[Translation]

June 8, 2018

To Shareholders with Voting Rights:

Disclosures on the Internet pursuant to Laws and Regulations and the Articles ofIncorporation regarding the Notice of the 157th Ordinary General Meeting of Shareholders■ Notes to Consolidated Financial Statements
for Consolidated Financial Statements ……………………… Pages 1 through 12■ Notes to Non-Consolidated Financial Statements
for Non-Consolidated Financial Statements ………………… Pages 13 through 19

The above-mentioned documents are provided to our shareholders by posting on the Company’s
website (English: https://www.seiko.co.jp/en/ir/) (Japanese: https://www.seiko.co.jp/ir/) via theInternet pursuant to laws and regulations and Article 16 of the Articles of Incorporation of theCompany.

SEIKO HOLDINGS CORPORATION

-1Notes to Consolidated Financial Statements
1.

Notes to Important Matters that are the Basis for Preparation of Consolidated Financial
Statements(1)

Matters relating to scope of consolidation
Number of consolidated subsidiaries: 56
SEIKO WATCH CORPORATION, Seiko Instruments Inc., Morioka Seiko Instruments,
SEIKO Solutions Inc., Seiko Clock Inc., WAKO Co., Ltd., SEIKO Corporation of America,
SEIKO U.K. Limited, SEIKO Hong Kong Ltd., Dalian Seiko Instruments Inc., Seiko
Instruments (Thailand) Ltd., Seiko Instruments Singapore Pte. Ltd., SEIKO Precision(Thailand) Co., Ltd., and others.
IIM Corporation was included in the scope of consolidation as from the 1st quarterly
consolidated accounting period due to the acquisition of its shares. SII Semiconductor
Europe GmbH was included in the scope of consolidation as from the 2nd quarterly
consolidated accounting period due to its incorporation.
Seiko Nextage Co., Ltd. and SEIKO Nextage Hong Kong Limited were excluded from thescope of consolidation as from the 1st quarterly consolidated accounting period, as they
became of little significance due to the commencement of their liquidation. S.I.E.
Netherlands B.V. completed its liquidation in the 1st quarterly consolidated accounting period.
SII Semiconductor Corporation, SII Semiconductor U.S.A. Corporation, SII Semiconductor
Korea Corporation, SII Semiconductor Hong Kong Limited, SII Semiconductor Taiwan
Corporation and SII Semiconductor Europe GmbH were excluded from the scope of
consolidation as from the 4th quarterly consolidated accounting period due to the partial saleof shares held therein, and SII Semiconductor Corporation has been made an affiliate
accounted for by the equity method. SII Semiconductor Corporation changed its trade nameto ABLIC Inc. on January 5, 2018.
Non-consolidated subsidiaries:
AOBA WATCH SERVICE Co. Ltd and others are of a small scale in terms of net sales, total
assets, profit and loss, and retained earnings, and none of them have any material impact on
the consolidated financial statements. Therefore, they were excluded from the scope of
consolidation.

(2)

Matters relating to the application of the equity method
Number of affiliates accounted for by the equity method:
6
SEIKO OPTICAL PRODUCTS CO., LTD., OHARA INC., ABLIC Inc., and others.
ABLIC Inc. (formerly SII Semiconductor Corporation) was excluded from the scope of
consolidation as from the 4th quarterly consolidated accounting period due to the partial saleof shares held therein, and has become an affiliate accounted for by the equity method.
THE CLOCK HOUSE CO.,LTD has become an affiliate accounted for by the equity method
as from the end of the consolidated fiscal year under review due to the acquisition of its
shares.
Non-consolidated subsidiaries and affiliates not accounted for by the equity method:
AOBA WATCH SERVICE Co. Ltd, I.B.L. Electroplating Co., Ltd., and others have a minimal
impact on the consolidated net income and loss and retained earnings and are of little
significance. Therefore, the equity method has not been applied to these companies.

-2-

(3)

Standards and methods for evaluating significant assets(i) Inventories
Basically stated at cost using the movingaverage method (for values stated on the balance
sheet, writing down the book values in response
to decreased profitability)(ii) Securities
Available-for-sale securities
Securities with market valueMarket value method based on the market priceas of the consolidated closing date (differencesin valuation are included directly in net assets
and the costs of securities sold are calculatedusing the moving-average method)
Securities without market value
Stated at cost using the moving-average method(iii) Derivatives
Market value method(4)

Depreciation methods for significant depreciable assets(i) Property, plant and equipment
As for domestic consolidated companies, basically(excluding leased assets)
the straight-line method is used for buildings(excluding equipment attached to buildings), andthe declining-balance method for those other thanbuildings (except that the straight-line method isused for the equipment attached to buildings, andstructures that were acquired on or after April 1,
2016); as for consolidated subsidiaries outside
Japan, basically the straight-line method is used.
As for domestic consolidated companies, a usefullife and a residue value are basically evaluatedusing the same standards as set forth in the
Corporation Tax Act.
(ii) Intangible non-current assets
The straight-line method is used. A useful life is(excluding leased assets)
basically evaluated using the same standards as set
forth in the Corporation Tax Act. However, as forsoftware for in-house use, the straight-line method
is used with a usable period of 5 years.
(iii) Leased assets
Leased assets relating to finance The same depreciation method as applied to thelease with transfer of ownershipproperty, etc. owned by the Company is used.
Lease assets relating to financelease without transfer of ownership(5)

The straight-line method is used with a useful lifeof the lease period and with a residue value of zero.

Accounting standards for significant allowances and provisions(i) Allowance for doubtful accounts In order to prepare for possible losses on
uncollectible receivables held, estimateduncollectible amounts are posted: for general
receivables, according to the historical percentage
of uncollectibles, and for doubtful receivables,
considering the probability of collection.
(ii) Provision for loss on
In order to prepare for possible losses oninvestments to subsidiaries andinvestments to subsidiaries and affiliates, anaffiliates
amount deemed necessary is provided after
considering the financial position of each company
and based on a respective review. The provision
for loss on investments to subsidiaries and affiliates

-3-(iii) Provision for bonuses(iv) Provision for goods warranties(v) Provision for loss on leaseagreements(vi) Provision for environmental
measures(vii) Provision for gift certificate
exchange losses(viii) Provision for loss on businesswithdrawal(ix) Provision for directors’
retirement benefits(6)of 4 million yen is directly reduced from theamount of investment securities.
In order to prepare for payment of bonuses to
employees, a provision is made based on theestimated bonus payments, which are attributable
to the consolidated fiscal year under review.
As for some of the consolidated subsidiaries
outside Japan, an amount estimated according totheir respective historical percentages is posted.
An estimated amount of loss to be incurred during
the periods when real estate lease agreements
cannot be terminated is posted.
In order to prepare for possible expenditure aimed
at future environmental measures, an estimatedamount to be incurred is posted.
In order to prepare for possible losses relating togift certificates collected after cancelling their
inclusion in liabilities, provision is made for an
estimated redemption amount according to thehistorical percentage of collection of such gift
certificates.
In order to prepare for possible losses relating to
the business withdrawal, an estimated loss amountis posted.
Some of the domestic consolidated companies
passed a resolution to discontinue their respective
directors’ retirement benefit systems during the
fiscal year ended March 2005 and that ended
March 2014. Accordingly, the amount of
retirement benefits for incumbent officers is posted
corresponding to the terms of office till the end of
the Ordinary General Meeting of Shareholders
during the relevant consolidated fiscal year.

Accounting standards for significant income and expenses
Accounting standards for the amount of completed work and cost of completed work
Regarding the portions of work that were definitely completed by the end of the consolidated
fiscal year under review, a percentage-of-completion method is used, and for other portions ofwork, a work-completion method is used.

(7)

Standards for translation of significant foreign currency-denominated assets or liabilities into
Japanese yen
Foreign currency receivables/payables are translated into yen using the spot foreign exchange
rate on the consolidated closing date, and translation differences are treated as income or loss.
The assets and liabilities of subsidiaries outside Japan are translated into yen using the spot
foreign exchange rate on the consolidated closing date; income and expenses are translated
into yen using an average market rate during the period, and translation differences areincluded in “Foreign currency translation adjustment” and “Non-controlling interests” of the“Net assets”.

-4(8)

Significant hedge accounting methods(i) Hedge accounting method(ii) Means of hedging and hedged
items(iii) Hedging policy(iv) Assessment of hedge effectiveness(9)

Deferred hedge accounting is employed.
However, regarding domestic consolidated
companies, basically deferral hedge accounting(“furiate-shori”) is employed for foreign
currency receivables/payables with forward
exchange contracts or the like, and with regard
to interest-rate swaps that meet the requirements
for exceptional accounting (“tokurei-shori”),
exceptional accounting is employed.
Forward exchange contracts and foreign
currency deposits to hedge foreign exchangerate fluctuation risks regarding foreign currencydenominated trade payables and receivables; andinterest-rate swaps to avoid fluctuation risks
regarding loans payable on floating interest
rates.
Forward exchange contracts, foreign currency
deposits and interest-rate swaps are hedged to
avoid exchange- and interest-rate fluctuation
risks present in hedged items in accordance with
the internal rules of the respective companies,
and no speculative transactions are conducted.
For interest-rate swaps, hedge effectiveness is
assessed by analysis of the percentage between
the accumulated cash flow changes of hedged
items and the accumulated cash flow changes bymeans of hedging. However, the assessment ofhedge effectiveness is omitted if the material
conditions of the means of hedging and thehedged items are the same.

Accounting for employees’ retirement benefits
In order to prepare to pay retirement benefits to employees, the net defined benefit liability isposted based on the estimated amount of retirement benefit obligations minus the amount ofplan assets as of the end of the consolidated fiscal year under review. To calculate retirement
benefit obligations, the benefit formula method is adopted as a method to attribute theestimated retirement benefits to the periods up to the end of the consolidated fiscal year underreview. The actuarial differences that resulted are recognized in the following consolidated
fiscal year by the straight-line method over various periods (5 to 10 years) that are not morethan the average remaining service period of employees at the time of the accrual of adifference. Prior service costs are basically recognized by the straight-line method overvarious periods that are not more than the average remaining service period of employees at
the time of the accrual thereof. Unrecognized actuarial differences and unrecognized priorservice costs after tax effect adjustment are posted in “Remeasurements of defined benefit
plans”, “Accumulated other comprehensive income” in “Net assets”.

(10)

Matters relating to accounting for consumption taxes, etc.
Consumption taxes and local consumption taxes payable by domestic consolidated companies
are accounted for by the tax exclusion method.

-5(11)

Matters relating to application of consolidated tax system
Consolidated tax system is applied.

(12)

Method and period of amortization of goodwill
Goodwill is equally amortized for 5 to 20 years; minor goodwill is entirely amortized upon
accrual.

2.

Notes to Changes in Presentation Method<Consolidated Statements of Income>(1)“Share of loss of entities accounted for using equity method” that was included in “Other” of“Non-operating expenses” in the previous consolidated fiscal year became “Share of profit ofentities accounted for using equity method” in the consolidated fiscal year under review, andwas separately itemized as “Non-operating income” as from the consolidated fiscal year underreview because the amount became more significant.
“Share of loss of entities accounted for using equity method” in the previous consolidated
fiscal year was 6 million yen.

(2)

“Foreign exchange losses” that were included in “Other” of “Non-operating expenses” in theprevious consolidated fiscal year was separately itemized as from the consolidated fiscal year
under review because the amount became more significant.
“Foreign exchange losses” in the previous consolidated fiscal year was 294 million yen.

3.

Notes to Consolidated Balance Sheet(1)

Assets provided as security and secured obligations
Assets provided as security
Cash and deposits
Deposits (Investments andother assets)
Total
Secured obligations
Accounts payable - other
Gift certificates (Current
liabilities; Other)
Total

(2)

27 million yen
424 million yen
451 million yen

1 million yen
88 million yen
89 million yen

Guarantee obligation
The Company has guaranteed borrowings extended to its employees from financial
institutions, as follows.
Employee (housing fund)

14 million yen

-6(3)

Amount of discount on negotiable instruments receivable(4)

Land for business use was revaluated pursuant to the “Act on Revaluation of Land” (Act No.
34 promulgated on March 31, 1998), and valuation differences which correspond to taxes areposted as “Deferred tax liabilities for land revaluation” of “Liabilities” and the balance thereofis posted as “Revaluation reserve for land” of “Net assets”.
(i)

471 million yen

Method of revaluation

Land for business use was evaluated based on the main-street land price set forth in Article 2,
item 4 of the “Order for Enforcement of the Act on Revaluation of Land (Cabinet Order No.
119 promulgated on March 31, 1998), and that land without a main-street land price was
evaluated based on the assessed value of fixed assets as set forth in item 3 thereof, withreasonable adjustment.
(ii)

Date of revaluation:

March 31, 2001

(5)

Out of investment securities, 417 million yen is for lending stock.

4.

Notes to Consolidated Statements of Changes in Equity(1)

Matters relating to type and total number of issued shares, and type and number of treasury
sharesIssued shares
Commonshares (Note 1)
Total(Thousands of shares)
Number of
Number ofshares decreased shares at the end
during theof theconsolidated
consolidated
fiscal year under fiscal year underreview
review

Number ofshares at the
beginning of theconsolidated
fiscal year underreview

Number ofshares increased
during theconsolidated
fiscal year underreview

207,021―

165,617

41,404207,021―

165,617

41,404

Treasury shares
Common
931
4
748
188
shares (Note 2)
Total
931
4
748
188
(Note 1) The total number of issued shares has decreased by 165,617,000 as the Company conducted ashare consolidation by which five common shares have been consolidated into one share as of October
1, 2017.
(Note 2) The number of common shares held as treasury shares at the end of the consolidated fiscal
year under review includes 108,000 shares of the Company held in the Board Benefit Trust (BBT).
The increase in common shares (4,000 shares) held as treasury shares is the result of the purchase of
fraction shares, and the purchase of fraction shares associated with the share consolidation. The
decrease in common shares (748,000 shares) held as treasury shares is the result of the shareconsolidation.

-7(2)

Matters relating to dividend(i)Amount of dividend paid
Total
Dividend
Type ofdividend
Resolution
per share
Record date
Effective dateshares(million(yen)
yen)
Ordinary
GeneralCommonMarch 31,
Meeting of
1,550
7.50
June 30, 2017
share
2017
Shareholders on
June 29, 2017
Board ofDirectors
CommonSeptember 30,
December 5,
meeting on
1,550
7.50
share
2017
2017
November 14,
2017(Note 1) The total amount of dividend approved by a resolution of the Ordinary General Meeting of
Shareholders on June 29, 2017 includes a dividend of 4 million yen payable for the Company shares
held in the Board Benefit Trust (BBT).
(Note 2) The total amount of dividend approved by a resolution of the Board of Directors meeting on
November 14, 2017 includes a dividend of 4 million yen payable for the Company shares held in the
Board Benefit Trust (BBT).
(ii)

Dividend for which the record date falls in the consolidated fiscal year under review
but the effective date comes after the end of that consolidated fiscal year
Total
SourceDividend
Type ofdividend
Resolutionforper share
Record date
Effective dateshares(million
dividend(yen)
yen)
Ordinary
GeneralCommonRetained
March 31,
Meeting of
1,550
37.50
June 29, 2018
Share
earnings
2018
Shareholders on
June 28, 2018
(Note) The total amount of dividend proposed for approval by a resolution of the Ordinary General
Meeting of Shareholders on June 28, 2018 includes a dividend of 4 million yen payable for theCompany shares held in the Board Benefit Trust (BBT).
5.

Notes to Financial Instruments(1)

Matters relating to status of financial instruments
The Company Group raises funds (mainly borrowing from banks) necessary in light ofrespective business plans of business companies. Temporary surplus funds are invested in
more safe financial assets.
Notes and accounts receivables - trade (which are operating receivables) are exposed tocustomers’ credit risks; as such, the Company controls each customer’s due date and balance,
and understands major customers’ credit status. Exchange-rate fluctuation risks for foreign
currency operating receivables due to the Company’s global development are almost set off by
the risks resulting from foreign currency operating payables, some of which are hedged using

-8forward exchange contracts. Investment securities are mainly shares of customers, andexposed to market price fluctuation risks.
Most of the notes and accounts payable - trade (which are operating payables) are due within
one year. Loans payable are mainly to raise funds for operating transactions, and interest-rate
swaps are used to hedge part of exchange-rate fluctuation risks.
Derivatives include forward exchange contracts to hedge exchange-rate fluctuation riskspresent in foreign currency receivables/payables, and interest-rate swaps to hedge fluctuation
risks of interest rates payable on loans payable.
(2)

Matters relating to market value, etc. of financial instruments
Amounts posted on the Consolidated Balance Sheet, market values, and the corresponding
differences between the two as of March 31, 2018, are as follows.
Items, for which ascertaining market values is extremely difficult, are not included in the tablebelow.
(Millions of yen)Amounts posted on
Market value
the Consolidated
Difference(*)
Balance Sheet (*)(1) Cash and deposits
34,22934,229(2) Notes and accounts receivable trade38,10938,109-(3) Accounts receivable - other

3,537

3,537

-

(4) Investment securities(i) Shares in subsidiaries andaffiliates(ii) Available-for-sale securities

17,30323,18525,76523,185(5) Notes and accounts payable trade(24,921)(24,921)-(6) Electronically recorded
obligations - operating(7,956)(7,956)-(7) Short-term loans payable(49,916)(49,916)-(8) Current portion of long-termloans payable(21,476)(21,504)-28(9) Accounts payable - other(12,598)(12,598)-(10) Long-term loans payable(40,075)(40,105)

-29

(321)

-

(11) Derivatives(*) Items posted as liabilities are enclosed in brackets.

(321)

8,462
-

(Note 1)
Calculation methods for the market value of financial instruments and transactions involving
securities and derivatives

-9(1) Cash and deposits, (2) Notes and accounts receivable - trade, and (3) Accounts receivable other:
These are settled within a short time frame and therefore have a market value nearly
equivalent to their book value; as such, these are posted according to their book value.
(4) Investment securities:
Equities are based on their value on exchanges.
(5) Notes and accounts payable - trade, (6) Electronically recorded obligations - operating, (7)Short-term loans payable, and (9) Accounts payable - other:
These are settled within a short time frame and therefore have a market value nearly
equivalent to their book value; as such, these are posted according to their book value.
(8) Current portion of long-term loans payable, and (10) Long-term loans payable:
The market value of long-term loans payable is calculated by taking into account the total
amount of principal and interest and discounting it by the assumed interest rate that would beapplied when new borrowings are conducted. The market value of long-term loans payablethat are subject to exceptional accounting treatment for interest-rate swaps is calculated bydiscounting the total amount of principal and interest, which is treated as one with the interestrate swap in question, by a logically estimated interest rate that would be applied when similarborrowings are conducted.
(11) Derivatives
Derivatives conducted through exceptional accounting treatment of interest-rate swaps aretreated as being one with the long-term loans payable under the relevant hedge. As such, themarket value of such transactions is presented as being included in the market value for the
long-term loans payable concerned.
(Note 2)Unlisted shares (posted as 446 million yen on the Consolidated Balance Sheet) and shares in
unlisted subsidiaries and affiliates (posted as 5,839 million yen on the Consolidated Balance
Sheet) have no market price, and it is recognized that ascertaining their market value isextremely difficult. As such, these items are not included in “(4) Investment securities”.
6.

Notes to Leased Property
The Company and some of its subsidiaries own real property for lease and others in Tokyo andother regions. Income or expenses from the leased property during the fiscal year ended
March 2018 was 356 million yen (rent income was posted as non-operating income andexpenses are posted as non-operating expenses), and transfers to the provision forenvironmental measures were 133 million yen (posted as “business structure improvement
expenses” in extraordinary losses).
The amount posted on the Consolidated Balance Sheet, major changes during the consolidated
fiscal year under review, market value on the consolidated closing date, and the calculation
method of such market value are as follows:- 10 (Millions of yen)Amounts posted on the Consolidated Balance Sheet
Balance at the
beginning of theconsolidated fiscal
year under review

Amount ofincreases/decreases
during theconsolidated fiscal
year under review

13,953(Note 1)
(Note 2)

(Note 3)

7.

Balance at the end of
the consolidated
fiscal year underreview

Market value on the
consolidated closing
date

14,284

14,182331

Amounts posted on the Consolidated Balance Sheet were the acquisition costs
minus accumulated depreciation and accumulated impaired loss.
The key substance of the increases/decreases during the consolidated fiscal
year under review is an increase in the rate of rent (197 million yen) and anincrease in leased property associated with the increase in new consolidated
subsidiaries (183 million yen).
Calculation method of market value
Basically the amount based on a real-estate appraisal report prepared by a realestate appraiser.

Notes to Per-Share Information
Net assets per share
Net income per share(Calculation basis) Profit attributable to owners ofparentProfit attributable to owners ofparent, available to common shares
Average number of shares during
the fiscal year under review

2,523.54 yen
280.01 yen
11,541 million yen
11,541 million yen
41,217 thousand
shares(Note 1) For the purpose of calculating the net income per share, the treasury shares remaining
in trust posted as treasury shares in the “Shareholders’ equity” section are included in
the treasury shares deducted in the calculation of the average number of shares during
the fiscal year under review. For the purpose of calculating the net assets per share,
the treasury shares so remaining in trust are included in the treasury shares deductedfrom the total number of shares issued and outstanding at the end of the fiscal year
under review.
For the purpose of calculating the net income per share, the average number oftreasury shares, so deducted, during the fiscal year under review was 108,000 shares,
and for the purpose of calculating the net assets per share, the number of treasury
shares, so deducted, as at the end of the fiscal year under review was 108,000 shares.
(Note 2) The Company conducted a share consolidation by which five common shares havebeen consolidated into one share as of October 1, 2017. Net assets per share and net
income per share represent figures on the assumption that the share consolidation was
performed at the beginning of the consolidated fiscal year under review.

- 11 8.

Notes to Business Combination
Business divestiture(Partial share transfer of a consolidated subsidiary (sub-subsidiary))(1)

Overview of business divestiture(i)Name of the enterprise to which the divested business was transferred
Development Bank of Japan Inc. (“DBJ”)(ii)

Substance of the divested businessSubsidiary: SII Semiconductor Corporation (“SSJ”) and its subsidiaries
Nature of business: Development, manufacture, and sale of semiconductors
SSJ changed its trade name to ABLIC Inc. on January 5, 2018.

(iii)

Primary reasons for the business divestiture
The semiconductor business (the “Target Business”) of Seiko Instruments Inc.
(“SII”), our subsidiary, has been providing outstanding products based onwatch-related technologies, including EEPROM and analog semiconductor
products such as Power Management ICs. SII and DBJ concluded anagreement on September 8, 2015 (the “Agreement”) to transfer the Target
Business to SSJ, a semiconductor business company that was to be established
as a joint investment by SII and DBJ, including the option to transfer a portionof the equity in SSJ held by SII to DBJ after two years, for future sustainablegrowth in the semiconductor market, which was under growing competitive
pressure on a global level.
The above option having been exercised pursuant to the Agreement, SII
concluded a share transfer agreement with DBJ on December 1, 2017 andtransferred a portion of the equity in SSJ to DBJ on January 5, 2018.

(2)

(iv)

Date of business divestiture (Date of share transfer)
January 5, 2018(v)

Overview of the business divestiture including the legal form thereof
Legal form: Share transfer
Number of shares for transfer, and transfer price
Number of shares for transfer: 555,000 shares (ratio to the number ofissued shares: 30.0%)
Transfer price: 5,527 million yen
Post-transfer ownership ratio: 30.0%

Overview of accounting conducted for business divestiture(i)

Amount of gain or loss on transfer
Gain on business transfer: 9,373 million yen(ii)

Fair book values of the assets and liabilities pertaining to the transferredbusiness, and the major breakdown thereof
Current assets:
20,997 million yen
Non-current assets:
9,724 million yen
Total assets:
30,722 million yen
Current liabilities:
10,694 million yen
Non-current liabilities: 12,588 million yen
Total liabilities:
23,283 million yen

- 12 -

(iii)

9.

Accounting
The business divestiture was accounted for pursuant to the “AccountingStandard for Business Divestitures” and the “Guidance on AccountingStandard for Business Combinations and Accounting Standard for Business
Divestitures”.

(3)

Reporting segment in which the divested business was included
Electronic devices business(4)

Estimated amount of profit or loss pertaining to the divested business, which isreported on the consolidated statements of income for the consolidated fiscal year
under review
Net sales:
25,193 million yen
Operating income:
5,013 million yen

Notes to Significant Post-Balance Sheet Events
Not applicable.

10.

Presentation of Amounts
In the Consolidated Balance Sheet, Consolidated Statement of Income, Consolidated
Statements of Changes in Equity, and Notes to Consolidated Financial Statements, any amountless than one million yen is discarded.

- 13 Notes to Non-Consolidated Financial Statements
1.

Notes to Significant Accounting Policies(1)Standards and methods for evaluating securities(i)

Shares in subsidiaries and affiliates:
Stated at cost using the moving-average method(ii)

Available-for-sale securities:
Securities with market value:
Market value method based on the market price as of the closing date (differences invaluation are included directly in net assets and the costs of securities sold are
calculated using the moving-average method)
Securities without market value:
Stated at cost using the moving-average method(2)Standards and methods for evaluating derivatives
(i)

(3)

(4)

Derivatives:
Market value method

Depreciation methods for non-current assets(i)

Property, plant and equipment (excluding leased assets):
The straight-line method is used for buildings (excluding equipment attached tobuildings), and equipment attached to buildings, and structures acquired on or after
April 1, 2016, and the declining-balance method for other property, plant andequipment. A useful life and a residue value are evaluated using the same standards
as set forth in the Corporation Tax Act.

(ii)

Intangible non-current assets (excluding leased assets)
The straight-line method is used. A useful life is evaluated using the same standards
as set forth in the Corporation Tax Act. However, as for software for in-house use,
the straight-line method is used with a usable period of 5 years.

(iii)

Leased assets
Lease assets relating to finance lease without transfer of ownership:
The straight-line method is used with a useful life of the lease period and with aresidue value of zero.

Accounting standards for significant allowances and provisions(i)

Allowance for doubtful accounts:
In order to prepare for possible losses on uncollectible receivables held, estimateduncollectible amounts are posted: for general receivables, according to the historicalpercentage of uncollectibles, and for doubtful receivables, considering the probabilityof collection.

(ii)

Provision for bonuses:
In order to prepare for payment of bonuses to employees, a provision is made based on
the estimated bonus payments, which are attributable to the fiscal year under review.

- 14 -

(5)

(6)

(iii)

Provision for loss on subsidiaries and affiliates:
In order to prepare for possible losses exceeding the book value of investments to any
subsidiary or affiliate, an amount deemed necessary is provided for the loss exceeding
the amount of receivables from such subsidiary or affiliate.

(iv)

Provision for environmental measures:
In order to prepare for possible expenditure aimed at future environmental measures,
an estimated amount to be incurred is posted.

(v)

Provision for loss on investments to subsidiaries and affiliates:
In order to prepare for possible losses on investments to subsidiaries and affiliates, anamount deemed necessary is provided after considering the financial position of eachcompany and based on a respective review. The provision for loss on investments to
subsidiaries and affiliates of 4 million yen is directly reduced from the amount ofshares in subsidiaries and affiliates.

(vi)

Provision for Board Benefit Trust:
The Company has posted an estimated amount, as of the end of the fiscal year underreview, for the obligation to deliver shares, as a provision for the delivery of its shares
to its Executive Directors in accordance with the Rules for Delivery of Shares to
Officers.

Hedge accounting method(i)

Hedge accounting method
Deferred hedge accounting is employed. However, with regard to forward exchange
contracts and the like that meet the requirements for deferral hedge accounting(“furiate-shori”), deferral hedge accounting is employed; with regard to interest-rate
swaps that meet the requirements for exceptional accounting (“tokurei-shori”),
exceptional accounting is employed.

(ii)

Means of hedging and hedged items:
Forward exchange contracts and foreign currency deposits to hedge foreign exchangerate fluctuation risks regarding foreign currency-denominated trade payables andreceivables and the like; and interest-rate swaps to avoid fluctuation risks regarding
borrowings on floating interest rate.

(iii)

Hedging policy
Forward exchange contracts, foreign currency deposits and interest-rate swaps arehedged to avoid exchange- and interest-rate fluctuation risks present in hedged items
in accordance with the Company’s internal rules, and no speculative transactions are
conducted.

(iv)

Assessment of hedge effectivenessHedge effectiveness is assessed by analysis of the percentage between theaccumulated cash flow changes of hedged items and the accumulated cash flowchanges by means of hedging. However, the assessment of hedge effectiveness isomitted if the material conditions of the means of hedging and the hedged items are
the same.

Accounting for consumption tax, etc.
Consumption taxes and local consumption taxes are accounted for by the tax exclusion
method.

- 15 (7)Other Important Matters that are the Basis for Preparation of Financial Statements
Consolidated tax system is applied.

2.

Notes to Changes in Presentation Method<Non-Consolidated Statements of Income>(1)“Service contract fees” in “Non-operating income” that were separately itemized in theprevious fiscal year is included in “Other” of “Non-operating income” as from the fiscal year
under review because the amount became less significant.
“Service contract fees” in the fiscal year under review were 105 million yen.

(2)

“Property lease expenses” in “Non-operating expenses” that were separately itemized in theprevious fiscal year were offset with “House rent and other rental revenues” in “Non-operating
income”. In the fiscal year under review, “Property lease expenses” became “House rent andother rental revenues” and are included in “Other” in “Non-operating income” because theamount became less significant.
“House rent and other rental revenues” in the fiscal year under review were 8 million yen.

3.

Notes to Non-Consolidated Balance Sheet, Statements of Income, and Statements of Changes
in Equity(1)

Accumulated depreciation of Property, plant and equipment(2)

Monetary claims, monetary debts and transactions with subsidiaries and affiliates
Short-term receivables
51,092 million yen
Short-term payables
3,541 million yen
Long-term receivables
9,986 million yen
Long-term payable
1,473 million yen
Operating income
10,911 million yen
Operating expenses
2,441 million yen
Transactions other than operating transactions
3,116 million yen(3)

Revaluation of land for business use

8,617 million yen

Land for business use was revaluated pursuant to the “Act on Revaluation of Land” (Act No.
34 promulgated on March 31, 1998), and valuation differences which correspond to taxes areposted as “Deferred tax liabilities for land revaluation” of “Liabilities” and the balance thereofis posted as “Revaluation reserve for land” of “Net assets”.
(i)Date of revaluation:

March 31, 2001

(ii)

Method of revaluation:
Land for business use was evaluated based on the main-street land price set forth in
Article 2, item 4 of the “Order for Enforcement of the Act on Revaluation of Land
(Cabinet Order No. 119 promulgated on March 31, 1998), and that land without amain-street land price was evaluated based on the assessed value of fixed assets as set
forth in item 3 thereof, with reasonable adjustment.

- 16 (4)Notes to lending stock
Out of shares in subsidiaries and affiliates, 46 million yen is for lending stock.

(5)

Notes to Statements of Income“Transfers to provision for loss on investments to subsidiaries and affiliates” of “Extraordinary
losses” consists of: reversal of the provision for loss on investments to subsidiaries andaffiliates (9 million yen); transfers to an allowance for doubtful accounts of subsidiaries andaffiliates (886 million yen); transfers to provision for loss on subsidiaries and affiliates (238
million yen); and reversal of the provision for loss on subsidiaries and affiliates (324 million
yen).

(6)

Notes to Statements of Changes in Equity
Type and number of treasury shares at the end of the fiscal year under review
Common shares
166,948 shares
The number of shares above includes 108,000 shares of the Company held in the Board
Benefit Trust (BBT) as a result of the introduction of the BBT plan.
The Company conducted a share consolidation by which five common shares have been
consolidated into one share as of October 1, 2017.

- 17 4.

Notes to Tax Effect Accounting
Breakdown by major reason for incurring deferred tax assets and deferred tax liabilities
Deferred tax assets
Provision for bonuses
Allowance for doubtful accounts
Loss on valuation of shares insubsidiaries
Provision for loss on investments to
subsidiaries and affiliates
Provision for loss on subsidiaries andaffiliates
Impaired loss on non-current assets
Assets for adjustment of profit and loss
due to transfer
Long-term accounts payable - other
Loss carried forward
Other
Deferred tax assets - subtotal
Valuation-related reserves
Deferred tax assets - total

26 million yen
3,082 million yen
6,103 million yen
1 million yen
696 million yen
713 million yen
1,222 million yen
18 million yen
2,198 million yen
231 million yen
14,295 million yen-13,307 million yen
987 million yen

Deferred tax liabilities
Assets for adjustment of profit and loss
due to transfer
Valuation difference on available-for-salesecurities
Other
Deferred tax liabilities - total
Net deferred tax assets (liabilities)

20 million yen
4,656 million yen
28 million yen
4,705 million yen-3,718 million yen

Other than the above items, “deferred tax liabilities” concerning “revaluation reserve for land”
was 3,614 million yen.
5.

Notes to Transactions with Related Parties(1)

Parent company and major corporate shareholders

Attributes Name of company

Ratio of voting
rights held (%)

Relationshipwith related
partyContent oftransaction(Direct)
Major
11.5
shareholder
Property
Property
Sanko Kigyo K.K. (Closer parties or(company,lease-in, etc. lease-inagreed parties)
etc.)
5.3

Transaction
amount(million yen)

Item

901

Accruedexpenses

Term-endbalance(millionyen)

3

- 18 (2)Subsidiaries and affiliates, etc.

Ratio of holding Relationship
Attributes Name of company of voting rights, with related
etc. (%)
party

SEIKO WATCHCORPORATION(direct) 100.0

Interlocking
directorate

Content oftransaction

Transaction
amount(million yen)

Term-endbalance(million
yen)

Item

Royaltyrevenue

Accounts
2,140 receivable other

1,157

Proceeds
frommanagement
guidance

Accounts
1,194 receivable other26

Subsidiary WAKO Co., Ltd.

(direct) 100.0

Interlocking
directorate

Property
lease-out

840

Seiko PrecisionInc.

(direct) 100.0

Interlocking
directorate

Release ofobligations

686

Accruedincome113―(Note 1) Transaction terms and policies to determine them
1)
The terms for property lease-in are determined based on the same standards as forgeneral transaction terms after considering market price. In the Statements ofIncome, the property rents payable are offset with property rents receivable.
2)
Royalty revenue is determined based on the standards similar to general transaction
terms.
3)
Proceeds from management guidance are determined by the Company and relevant
consolidated subsidiary upon mutual consultation after considering the content ofbusiness operations.
4)Regarding property rents receivable, those of owned property leased out for businessuse are determined linked to relevant income, and those leased out as office or the likeare determined based on a professional valuation. In the Statements of Income,property rents receivable are offset with property rents payable.
5)
The release of obligations occurred as a result of the individually attributed amount ofconsolidated corporation tax not being transferred between members of theconsolidated taxation group.
(Note 2) Transaction amounts do not include consumption tax, etc.; the term-end balance includes
consumption tax, etc.
6.

Notes to Per-Share Information
Net assets per share
Net income per share(Calculation basis) Profit
Profit available to common shares
Average number of shares during the fiscal
year under review

1,358.87 yen
91.26 yen
3,763 million yen
3,763 million yen
41,238 thousand shares(Note 1) For the purpose of calculating the net income per share, the treasury shares remaining
in trust posted as treasury shares in the “Shareholders’ equity” section are included in―- 19 the treasury shares deducted in the calculation of the average number of shares during
the fiscal year under review. For the purpose of calculating the net assets per share,
the treasury shares so remaining in trust are included in the treasury shares deductedfrom the total number of shares issued and outstanding at the end of the fiscal year
under review.
For the purpose of calculating the net income per share, the average number oftreasury shares, so deducted, during the fiscal year under review was 108,000 shares,
and for the purpose of calculating the net assets per share, the number of treasury
shares, so deducted, as at the end of the fiscal year under review was 108,000 shares.
(Note 2) The Company conducted a share consolidation by which five common shares havebeen consolidated into one share as of October 1, 2017. Net assets per share and net
income per share represent figures on the assumption that the share consolidation was
performed at the beginning of the fiscal year under review.
7.

Notes to Companies subject to Restriction on Consolidated Dividend
The Company will become a company subject to restriction on consolidated dividend fromwhen the last day of the fiscal year under review is the last day of the last fiscal year.

8.

Presentation of Amounts
In the Non-Consolidated Balance Sheet, Non-Consolidated Statements of Income, NonConsolidated Statements of Changes in Equity, and Notes to Non-Consolidated Financial
Statements, any amount less than one million yen is discarded.