Services Bank, Ltd. (Trust Account)993,500

2.4

STATE STREET LONDON CARE OF STATE STREET BANK AND TRUST, BOSTONSSBTC A/C UK LONDON BRANCH CLIENTS- UNITED KINGDOM

967,500

2.3

SHIMIZU CORPORATION

744,200

1.8

FUJI BUILDING Co., Ltd.

671,400

1.6

Note: Percentages of shares held have been rounded to one decimal place.

(5) Other important matters related to shares
Effective October 1, 2017, the Company changed the number of unit shares from 1,000 shares to 100 shares andconducted a share consolidation by which five common shares have been consolidated into one share.

Matters related to stock acquisition rights issued by the Company
Not applicable.
Business Report

18

Matters related to officers(1) Name, etc. of Directors and Corporate Auditors (as of March 31, 2018)
Name

Shinji Hattori

Position and responsibility at the Company
Chairman & Group CEO

Significant concurrent positions at other entities
Chairman & CEO of SEIKO WATCH CORPORATION
Outside Director of JAPAN POST INSURANCE Co., Ltd.

Yoshinobu Nakamura President
Akihiro Okuma

Executive Director in charge of Secretariat,
Human Resources, General Affairs, IT Planning,and Long-Term Management & Technology Strategy

Hiromi Kanagawa

Director in charge of Public Relations, Sports
Branding, and Corporate Culture
General Manager of the Corporate Culture Department

Shimesu Takizawa

Director in charge of Finance & Accounting, Corporate
Strategy & Planning, and Legal & Intellectual Property
General Manager of the Corporate Strategy& Planning Department

Shuji Takahashi

Director in charge of Watches BusinessPresident & COO & CMO of SEIKO WATCH CORPORATION

Akio Naito

Director

Director, Senior Executive Vice President of SEIKO WATCH CORPORATION
Chairman, President & CEO of SEIKO Corporation of America

Shuntaro Ishii

Director

Representative Director, Senior Executive Vice President of
Seiko Instruments Inc.

Carsten Fischer

Director

Nobuhiro Endo

Director

Chairman of the Board (Representative Director) of NEC Corporation
Outside Director of JAPAN POST INSURANCE Co., Ltd.

Seiichi MikamiStanding Corporate Auditor

Outside Corporate Auditor of OHARA INC.

Haruhiko TakagiStanding Corporate Auditor

Yoshiaki Yamauchi Corporate Auditor
Yoshiro Aoki

Corporate Auditor

Tomoyasu Asano

Corporate Auditor

Director, Senior Executive Vice President of SEIKO Solutions Inc.
Outside Director of OHARA INC.

Director, Executive Vice President of Seiko Instruments Inc.

Outside Audit & Supervisory Board Member of STANLEY ELECTRIC CO., LTD.
Certified public accountant
President of the Cardiovascular InstituteOutside Auditor of Tokyu Fudosan Holdings Corporation

Note 1: Messrs. Carsten Fischer and Nobuhiro Endo, Directors, are outside directors set forth in Article 2, item 15 of the Companies Act.
Note 2: ‌Messrs. Yoshiaki Yamauchi, Yoshiro Aoki, and Tomoyasu Asano, Corporate Auditors, are outside company auditors set forth in Article 2, item 16 of
the Companies Act.
Note 3: ‌The Company has reported to the Tokyo Stock Exchange Messrs. Carsten Fischer and Nobuhiro Endo, Directors, and Mr. Yoshiaki Yamauchi,
Corporate Auditor, as independent officers.

19

Business ReportNote 4: ‌Messrs. Seiichi Mikami and Haruhiko Takagi, Standing Corporate Auditors, have experience as officers in charge of Finance & Accounting in the
Company’s group companies and have reasonable-degrees of knowledge about finance and accounting. Mr. Yoshiaki Yamauchi, Corporate Auditor,
is a certified public accountant, and has reasonable-degree of knowledge about finance and accounting.
Note 5: ‌Changes in significant concurrent positions at other entities of Directors and Corporate Auditors of the Company during and after this fiscal year are
as follows:(1) Mr. Akihiro Okuma, Executive Director, assumed office of Director, Executive Vice President of Seiko Instruments as of April 1, 2018.
(2) ‌Mr. Shuntaro Ishii, Director, retired from office of Representative Director, Senior Executive Vice President of Seiko Instruments Inc. as of April 1,
2018.
(3) Mr. Carsten Fischer, Outside Director, retired from Outside Director of Kate Spade & Company as of July 11, 2017.
(4) Mr. Tomoyasu Asano, Outside Corporate Auditor, assumed office of President of the Cardiovascular Institute as of June 30, 2017.
Note 6: ‌The Company has a relationship (product transactions) with NEC Corporation at which Mr. Nobuhiro Endo, Outside Director, has a concurrent
position. The scale of such transactions is extremely small compared with the business scale of both companies.
Note 7: As of April 1, 2018, positions and responsibility of Directors at the Company changed as follows:
Position

Name

Responsibility at the Company

Executive Director

Akihiro Okuma

Executive Director

Shuntaro Ishii

In charge of Legal & Intellectual Property and Long-Term Management & Technology Strategy

Shimesu Takizawa

In charge of Finance & Accounting, and Corporate Strategy & Planning
General Manager of the Corporate Strategy & Planning Department

Director

In charge of Secretariat, Human Resources, General Affairs, and IT Planning(2) Overview of agreements limiting liability
The Company entered into an agreement with each of Messrs. Carsten Fischer and Nobuhiro Endo, Outside Directors,
and Messrs. Yoshiaki Yamauchi, Yoshiro Aoki, and Tomoyasu Asano, Outside Corporate Auditors, to limit liability fordamages set forth in Article 423, paragraph 1 of the Companies Act, pursuant to Article 427, paragraph 1 thereof. The
upper limit of liability for damages under the agreement shall be that stipulated by laws. The limitation on liability ispermitted only when such Outside Directors or Outside Corporate Auditors have acted in good faith and without grossnegligence in performing their duties that caused the liability.

(3) Amount of compensation, etc. for Directors and Corporate Auditors
Classification

Number of payees

Director
Corporate Auditor
Total

14
5
19

Amount of compensation, etc.

Remarks

228 million yen
68 million yen
296 million yen

Note 1: ‌The foregoing includes one Director who retired from his office as of April 6, 2017 and three Directors who retired from their offices at the close of the156th Ordinary General Meeting of Shareholders held on June 29, 2017.
Note 2: ‌The amount of compensation, etc. above does not include the expenses recorded for the fiscal year ended March 31, 2018 of performance-based
bonuses of 38 million yen (payees: 6 Executive Directors).
Note 3: ‌The amount of compensation, etc. above does not include the expenses recorded for the fiscal year ended March 31, 2018 of performance-based
share compensation of 18 million yen (payees: 6 Executive Directors).

Business Report20

(4) Matters related to outside officers
Main activities of outside officers
Classification

Name

Main activities

Director

Carsten Fischer

He attended all of the 13 Board of Directors meetings held during the fiscal year ended
March 31, 2018, and made necessary remarks on discussion items and deliberation items,
mainly based on his broad experience through managing global companies and as amarketing expert.

Director

Nobuhiro Endo

He attended all of the 10 Board of Directors meetings held after his assumption of office of
Director in June 2017, and made necessary remarks on discussion items and deliberation
items, mainly based on his broad experience through managing global companies.

Corporate Auditor

Yoshiaki Yamauchi

He attended all of 13 Board of Directors meetings and 8 of the 9 Audit Committee meetings
held during the fiscal year ended March 31, 2018, and made remarks, as necessary, mainly
from the expert viewpoint of a certified public accountant.

Corporate Auditor

Yoshiro Aoki

He attended all of 13 Board of Directors meetings and all of 9 Board of Corporate Auditors
meetings held during the fiscal year ended March 3 1, 2 018, and made remarks, asnecessary, mainly based on his broad experience through managing companies.

Corporate Auditor

Tomoyasu Asano

He attended all of 10 Board of Directors meetings and all of 9 Board of Corporate Auditors
meetings held during the fiscal year ended March 3 1, 2 018, and made remarks, asnecessary, mainly based on his broad experience through managing insurance companies.

Note: ‌In addition to the number of Board of Directors meetings held above, one resolution was made in writing which shall be deemed to have been made ata Board of Directors meeting pursuant to Article 370 of the Companies Act and Article 29 of the Articles of Incorporation of the Company.

Aggregate amount of compensation, etc. for outside officers
Number of payees

Amount of compensation, etc.

Compensation, etc. for officers paid by the Company’s subsidiaries

6

46 million yen

4 million yen

Note: ‌The foregoing includes one Director who retired from his office on April 6, 2017.

21

Business ReportMatters related to the Accounting Auditor(1) Name of the accounting auditor
KPMG AZSA LLC(2) ‌Amount of compensation, etc. for theaccounting auditor for the current fiscal
year(i) Total amount of compensation, etc. for the services(auditing and attesting financial documents) set
forth in Article 2, paragraph 1 of the “Certified
Public Accountants Act (Act No. 103 of 1948)”
payable by the Company and its subsidiaries to theaccounting auditor(3) ‌Reasons for the Board of Corporate
Auditors’ agreement to the amount ofcompensation, etc. for the accounting
auditor
The Board of Corporate Auditors evaluated audit records
during the fiscal year ended March 31, 2016, andconfirmed the content of the audit plan, the performancestatus of the auditing auditor, and rationale of theestimate compensation during the fiscal year ended
March 31, 2017; as a result, the Board of Corporate
Auditors agreed to the amount of compensation, etc. forthe accounting auditor as set forth in Article 399,
paragraph 1 of the Companies Act.

�������������������������������������������������������������������������������������� 225 million yen(4) Non-audit operations(ii) Amount of compensation, etc. (out of (i) above)
payable by the Company to the accounting auditor������������������������������������������������������������������������������������������ 63 million yen(iii) Total amount of monies and other financial benefits
payable by the Company and its subsidiaries to theaccounting auditor���������������������������������������������������������������������������������������� 234 million yen

Note 1: ‌Under the audit contract with the accounting auditor, the amountof compensation, etc. for audits under the Companies Act andthat for audits under the Financial Instruments and Exchange Act
are not clearly separated, and those amounts cannot practicallybe separated; as such, the aggregate of those amounts is shownas the amount of compensation, etc. for the services.
Note 2: ‌Among the Company’s major subsidiaries listed in “1. Mattersrelated to current status of the Corporate Group, (6) Status ofmajor parent companies and subsidiaries”, SEIKO Corporation ofAmerica, SEIKO Hong Kong Ltd., Seiko Instruments (H.K.) Ltd.,and Seiko Instruments Singapore Pte. Ltd. were audited bycertified public accountants (or audit corporations) other than the
Company’s accounting auditor.
Note 3: ‌The amounts of (i) and (iii) above include the amount payable by
ABLIC Inc. (former tradename: SII Semiconductor Corporation)that was excluded from the scope of consolidation for the fourth
quarter of the consolidated accounting period.

The Company and its subsidiaries entrusted to theaccounting auditor, and paid compensation for, theagreed procedural service that was outside of theservices set forth in Article 2, paragraph 1 of the Certified
Public Accountants Act.

(5) ‌Policy for determining dismissal or nonreappointment of the accounting
auditorPursuant to laws and regulations, if any reasonable event
occurs to the accounting auditor, the Board of Corporate
Auditors shall dismiss the accounting auditor with
unanimous consent of the Corporate Auditors; if it isdeemed difficult for the accounting auditor to properly
perform audits, the Company shall propose a resolution
for dismissal or non-reappointment of the accounting
auditor to the General Meeting of Shareholders .
Business Report22Systems and policies of the Company
Overview of a resolution to establish systems to ensure the proper operations of the Company(1) ‌System to ensure that the duties of Directors and employees are executed in compliance with laws and regulations
and the Articles of Incorporation
In order for Directors and employees to comply with corporate ethics, laws and regulations, and internal rules, theCompany shall establish the “Basic Principles of Corporate Ethics” and the “Action Guidelines for Corporate Ethics”
to thoroughly ensure their compliance with corporate ethics and laws and regulations, as follows:1) ‌The President shall repeatedly convey the spirit of the “Basic Principles of Corporate Ethics” to all Directors andemployees to ensure that compliance with corporate ethics and the laws and regulations are the basis for every
corporate activity.
2) ‌The “Corporate Ethics Committee” chaired by the President shall discuss corporate ethical issues that mightsignificantly affect the Company and its subsidiaries (the “Company Group”) and matters related to revisions of thesystem to comply with corporate ethics, and report the discussion results to the Board of Directors.
3) ‌The Company shall develop a system where any Director or employee who finds any action suspected of violating
the laws and regulations can promptly report it to the “Corporate Ethics Committee”, and establish a “Corporate
Ethics Helpline” as means for transmitting information.
4) ‌The Company shall continuously provide training sessions on corporate ethics for Directors and employees to fosterand enhance their awareness of compliance with corporate ethics and laws and regulations.
(2) System to store and manage information regarding execution of the duties of Directors(i)	P ursuant to the “Internal Document Management Rules”, the Company shall record information regarding
execution of the duties of Directors in a document or electromagnetic medium, and properly store and manage it.
(ii)	Directors and Corporate Auditors may inspect such document or medium at any time pursuant to the “Internal
Document Management Rules”.
(3) Regulations and systems for loss risk management of the Company and its subsidiaries(i)	Pursuant to the “Risk Management Rules”, the Company shall set forth the basic policy for risk management of theCompany Group and develop a risk management system.
(ii)	The Company shall establish the “Risk Management Committee” chaired by the President in order to build, develop
and monitor risk management processes, including understanding business risks that might affect the activities of
the Company Group, and identifying, analyzing, evaluating and monitoring risks.
(iii)	The Risk Management Committee shall report the status of each risk to the Board of Directors, regularly or asnecessary, pursuant to the “Risk Management Rules”.
(4) System to ensure that the duties of Directors of the Company and its subsidiaries are efficiently executed(i)	The Company shall develop a Medium-Term Business Plan as the target to be shared by Directors and employeesof the Company Group. It shall also review the progress of annual budgets consisting of the plan quarterly using themanagement accounting method, and discuss and implement remedial measures therefor, thereby promoting theefficiency of operations.
23

Business Report

(ii)	In order to respect autonomous and independent management of its subsidiaries while contributing to the properand efficient operation of the Group management, the Company shall develop basic management rules therefor. It
shall also establish the “Management Council” comprising standing Directors of the Company and respective
President of major subsidiaries, to share the management policy and management information of the Group.
(iii)	The Company shall clarify the assignment of duties among the Directors, and the responsibility and authority ofeach division/department, thereby securing the efficient execution of duties.
(5) System to ensure the proper operations of the Corporate Group comprising the Company and its subsidiaries(i)	The Company shall assist its subsidiaries to develop a system to comply with corporate ethics, and laws andregulations, and other systems to ensure their proper operations.
(ii)	Each subsidiary shall share the “Basic Principles of Corporate Ethics” and the “Action Guidelines for Corporate
Ethics” established by the Company, and manage its operations pursuant to them. The Company shall set forth therules for reporting any violation of laws and regulations by any subsidiary, and assist its subsidiaries to develop theirinternal reporting systems.
(iii)	Pursuant to the “Consolidated Business Management Rules”, the Company shall request that each subsidiaryconsult in advance with, and report to, the Company regarding significant management-related matters, andwhenever necessary, shall dispatch its officers or employees as Directors or Corporate Auditors of the subsidiary toproperly supervise and audit the subsidiary.
(iv)	Pursuant to the “Consolidated Business Management Rules”, each subsidiary shall report its business results,financial position and other important matters to the Company, and whenever necessary, the President of therelevant subsidiary shall report the execution status of the operations to the Company’s Board of Directors.
(v)	The Company’s Internal Audit Department shall conduct internal audits on each subsidiary regarding the execution
status of the operations, compliance with laws and regulations, and the Articles of Incorporation, and risk
management.
(6) Matters related to employees to assist the duties of Corporate Auditors(i) There shall be a system where the Internal Audit Department will assist the duties of Corporate Auditors.
(ii)	Employees posted to the Internal Audit Department shall not concurrently hold duties related to the execution ofoperations.
(iii)	Regarding any replacement of the General Manager of the Internal Audit Department, the President shall discusswith the Board of Corporate Auditors in advance, and respect the Board of Corporate Auditors’ opinions.
(7) System for reporting to Corporate Auditors(i)	Each Director and employee of the Company shall regularly report the status of finance, compliance with corporate
ethics, risk management, and internal audits to Corporate Auditors; if any Director/employee finds any fact likely tosignificantly damage the Company or its subsidiaries or any violation of laws and regulations or internal rules, he/she shall immediately report it to Corporate Auditors.
(ii)	The Company shall develop a reporting system where if any Director, Corporate Auditor or employee of a subsidiaryfinds any material violation of laws and regulations or internal rules regarding the execution of operations of theCompany or the subsidiary, or any fact likely to significantly damage the Company, he/she or the person who wasreported by him/her shall report it to the Company’s Corporate Auditors.
Business Report24

(iii)	The Company shall develop necessary systems so that the person who made the report in the preceding two
paragraphs might not be treated disadvantageously because of having made such report.
(iv)	In conducting internal audits, the General Manager of the Internal Audit Department shall cooperate with standing
Corporate Auditors in advance, and make efforts to report important matters to standing Corporate Auditors in atimely manner. In addition, the General Manager shall report the results of internal audits to standing Corporate
Auditors without delay, and regularly report them to the Board of Corporate Auditors.
(8) Other systems to ensure that audits by Corporate Auditors are effectively conducted(i)	The Company shall ensure a system where, besides the Internal Audit Department, the General Affairs Department
and the Finance & Accounting Department will assist audits by Corporate Auditors from time to time based on
respective instructions of Corporate Auditors.
(ii)	The Company shall ensure that Corporate Auditors will attend important meetings and committees established toensure proper operations, and to be held in a timely manner, by the Board of Directors.
(iii)	The President shall meet with the Board of Corporate Auditors, as necessary, and exchange opinions regarding
important management issues.
(iv)	If a Corporate Auditor requests that the Company pay expenses incurred in executing his/her duties, the Company
shall promptly pay them unless the Company proves that they are not necessary for the Corporate Auditor to
execute his/her duties.

Overview of the implementation status of the system to ensure proper operations(1) System for compliance with corporate ethics and laws and regulations(i)	The Company has established a Corporate Ethics Committee chaired by the President to discuss corporate ethicalissues and the system for compliance with corporate ethics, including those relating to its subsidiaries, and reports
the result of discussions to the Board of Directors. The Committee held two meetings during the fiscal year ended
March 31, 2018.
(ii)	The Company has established a “Corporate Ethics Helpline” internally and at a law firm as a contact point toreceive consultations or whistle-blowing from employees regarding violations of laws and regulations within the
Company. The Company has made sure all employees are well informed about how to use these helplines by
posting them on the internal intranet and distributing portable cards, etc.
(iii)	The Company regularly provides training sessions on corporate ethics to enhance awareness of compliance withcorporate ethics and laws and regulations. During the fiscal year ended March 31, 2018, the Company provided
training sessions titled “Responding to Scandals” for standing officers and “Laws and Regulations related toWorking Hours” for employees.
(2) Risk management system(i)	The Company has established the Risk Management Committee chaired by the President to discuss the Company
Group’s risk management system and various risk issues. The Committee held four meetings during the fiscal year
ended March 31, 2018.
	The Committee also reports the matters discussed thereat and important risks to be addressed horizontally withingroups to the Board of Directors.
25

Business Report	Further, in order to confirm and share the risks and the counter-measures against them as experienced by eachgroup company, the Company newly established a Group Risk Management Committee consisting of respective
Representative Directors of the Company and its subsidiaries and held two meetings of the Committee during the
fiscal year ended March 31, 2018.
(ii)	Regarding responses when risks occur, the “Crisis Management Manual” sets out for the Company’s basic policy
therefor and measures to respond to respective risks, such as disasters.
(3) System to ensure that the duties of Directors are efficiently executed(i)	The Company has determined the assignment of duties for each Director upon a resolution of the Board of
Directors, and the responsibility and authority of each division/department in accordance with the “Duty
Assignment Rules”.
(ii)	The Company has established a council called the “Strategic Conference for Management” where the President
and Executive Directors exchange opinions and share information with other Directors, Corporate Auditors, orGeneral Managers of divisions/departments when they decide on and execute important matters relating to
execution of their duties. The Strategic Conference for Management held 44 meetings during the fiscal year ended
March 31, 2018.
(iii)	The Company has provided the “Consolidated Business Management Rules” for the execution of the operations of
its subsidiaries in order to perform its management and support functions from the viewpoint of consolidated
management.
(4) System to ensure the proper operations of the Company Group(i)	Pursuant to the “Consolidated Business Management Rules”, the Company properly discusses with its subsidiaries
in advance regarding their business plan, annual budgets, and measures to respond to important corporate ethicalissues, receives reports on material business matters from them, and dispatches its officers or employees tosubsidiaries, as necessary, to supervise and audit them. As of the end of the fiscal year ended March 31, 2018, theCompany has dispatched eight Directors, two Corporate Auditors, and two employees.
	Furthermore, the President of each subsidiary reports the execution status of its operations to the Company’s
Board of Directors as necessary; during the fiscal year ended March 31, 2018, five subsidiaries made such reports.
(ii)	Each division/department of the Company assists its subsidiaries to develop a system to comply with corporate
ethics and laws and regulations, and a system to comply with business operation laws. During the fiscal year
ended March 31, 2018, briefings were held to discuss topics such as “Responding to Scandals”, “EU General Data
Protection Regulation”, and “Act against Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors”.
(5) System to ensure that audits by Corporate Auditors are effectively conducted(i)	The Internal Audit Department holds a regular meeting once a month with standing Corporate Auditors and reports
the performance status of internal audits.
(ii)	Standing Corporate Auditors attend important meetings such as the Strategic Conference for Management, theRisk Management Committee, and the Corporate Ethics Committee, etc.
(iii)	The President attends the Board of Corporate Auditors’ meetings to exchange opinions and gather information
relating to material business issues, etc.

Business Report26Consolidated Financial Statements
Consolidated Balance Sheet (As of March 31, 2018)(Millions of yen)

Item

AmountItem(Assets)
Current assets:(

Cash and deposits

34,229Notes and accounts receivables - trade38,109Merchandise and finished goods

38,381Work in process

10,701

Raw materials and supplies

7,928

Accounts receivable - other

3,537

Deferred tax assets

4,216

Other

6,589

Allowance for doubtful accounts∆1,206

Non-current assets:
Property, plant and equipment:(

165,102)(89,498)

Buildings and structures

72,303

Machinery, equipment and vehicles

80,147

Tools, furniture and fixtures

30,419

Other

1,766

Accumulated depreciation∆145,116

Land

49,199Construction in progress
Intangible assets:

779(

18,036)

Goodwill

9,149

Other

8,887

Investments and other assets:

27

142,488)(

57,566)

Investment securities

46,774

Deferred tax assets

2,092

Other

8,908

Allowance for doubtful accounts∆208

Total assets

307,590

Consolidated Financial Statements(Liabilities)
Current liabilities:
Notes and accounts payable - trade
Electronically recorded obligations - operating
Short-term loans payable
Current portion of long-term loans payable
Accounts payable - other
Income taxes payable
Deferred tax liabilities
Provision for bonuses
Provision for goods warranties
Provision for loan agreement losses
Other provision
Asset retirement obligations
Other
Non-current liabilities
Long-term loans payable
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Provision for loan agreement losses
Provision for environmental measures
Provision for gift certificate exchange losses
Provision for long-term goods warranties
Provision for loss on business withdrawal
Provision for directors’ retirement benefits
Other provision
Net defined benefit liability
Asset retirement obligations
Other
Total liabilities(Net assets)
Shareholders’ equity:
Capital stock
Capital surplus
Retained earnings
Treasury shares
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Non-controlling interests
Total net assets
Total liabilities and net assets

Amount
(

(

(

(

(

134,469)
24,921
7,956
49,916
21,476
12,598
1,275
2
3,534
445
348
350
51
11,58967,950)40,075
4,811
3,614
1,832
351
157
77
57
36
38
10,810676
5,410
202,42084,886)
10,0007,245
67,975∆334
19,123)
11,639
∆294
8,190
468
∆879
1,159)
105,170
307,590

Consolidated Statements of Income (From April 1, 2017 to March 31, 2018)(Millions of yen)

Item

AmountNet sales

268,529

Cost of sales

166,231

Gross profit

102,297

Selling, general and administrative expenses

91,461

Operating income
Non-operating income:

10,836(3,255)

Interest income

152

Dividend income

735

Equity method investment gain

734

House rent and other rental revenues

426

Royalty revenue

386

Other

820

Non-operating expenses:(

Interest expenses

3,180)
1,293

Exchange loss

558

Other

1,327

Ordinary income

10,911

Extraordinary income:(Gain on business transfer
Extraordinary losses:

9,373)
9,373(

4,456)

Transfers to provision for loss on lease agreements

2,181

Business structure improvement expenses

1,955

Impairment loss

177

Loss from liquidation of affiliates

142

Profit before income taxes

15,828

Income taxes - current

2,338

Income taxes - deferred

470

ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

13,0191,477
11,541

Consolidated Financial Statements

28Consolidated Statements of Changes in Equity (From April 1, 2017 to March 31, 2018)(Millions of yen)

Shareholders’ equity
Capital stock

Capital surplus

10,0007,245

Balance at beginning of the fiscal year

Retained earnings
59,535

Treasury shares

Total shareholders’ equity∆329

76,451

Changes of items during theconsolidated fiscal year
Dividends of surplus∆3,100∆3,100

Profit attributable to owners of parent

11,541

11,541

Purchase of treasury shares∆4∆4

Net changes of items otherthan shareholders’ equity
Total changes of items during theconsolidated fiscal year

—

—

8,440

∆4

8,435

Balance at end of current period

10,0007,245

67,975∆334

84,886(Millions of yen)

Accumulated other comprehensive income

Balance at beginning of current period

Valuationdifference on
available-forsale securities

Deferred
gains orlosses onhedges

Revaluation
reserve forland

Foreigncurrencytranslation
adjustment

Remeasurementsof defined benefit
plans

Total accumulated
othercomprehensive
incomeNoncontrollinginterests

Total net
assets

14,962

39

8,190

∆402

∆1,121

21,668

9,042

107,161

Changes of items during theconsolidated fiscal year ended
March 31, 201829

Dividends of surplus∆3,100

Profit attributable to owners of parent

11,541

Purchase of treasury shares∆4

Net changes of items otherthan shareholders’ equity∆3,322

∆334

—

870

242

∆2,544∆7,882∆10,426

Total changes of items during theconsolidated fiscal year

∆3,322

∆334

—

870

242

∆2,544∆7,882∆1,990

Balance at end of the fiscal year

11,639

∆294

8,190

468

∆879

19,123

1,159

105,170

Consolidated Financial Statements

Non-consolidated Financial Statements
Non-Consolidated Balance Sheet (As of March 31, 2018)(Millions of yen)

Item

AmountItem(Assets)
Current assets:

Amount(Liabilities)
68,376

Current liabilities:

70,137

Short-term loans payable

44,640Current portion of long-term loans payable

20,408Cash and deposits

14,634

Prepaid expenses

391

Lease obligations (current)

1

Short-term loans receivable

45,057

Accounts payable - other

2,358

Accounts receivable - other

7,467

Accrued expenses
Income taxes payable431
17

Deferred tax assets

200

Deposit received

1,978

Other

625

Unearned income

214

111,092

Non-current liabilities

Non-current assets:
Property, plant and equipment
Buildings
Furniture and fixtures
Land

23,053
3,804Long-term loans payable
Lease obligations (non-current)

86
53,29538,844
8

778

Deferred tax liabilities

3,918

Deferred tax liabilities for land revaluation

3,614

18,460

Provision for loss on subsidiaries and affiliates

2,274

Provision for environmental measures

143

Leased assets

10

Intangible assets:
Leasehold

Provision for Board Benefit Trust

32

2,535

Asset retirement obligations (non-current)

123

1,952

Guarantee deposits received
Other

3,882
453

Total liabilities

123,432(Net assets)
Shareholders’ equity:

37,492

Trademark rights

12

Software

550

Other

20

Investments and other assets:

Provision for bonuses

85,503

Capital stock

10,000Capital surplus

6,625

Investment securities

23,043

Capital reserve

Shares of subsidiaries and affiliates

59,899Other capital surplus
Retained earnings

2,378
4,246
21,174Contributions in subsidiaries and affiliates

0Long-term loans receivable from subsidiaries and affiliates

9,986

Bankruptcy and reorganization claims

32

Long-term prepaid expenses

8

Valuation and translation adjustments

18,544

2,402

Valuation difference on available-for-sale securities

10,550

198

Deferred gains or losses on hedges
Revaluation reserve for land

∆196
8,190

Guaranty money deposited
Other

Retained earnings reserve

121

Other retained earnings
Retained earnings carried forward
Treasury shares

21,053∆307

Allowance for doubtful accounts∆10,067

Total net assets

56,036

Total assets

179,469

Total liabilities and net assets

179,469

Non-consolidated Financial Statements

30Non-Consolidated Statements of Income (From April 1, 2017 to March 31, 2018)(Millions of yen)

Item
Operating income:Amount(Dividend received from subsidiaries and affiliates

6,467

Proceeds from management guidance

2,068

Royalty revenue

2,701

Operating expenses:

8,690

Operating income

2,547

Non-operating income:(

628

Dividend income

720

Other

393
(

981)

Interest expenses

876

Other

104

Ordinary income

3,308

Extraordinary income:(Gain on forgiveness of consolidated tax debt
Extraordinary losses:

692)
692

(

844)

Transfers to provision for loss on
investments to subsidiaries and affiliates

790

Business structure improvement expenses

53

Profit before income taxes

3,156

Income taxes - current∆682

Income taxes - deferred

75

ProfitNon-consolidated Financial Statements

1,742)

Interest income

Non-operating expenses:

31

11,237)3,763

Non-Consolidated Statements of Changes in Equity (From April 1, 2017 to March 31, 2018)(Millions of yen)

Shareholders’ equity
Capital surplus
Capital stock

CapitalOther capital

Total capitalreserve

surplussurplus

2,378

4,246

6,625

Retainedearnings
reserve

Other retained
earnings

Total retained

Retained earnings

earnings

carried forward
20,39020,512

Dividends of surplus∆3,100∆3,100

Profit

3,763

3,763

Balance at beginning of current period

10,000Retained earnings

121

Changes of items during period

Purchase of treasury shares
Net changes of items other thanshareholders’ equity during
periodTotal changes of items during period
Balance at end of current period

—

—

—

—

—

662

662

10,000

2,378

4,246

6,625

121

21,053

21,174(Millions of yen)

Shareholders’ equity
TreasurysharesBalance at beginning of current period∆303

Valuation and translation adjustments

Total
Valuation difference Deferred gains
shareholders’ on available-foror losses on
equitysale securities
hedges36,833

14,322—

Revaluation
reserve for
land
8,190

Total valuationand translation
adjustments

Total net
assets

22,512

59,346

Changes of items during period
Dividends of surplus∆3,100∆3,100

Profit

3,763

3,763

∆4

∆4

Purchase of treasury shares∆4

Net changes of items other thanshareholders’ equity during
period∆3,771∆196—∆3,967∆3,967

Total changes of items during period

∆4

658

∆3,771∆196—∆3,967∆3,309Balance at end of current period∆307

37,492

10,550

∆196

8,190

18,54456,036

Non-consolidated Financial Statements

32

Audit Report[Translation]

Certified copy of audit report on the consolidated financial statements by the Accounting Auditor
Independent Auditor’s Report
The Board of Directors
SEIKO HOLDINGS CORPORATION

May 10, 2018
KPMG AZSA LLC
Junichi Obi [seal]
Designated Limited Partner
Engagement Partner
Certified Public Accountant
Akira Nishino [seal]
Designated Limited Partner
Engagement Partner
Certified Public Accountant
Osamu Takagi [seal]
Designated Limited Partner
Engagement Partner
Certified Public Accountant

We have audited the consolidated financial statements, comprising the consolidated balance sheets, the consolidated
statements of income, the consolidated statements of changes in shareholders’ equity and the notes to the consolidated
financial statements of SEIKO HOLDINGS CORPORATION for the consolidated fiscal year from April 1, 2017 to March
31, 2018 in accordance with Article 444, Paragraph 4 of the Companies Act.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements inaccordance with corporate accounting principles generally accepted in Japan, and for designing and operating suchinternal control as management determines is necessary to enable the preparation and fair presentation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audit as independent
auditor. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence for the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including theassessment of risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In
making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the application thereof, and thereasonableness of accounting estimates made by management, as well as evaluating the overall presentation of theconsolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position and results of operations for the period covered by the aforementioned consolidated financial statements of thecorporate group comprising Seiko Holdings Corporation and its consolidated subsidiaries in conformity with corporate
accounting principles generally accepted in Japan.
Conflicts of Interest
Our firm or its engagement partners have no interest in the Company which should be disclosed in compliance with theCertified Public Accountants Act.

33

Audit Report[Translation]

Certified copy of audit report (on the non-consolidated financial statements) by the Accounting Auditor
Independent Auditor’s Report
The Board of Directors
SEIKO HOLDINGS CORPORATION

May 10, 2018
KPMG AZSA LLC
Junichi Obi [seal]
Designated Limited Partner
Engagement Partner
Certified Public Accountant
Akira Nishino [seal]
Designated Limited Partner
Engagement Partner
Certified Public Accountant
Osamu Takagi [seal]
Designated Limited Partner
Engagement Partner
Certified Public Accountant

We have audited the financial statements, comprising the balance sheets, the statements of income, the statements ofchanges in shareholders’ equity and the notes to the financial statements, and accompanying schedules thereto of
SEIKO HOLDINGS CORPORATION for the 157th fiscal year from April 1, 2017 to March 31, 2018 in accordance with
Article 436, Paragraph 2, Item 1 of the Companies Act.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements and accompanying
schedules thereto in accordance with corporate accounting principles generally accepted in Japan, and for designingand operating such internal control as management determines is necessary to enable the preparation and fairpresentation of financial statements and accompanying schedules thereto that are free from material misstatement,
whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the financial statements and accompanying schedules thereto based on
our audit as independent auditor. We conducted our audit in accordance with auditing standards generally accepted inJapan. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether thefinancial statements and accompanying schedules thereto are free from material misstatement.
An audit involves performing procedures to obtain audit evidence for the amounts and disclosures in the financial
statements and accompanying schedules thereto. The procedures selected depend on the auditors’ judgment, including
the assessment of risks of material misstatement of the financial statements and accompanying schedules thereto,whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to theentity’s preparation and fair presentation of the financial statements and accompanying schedules thereto in order todesign audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the application thereof, and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements and accompanying schedules thereto.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the financial statements and accompanying schedules thereto referred to above present fairly, in allmaterial respects, the financial position and results of operations for the period covered by the aforementioned financial
statements and accompanying schedules thereto in conformity with corporate accounting principles generally acceptedin Japan.
Conflicts of Interest
Our firm or its engagement partners have no interest in the Company which should be disclosed in compliance with theCertified Public Accountants Act.
Audit Report34[Translation]

Certified copy of audit report by the Board of Corporate Auditors
Audit Report
The Board of Corporate Auditors has deliberated on, prepared and submitted this Audit Report as below, based on theaudit reports made by the Corporate Auditors concerning the execution of duties by Directors for the fiscal year ended
March 31, 2018 (from April 1, 2017 to March 31, 2018).
1. Methods and contents of the audit by Corporate Auditors and Board of Corporate Auditors(1) ‌The Board of Corporate Auditors established the audit policies and division of duties, received reports regarding
the implementation of the audit and results thereof from the respective Corporate Auditors, as well as reports
regarding the execution of duties from Directors and the Accounting Auditor, and requested explanations asnecessary.
(2) ‌In accordance with the audit policies and division of duties determined by the Board of Corporate Auditors, each
Corporate Auditor made efforts to collect information and establish proper circumstances for the audit bycommunicating with the Directors, the internal audit department and other employees, and performed an audit
using the following methods:(i)	Attending Board of Directors meetings and other important meetings to receive reports regarding theexecution of duties from Directors and employees, and requested explanations as necessary. Each Corporate
Auditor also inspected important decision-making documents and other materials, and examined the status ofoperations and the condition of the assets of the Company. With regard to subsidiaries, the Corporate
Auditors communicated and exchanged information with directors and corporate auditors thereof, andreceived reports on business from those subsidiaries as necessary.
(ii)	With regard to the resolutions by the Board of Directors, described in the business report, regarding theestablishment of systems to ensure that the Directors’ duties are performed in conformity of laws, regulations
and the Articles of Incorporation of the Company and those other systems which are provided for in Article
100, Paragraphs 1 and 3 of the Ordinance for Enforcement of the Companies Act of Japan as systems
necessary to ensure proper business operations of a corporate group comprised of a stock company and its
subsidiaries, as well as the systems (internal control system) established in accordance with theaforementioned resolutions of the Board of Directors, the Corporate Auditors also periodically received reports
from Directors and employees regarding the development and operation thereof, requested explanations asnecessary, and expressed opinions.
(iii)	The Corporate Auditors monitored and examined whether the Accounting Auditor was maintaining an
independent position and conducting audits appropriately, obtained reports on the execution of duties fromthe Accounting Auditor, and requested explanations as necessary. In addition, the Corporate Auditors were
informed by the Accounting Auditor that a “system to ensure the duties are performed properly” (the matters
stipulated in the respective items of Article 131 of Corporate Accounting Rules) had been implemented inaccordance with the “quality management standards concerning audits” (Business Accounting Deliberation
Council, October 28, 2005), and requested explanations as necessary.
In accordance with the aforementioned procedures, the Corporate Auditors reviewed the business report andaccompanying schedules thereto, and the financial statements (non-consolidated balance sheets, non-consolidated
statements of income, non-consolidated statements of changes in shareholders’ equity, and notes to nonconsolidated financial statements) and accompanying schedules thereto, and consolidated financial statements(consolidated balance sheets, consolidated statements of income, consolidated statements of changes inshareholders’ equity, and notes to consolidated financial statements) for the fiscal year ended March 31, 2018.

35

Audit Report2. Results of audits(1) ‌Results of the audit on business reports and related materials(i)	The business report and accompanying schedules thereto fairly present the condition of the Company inaccordance with the laws, regulations and the Articles of Incorporation of the Company.
(ii)	Regarding the execution of duties by Directors, there were no instances of misconduct or material matters inviolation of laws, regulations, or the Articles of Incorporation of the Company.
(iii)	The contents of resolutions by the Board of Directors with regard to the internal control system are reasonable.
Additionally, regarding the descriptions of the relevant internal control system in the business report and theexecution of duties by Directors under the relevant internal control system, there are no matters to be pointedout.
(2) ‌Results of the audit of the non-consolidated financial statements and accompanying schedules thereto
The methods and results of the audit by KPMG AZSA LLC, Accounting Auditor, are fair and reasonable.
(3) ‌Results of the audit of the consolidated financial statements
The methods and results of the audit by KPMG AZSA LLC, Accounting Auditor, are fair and reasonable.
May 11, 2018
Board of Corporate Auditors
Seiko Holdings Corporation
Seiichi Mikami [seal]
Standing Corporate Auditor
Haruhiko Takagi [seal]
Standing Corporate Auditor
Yoshiaki Yamauchi [seal]
Outside Corporate Auditor
Yoshiro Aoki [seal]
Outside Corporate Auditor
Tomoyasu Asano [seal]
Outside Corporate Auditor

Audit Report36