NOTICE OF THE 155TH
ORDINARY GENERAL MEETINGOF SHAREHOLDERS
Date and Time
Place

Wednesday, June 29, 2016,at 10 a.m. Japan time

Toranomon Hills Forum Hall B
Toranomon Hills Mori Tower 4F
23-3, Toranomon 1-chome, Minato-ku, Tokyo, Japan目

次‌NOTICE OF ORDINARY GENERAL MEETING OF

SHAREHOLDERS���������������������������������������������������������������� 1‌Reference Documents for the General Meeting of
Shareholders������������������������������������������������������������������������� 5

Proposal 1: Distribution of Surplus
Proposal 2: ‌Partial amendment to the
Articles of Incorporation
Proposal 3: Election of Two (2) Directors
Proposal 4: Election of Three (3) Corporate Auditors
Proposal 5: ‌Revision of the amount ofcompensation for Directors
Proposal 6: ‌Decision on the amount and content ofstock compensation, etc. for Directors
Proposal 7: Revision‌of the amount of compensation
for Corporate Auditors
Attached Documents

Business Report������������������������������������������������������������������� 15
Consolidated Financial Statements������������������������������ 36
Non-consolidated Financial Statements��������������������� 50
Audit Report��������������������������������������������������������������������������� 59
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 10, 2016

To Shareholders with Voting Rights:

Yoshinobu Nakamura
President

Seiko Holdings Corporation
5-11, Ginza 4-chome, Chuo-ku, TokyoNOTICE OF
THE 155TH 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 155th Ordinary General Meeting of Shareholders of Seiko Holdings Corporation(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 through 4 by 6 p.m. on Tuesday, June 28, 2016, Japan time.
1 Date and Time: Wednesday, June 29, 2016, 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, 2016 (from April 1, 2015 to March 31, 2016)

Proposals to be resolved: Proposal 1: Distribution of Surplus
Proposal 2: Partial amendment to the Articles of Incorporation
Proposal 3: Election of Two (2) Directors
Proposal 4: Election of Three (3) Corporate Auditors
Proposal 5: Revision of the amount of compensation for Directors
Proposal 6: Decision on the amount and content of stock compensation, etc. for Directors
Proposal 7: Revision of the amount of compensation for Corporate Auditors
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 155TH ORDINARY GENERAL MEETING OF SHAREHOLDERS

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.

Date and time of
the meeting

Wednesday, June 29, 2016, 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.

Business Report

Shareholders not attending the meeting in person

Reference Documents for the
General Meeting of Shareholders

Shareholders attending the meeting in person

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Notice regarding Exercise of Voting Rights

Exercise of voting rights in writing (by mail)Must reach the Company by 6 p.m. on Tuesday,June 28, 2016, 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)

By 6 p.m. on Tuesday, June 28, 2016, 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 (http://
www.it-soukai.com/), and enter your votes for or against the proposals in accordancewith the screen instructions.

Non-consolidated
Financial Statements

Deadline

Consolidated Financial
Statements

Deadline

Audit Report

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 (English: http://www.seiko.co.jp/en/ir/), (Japanese: http://www.seiko.co.jp/ir/).
NOTICE OF THE 155TH ORDINARY GENERAL MEETING OF SHAREHOLDERS

2

Notice regarding Exercise of Voting Rights via the Internet

1

Exercise of voting rights via the Internet‌Votingrights 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, andenter your votes in accordance with the screen instructions. Please note that you will be required to change yourpassword when you log in for the first time to ensure security.

http://www.it-soukai.com/
The deadline for exercising voting rights is 6 p.m. on Tuesday, June 28, 2016, Japan time, and votes must beentered by the above deadline. Please exercise your voting rights promptly.
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 betaken as the valid vote.
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 meeting ofshareholders.
‌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, as below.
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 Japan

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

NOTICE OF THE 155TH ORDINARY GENERAL MEETING OF SHAREHOLDERS

Conditions related to systems:

For
reference

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

Reference Documents for the
General Meeting of Shareholders(1) The screen resolution is at least 800 dots (horizontal) x 600 dots (vertical) (SVGA).
(2) The following applications have been installed:
A. Microsoft® Internet Explorer Ver. 5.01 SP2 or higher
B. Adobe® Acrobat® ReaderTM Ver. 4.0 or higher, or Adobe® Reader® Ver. 6.0 or higher(3)	The website can be used securely, as it uses an encryption technology (SSL 128bit) to prevent alteration ortheft of information submitted in exercising voting rights.

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

3

Business Report
Consolidated Financial
Statements
Non-consolidated
Financial Statements

Audit Report
NOTICE OF THE 155TH ORDINARY GENERAL MEETING OF SHAREHOLDERS

4

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: 7.5 yen
Total amount of dividends: 1,550,541,705 yen
Effective date of distribution of surplus
June 30, 2016

5

Reference Documents for the General Meeting of Shareholders

Partial amendment to the Articles of Incorporation

1. Reason for proposal

establish a management structure capable of flexibly responding to the diversity of the management environment.

2. Details of amendment to the Articles of Incorporation(Underlines denote amendments.)

Current Articles of Incorporation(Number of Directors)
Article 20
The number of Directors of the Company
shall be twelve (12) or less.

Proposed Amendment(Number of Directors)
Article 20
The number of Directors of the Company
shall be thirteen (13) or less.

Business Report

Details of amendment are as follows:

Reference Documents for the
General Meeting of Shareholders

The Company proposes to change the maximum number of Directors from twelve (12) to thirteen (13), in order to

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Proposal 2

Consolidated Financial
Statements
Non-consolidated
Financial Statements

Audit Report
Reference Documents for the General Meeting of Shareholders

6

Proposal 3

Election of Two (2) Directors

The Company proposes the election of two (2) Directors: namely, one Director to replace Mr. Satoshi Doi, Director, who
resigned from his office as of June 2, 2016, and one additional Director to ensure the diversity of the Board of Directors.
The resolution of this proposal shall take effect subject to Proposal 2 “Partial amendment to the Articles ofIncorporation” taking effect.
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

Hiromi Kanagawa (Date of Birth September 30, 1962) Newly Appointed
Number of shares of the Company held
4,000
Career, positions, responsibilities and significant concurrent positions

2

April 1985

Joined the Company

April 2012

General Manager, Sales & Marketing Department I,
Sales & Marketing Division II, Seiko Watch Corporation

April 2014

Senior Vice President of Seiko Watch Corporation

April 2016

Senior General Manager, Brand Promotion Department 1 and Brand Promotion
Department 2 of the Company (to present)

Shimesu Takizawa (Date of Birth July 2, 1963)

Newly Appointed

Number of shares of the Company held
2,000
Career, positions, responsibilities and significant concurrent positions
April 1987

Joined the Company

August 1993

Seconded to SEIKO U.K. Limited

June 2010

General Manager, Finance & Accounting Department of the Company (to present)(Note)
There is no special relationship of interest between the Company and each candidate for Director.

7

Reference Documents for the General Meeting of Shareholders

Election of Three (3) Corporate Auditors

Seiichi Mikami (Date of Birth June 25, 1956)

Reappointed

Number of shares of the Company held
25,000Career, positions, responsibilities and significant concurrent positions
Joined the Company

July 2001

General Manager, Finance & Accounting Department, Seiko Watch Corporation

March 2008

Director of Seiko Watch Corporation

June 2010

Corporate Auditor of the Company (to present)

January 2015

Outside Corporate Auditor, Ohara Inc. (to present)

Newly Appointed

Number of shares of the Company held
15,000Non-consolidated
Financial Statements

Haruhiko Takagi (Date of Birth January 10, 1959)

Consolidated Financial
Statements

2

April 1979

Business Report1

Reference Documents for the
General Meeting of Shareholders

The terms of office of the three (3) Corporate Auditors, Mr. Masatoshi Suzuki, Mr. Seiichi Mikami and Mr. Tomijiro Morita,
will expire at the conclusion of this Ordinary General Meeting of Shareholders. Accordingly, the Company proposes theelection of three (3) Corporate Auditors.
The Company has obtained consent from the Board of Corporate Auditors with regard to this proposal.
The candidates for Corporate Auditor are as follows:

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Proposal 4

Career, positions, responsibilities and significant concurrent positions
Joined the Company

June 2004

General Manager, Finance & Accounting Department of the Company

June 2007

Director of the Company

November 2009 General Manager, Corporate Planning & Financial Control Division,

Audit Report

April 1982

Seiko Optical Products Co., Ltd.
May 2010

Director of Seiko Optical Products Co., Ltd.

April 2014

Corporate Auditor, Seiko Solutions Inc. (to present)
Reference Documents for the General Meeting of Shareholders

8

3

Candidate for Outside Corporate Auditor

Tomoyasu Asano (Date of Birth April 27, 1953)

Newly Appointed

Number of shares of the Company held0
Career, positions, responsibilities and significant concurrent positions
April 1978

Joined The Dai-ichi Mutual Life Insurance Co., Ltd.

April 2006

Executive Officer of The Dai-ichi Mutual Life Insurance Co., Ltd.

April 2009Managing Executive Officer of The Dai-ichi Mutual Life Insurance Co., Ltd.

June 2009

Director, Managing Executive Officer of The Dai-ichi Mutual Life Insurance Co., Ltd.

April 2010

Director, Managing Executive Officer of The Dai-ichi Life Insurance Co., Ltd.

October 2013

Auditor of Tokyu Fudosan Holdings Corporation (to present)

April 2014

Director, Senior Managing Executive Officer of The Dai-ichi Life Insurance Co., Ltd.
(to present)(Notes)1. There is no special relationship of interest between the Company and each candidate for Corporate Auditor.
2. ‌Of the candidates for Corporate Auditor, Mr. Tomoyasu Asano is a candidate for Outside Corporate Auditor under Article 2, Paragraph 3,
Item 8 of the Ordinance for Enforcement of the Companies Act.
3. ‌The Company nominates Mr. Tomoyasu Asano as a candidate for Outside Corporate Auditor, expecting him to perform appropriate audit
functions based on his long experience and knowledge of corporate management.

9

Reference Documents for the General Meeting of Shareholders

Revision of the amount of compensation for Directors

Reference Documents for the
General Meeting of Shareholders

Business Report

The current amount of compensation for Directors was approved at 35 million yen or less per month at the 136th
Ordinary General Meeting of Shareholders held on June 27, 1997. In light of the subsequent changes in economic
conditions and the management environment, and other circumstances, and in order to be able to provide performancebased bonuses according to the performance of each fiscal year, the Company proposes to revise the above limit ofcompensation from a monthly to an annual basis to be 420 million yen or less per year (12 times the current monthly
amount of 35 million yen), thereby adopting an annual limit of compensation for fixed monthly compensations andperformance-based bonuses.
The persons eligible to receive performance-based bonuses are Executive Directors (excluding Non-Executive
Directors and Outside Directors), and the number of eligible persons is currently six (6).
The limit of compensation for Directors does not include, as in the past, the amount paid as salaries for employees to
Directors who concurrently serve as employees, and the Company requests that the amount of individual compensation
be left to the discretion of its Board of Directors.

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Proposal 5

Consolidated Financial
Statements
Non-consolidated
Financial Statements

Audit Report
Reference Documents for the General Meeting of Shareholders

10Proposal 6

Decision on the amount and content of stock compensation, etc. for Directors

1. Reasons for proposal, and reasons for appropriateness thereofThis is a proposal to adopt a BBT (Board Benefit Trust), a stock compensation plan (the “Plan”) in order to enhance theawareness of the Executive Directors of the Company (excluding Non-Executive Directors and Outside Directors) about
contributing to better business performance and higher corporate value in the middle- to long- term, by further clarifying
the link between their compensation and middle- to long-term performance and stock value, and by the Executive
Directors sharing conflicts of interest with our shareholders.
In light of such objective, the Company believes that the content of this proposal is appropriate.
Regarding the amount and content of compensation, etc. for Directors of the Company under the Plan, theCompany proposes that it provide its Executive Directors with a new stock compensation, apart from the amount ofexisting compensation for Directors (the annual limit of compensation including the performance-based bonuses will be
420 million yen or less if Proposal 5 is approved and resolved as originally proposed). The Company also requests thatthe details of the Plan be left to the discretion of its Board of Directors, within the scope of the limit set forth in 2. below.
The number of Directors eligible for the Plan is currently six (6).

2. Amount and content of compensation, etc. under the Plan
(1) Outline of the Plan
The Plan is a performance-based stock compensation plan where the Company’s shares are acquired through a trustwith funds contributed by the Company (the trust created under the Plan hereinafter being referred to as the “Trust”),
and the Company’s shares, and cash equivalent to the market value of the Company’s shares, (“Company Shares,Etc.”) are provided to the Executive Directors through the Trust in accordance with the “Rules for Delivery of Shares to
Officers” stipulated by the Company. The time at which an Executive Director receives Company Shares, Etc. shall, in
principle, be when he or she retires from office.
(2) Persons eligible for the Plan
The persons eligible for the Plan shall be the Executive Directors of the Company (the Non-Executive Directors andOutside Directors are not eligible for the Plan).
(3) Upper limit of the amount of contribution by the Company to the Trust
The Company will create the Trust by contributing cash up to a limit of 240 million yen as the funds required for thethree fiscal years from the fiscal year ending March 31, 2017 to the fiscal year ending March 31, 2019 (the “Initial
Period”).
After the Initial Period, the Company will, in principle, also make an additional contribution to the Trust up to a limitof 240 million yen for the subsequent three fiscal years (the “Subsequent Period”) every three fiscal years until the11

Reference Documents for the General Meeting of Shareholders

Non-consolidated
Financial Statements

Audit Report

Reference Documents for the General Meeting of Shareholders

Consolidated Financial
Statements(6) Timing of delivery to the Executive Directors
If an Executive Director who has retired from office meets the beneficiary requirements stipulated in the “Rules for
Delivery of Shares to Officers,” he or she will be able to receive the Company’s shares from the Trust, in principle,
after his or her retirement in proportion to the accumulated number of points awarded until his or her retirement fromoffice, by taking the prescribed procedures to determine the beneficiary. However, if an Executive Director meets therequirements stipulated in the “Rules for Delivery of Shares to Officers,” the Company may pay him or her cash
equivalent to the market value of a certain percentage of such shares, instead of delivering such shares.
Please note that the Trust may sell the Company’s shares to effect a cash delivery.

Business Report(5) Specific details of the Company Shares, Etc. shares to be delivered to Executive Directors
In each fiscal year, the Company will award points to each Executive Director in such number as will be determinedbased on his or her position, the degree of achievement of the medium- and long-term performance target, and otherfactors in accordance with the “Rules for Delivery of Shares to Officers.”
The total number of points awarded to the Executive Directors in each fiscal year will be a maximum of 180,000
points.
Upon the delivery of Company Shares, Etc. under (6) below, one point awarded to an Executive Director will be
converted to one ordinary share of the Company (however, if a stock split (kabushiki bunkatsu), allotment of shares
without contribution (kabushiki mush wariate), or reverse stock split (kabushiki heig ) is conducted with respect to
the Company’s shares, the conversion ratio will be adjusted in a reasonable manner depending on the ratio or otherfactors of such conduct).

Reference Documents for the
General Meeting of Shareholders(4) Method of acquisition of the Company’s shares
The Trust will acquire the Company’s shares through stock markets or by subscribing to treasury shares of theCompany. For the Initial Period, the Trust will acquire shares promptly upon the creation of the Trust (scheduled forAugust 26, 2016) up to a limit of 540,000 shares.

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

termination of the Plan. However, in making such additional contribution, if there are any shares of the Company(excluding the Company’s shares corresponding to the number of points awarded to the Executive Directors
pursuant to (5) below which have not been delivered to them) and cash remaining in the trust assets on the day
immediately preceding the commencement of the Subsequent Period for which such additional contribution is to bemade (the “Remaining Shares, Etc.”), the Remaining Shares, Etc. shall be allocated to the source of delivery to bemade under the Plan for the Subsequent Period, and the limit of amount that the Company may additionallycontribute in the Subsequent Period shall be 240 million yen less the value of the Remaining Shares, Etc. (the value ofshares shall be the market value as of the day immediately preceding the commencement of the relevant Subsequent
Period).

12

〔For reference〕<Structure of the Plan>(1) Establishment of “Rules for
Delivery of Shares to Officers”(Trustee)(3) Acquisitionof shares

Mizuho Trust & Banking Co., Ltd.
(Re-entrusted to Trust & Custody Services Bank, Ltd.)
Company’s shares

Executive Directors

Trust administrator

Instructions not toexercise voting rights(6) Delivery ofCompany Shares, Etc.

(Beneficiary)

Acquisition of entitlement(2) Trusting of cash(4) Points awarded(5) Non-exercise
of voting rights(Settlor)
The Company

Executive Directors who haveretired from office and who meet
the beneficiary requirements(1)	Subject to the passing of a resolution of the compensation for officers concerning the Plan at this General
Meeting of Shareholders, the Company will establish the “Rules for Delivery of Shares to Officers” within thescope approved by the meeting.
(2)	The Company will deposit cash in trust within the scope approved by this General Meeting of Shareholders as
set forth in (1).
(3)	The Trust will acquire the Company’s shares through stock markets or by subscribing to treasury shares of theCompany by using the cash deposited in trust as set forth in (2).
(4)	The Company will award points to each Executive Director in accordance with the “Rules for Delivery of Shares
to Officers.”(5)	In accordance with the instructions of the trust administrator independent from the Company, the Trust will not
exercise voting rights for the Company’s shares in the Trust account.
(6)	The Trust will deliver Company’s shares to an Executive Director who has retired from office and who meets thebeneficiary requirements stipulated in the “Rules for Delivery of Shares to Officers” (a “Beneficiary”), in proportion
to the number of points awarded to the Beneficiary. However, if an Executive Director meets the requirements
stipulated in the “Rules for Delivery of Shares to Officers,” the Company may pay him or her cash equivalent to
the market value of the Company’s shares for a certain percentage of his or her points, instead of delivering suchshares.

13

Reference Documents for the General Meeting of Shareholders

Revision of the amount of compensation for Corporate Auditors<Process to nominate officer candidates, and to determine compensation for officers>

Consolidated Financial
Statements

In order to procure the objectivity and transparency of the process to nominate officer candidates and to determine
compensation for officers, the Company has established the Corporate Governance Committee, a majority of themembers of which are outside officers, as an advisory organ for the Board of Directors.
The contents of the nomination of officer candidates in Proposals 3 and 4, and the compensation plan for Directors
in Proposals 5 and 6, have been determined by the Board of Directors after they are deliberated on by that Committee.

Business Report〔For reference〕

Reference Documents for the
General Meeting of Shareholders

The amount of compensation for Corporate Auditors of the Company was approved at 5 million yen or less per month at
the 133rd Ordinary General Meeting of Shareholders held on June 29, 1994. In light of the subsequent changes in
economic conditions and the management environment, and other factors existing under the circumstances, theCompany proposes to revise the amount of compensation for Corporate Auditors to 8 million yen or less per month.
The number of Corporate Auditors is currently five (5), and will remain five (5) if Proposal 4 is approved and resolved
as originally proposed.

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Proposal 7

Non-consolidated
Financial Statements

Audit Report
Reference Documents for the General Meeting of Shareholders

14

Business Report for the Fiscal Year Ended March 2016 (from April 1, 2015 to March 31, 2016)

Attached Documents 

Matters related to current status of the Corporate Group(1) Business developments and results
During the fiscal year ended March 31, 2016, the world
economy showed strong signs of stagnation, shaken by
the prospect of higher interest rates in the United States
and concerns about the slowdown in China. Personal
consumption drove economic growth in Europe and theUnited States. However, growth in China tended to slow
and the slump in emerging nations continued toprogress due to lower prices for resources including
crude oil.
The Japanese economy continues to experience astall in its recovery, as exports remain slack despite
support from an increase in consumption by foreign
tourists. Conditions in the department store industry
progressed favorably due to consumption by foreign
tourists, but this boost is tapering off. The electronic
devices and semiconductor market is seeing continuing
growth in demand due to advanced functionality ofsmartphones and increasing use of electronics inautomobile-related products, despite a slump in demand
for smartphones, among other factors.
For the fiscal year ended March 31, 2016, theCompany reported consolidated net sales of 296.7
billion yen, a year-on-year increase of 3.2 billion yen,despite a transfer of the wide format printer business to
OKI Data Corporation in the third quarter. On a persegment basis, sales under the Watches Business grewfavorably in Japan, and the Electronic Devices Businessa l s o c o n t i n u e d t o p e r f o r m s t e a d i l y, m a i n l y i nsemiconductors. However, sales under the Systems
Solutions Business regrettably declined from the
15

Business Reportprevious fiscal year. On an overall consolidated basis,domestic net sales came to 145.8 billion yen (a year-onyear increase of 4.6%), and overseas net sales were150.8 billion yen (a year-on-year decrease of 2.1%).
Overseas net sales comprised 50.8% of net sales
overall.
In terms of income, the Company posted operating
income of 13.3 billion yen (a year-on-year increase of
14.1%), an increase of 1.6 billion yen compared to theprevious fiscal year, due to an increase in sales and otherfactors. However, ordinary income decreased by 0.4
billion yen from the previous fiscal year to become 11.8
billion yen (a year-on-year decrease of 4.0%), as nonoperating income and expenses worsened year on year
due to factors including the posting of foreign exchange
losses in the fourth quarter. Gain on sales of non-current
assets of 0.4 billion yen was posted as extraordinary
income, and a total of 3.5 billion yen in businessstructure improvement expenses related to the transferof the wide format printer business and others wasposted as extraordinary losses, resulting in profit
attributable to owners of parent minus income taxes andprofit attributable to non-controlling interests of 12.1
billion yen (a year-on-year decrease of 44.2%).
During the fourth quarter, SII Semiconductor
Corporation, the Company’s subsidiary that operates thesemiconductor business, accepted an investment fromthe Development Bank of Japan Inc., which accounted
for 40% of all capital invested.

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Results for each segment are as follows.

Watches BusinessNet sales (Billions of yen)

Operating income (Billions of yen)

Tissé. Sales also grew favorably on consumption byforeign tourists. On the overseas front, sales developed

1,590

1,644

123

127

in markets including Germany in Europe and Taiwan inAsia, despite harsh economic conditions in some

55.0%

markets, including France, where sales over the
Christmas season were stagnant due to the impact of
FY2015FY2014FY2015*The above ratio was calculated based on values after the adjustment of intersegment
sales or transfers.

Net sales under the Watches Business for the fiscal year

the terrorist attacks. In addition, a Seiko Premium
Boutique was opened in the Ginza area of Tokyo, andSeiko Boutiques were opened in Frankfurt, Moscow, andSydney.
With regard to income, the increase in net sales

on-year increase of 5.3 billion yen, or 3.4%. In Japan,

yielded a year-on-year increase of 0.3 billion yen insales of men’s watch models were driven by the Grand

operating income, bringing it to 12.7 billion yen (a year-

Seiko, Astron, Mechanical, and Prospex, while sales ofon-year increase of 3.2%).

ladies’ watch models were driven by the Lukia andConsolidated Financial
Statements

ended March 31, 2016 came to 164.4 billion yen, a year-

Business Report

FY2014

Reference Documents for the
General Meeting of Shareholders

Composition of net sales

Non-consolidated
Financial Statements

Audit Report
Business Report16

Electronic Devices Business
Composition of net sales

Net sales (Billions of yen)961

Operating income (Billions of yen)

949

29
18

30.4%
FY2014FY2015FY2014FY2015*The above ratio was calculated based on values after the adjustment of intersegment
sales or transfers.

Net sales under the Electronic Devices Business cameto 94.9 billion yen (a year-on-year decrease of 1.3%),
and operating income to 2.9 billion yen (a year-on-yearincrease of 56.4%). On a per-domain basis, sales ofsemiconductors performed steadily mainly for power
management ICs for smartphones. Sales also increased
for products including industrial inkjet print heads, small
thermal printers and quartz crystal products. Net sales
declined from the previous fiscal year due to the transferof the wide format printer business to OKI Data
Corporation during the third quarter.

Systems Solutions Business
Composition of net sales

Net sales (Billions of yen)

Operating income (Billions of yen)

Net sales under the Systems Solutions Business came
to 19.4 billion yen (a year-on-year decrease of 8.0%),

211

194

6.5%

and operating income to 0.3 billion yen (a year-on-year3

3

increase of 11.2%). Sales of the data services businesswere steady, but sales of communication modules andother products stagnated.

FY2014FY2015FY2014FY2015*The above ratio was calculated based on values after the adjustment of intersegment
sales or transfers.

OthersComposition of net sales

Net sales (Billions of yen)

Operating income (Billions of yen)

9

8.1%

264

282

FY2014FY20156FY2014FY2015*The above ratio was calculated based on values after the adjustment of intersegment
sales or transfers.

17

Business Report

Net sales under Others came to 28.2 billion yen (a yearon-year increase of 6.7%), and operating income to 0.9
billion yen (a year-on-year increase of 43.2%). Amongsegments included in Others, sales under the Clocks
Business grew steadily in Japan and sales under the
Wako Business were driven by high-priced watches.

Fifth Medium-Term Management Plan (from the fiscal year ended March 31, 2014 through the fiscal year ended March 31, 2016)

Basic policy

Issues for realizing the qualitative reinforcementof the Group’s management foundation

Non-consolidated
Financial Statements(i) Improving financial constitution
Realizing further reductions in interest-bearing
liabilities and an improved equity capital ratio(ii) Promoting the utilization of human resources
Forming mechanisms for developing humanresources for sustainable business growth andconducting inter-Group personnel exchange(iii) Strengthening the role of the holding company
Reinforcing strategic decision-making in Groupmanagement and operating company support
functions as conducted by the holding company

Consolidated Financial
Statements

Basic strategy for maximizing segment profitability

Audit Report(i) Enhancing and expanding the Watches segment,
the fundamental business of the Group
Maximizing earnings through executing strategy thatmanifests the total capability of this segment’s
finished goods and movement businesses(ii) Electronic Devices segment to concentrate on coreareas
Concentrating resources into core business sectors
while actualizing our technology centered on
timepieces under the philosophy of “Craftsmanship,
Miniaturization, Efficiency” to the fullest extent, andestablishing a stable earnings structure.

Business Report

The Company formulated the Fifth Medium-Term
Management Plan, a three-year plan beginning in thefiscal year ended March 31, 2014, maintaining thefundamental group management philosophy of being “acompany that is trusted by society.” Under the MediumTerm Management Plan, the Company addresses thebasic strategies and issues as described below,
following the basic policy of “reconstructing the businessportfolio around our Watches segment as the Group’s
core business to maximize profitability, as well as
realizing the qualitative reinforcement of the Group’s
management foundation.”(iii) Cultivating our Systems Solutions Business as athird business segment
Cultivating a solutions-suggestion business with highadded value that positions Seiko Solutions Inc. as itscore entity and takes advantage of the resources
possessed by the Group.
(iv)Expanding business development efforts that
effectively leverage the brand’s strength
Perpetuating activities to improve brand image andrecognition while further strengthening brandutilization in various products

Reference Documents for the
General Meeting of Shareholders

The fiscal year ended March 31, 2016 was the last yearof the Fifth Medium-Term Management Plan of theCompany that commenced in the fiscal year ended
March 31, 2014. The details and achievement thereof
are as follows:

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS(2) Issues that need to be addressed by the Corporate Group

Business Report18

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

Medium-Term Management Plan
FY2013

FY2014FY2015FY2015Comparison vs. Plan

Actual

3,000

2,900

3,200

2,967

-233

Operating Income

100

140

200

133

-67

Ordinary Income
(%)

60
2.0%

100
3.4%

160
5.0%

118
4.0%

-42
-1.0%

Net income attributable to owners of parent
(%)

50
1.7%

80
2.8%

120
3.8%

121
4.1%

+1
+0.3%

Net Sales(ii) Net sales by segment

(Billions of yen)

Medium-Term Management Plan
FY2013

FY2014FY2015FY2015Comparison vs. Plan

Actual

1,350

1,400

1,500

1,644

+144

Electronic Devices Business

950

1,050

1,150

949

-201

Systems Solutions Business

280

300

350

194

-156

Others

480

250

270

282

+12

3,000

2,900

3,200

2,967

-233

Watches Business

Consolidated total(iii) Operating income by segment

(Billions of yen)

Medium-Term Management Plan
FY201319

FY2014FY2015FY2015Comparison vs. Plan

ActualWatches Business

100

110

130

127

-3

Electronic Devices Business

20

45

70

29

-41

Systems Solutions Business

10

15

20

3

-17

Others

10

5

10

9

-1

Consolidated total

100

140

200

133

-67

Business Report(Billions of yen)

Medium-Term Management Plan
FY2013

FY2014FY2015FY2015

ActualComparison vs. Plan

1,950

1,750

1,275

-475

Net assets

450

525

630

1,026

+396

Total assets

3,500

3,500

3,400

3,291

-109

Equity capital ratio

12.3%

14.3%

17.6%

28.7%

+11.1%Net D/E ratio

3.6

2.9

2.1

0.9

-1.2

In the businesses included in Others, the Clocks
Business, the System Clocks Business and the Wako
Business each saw increased sales with businesses
centering on the SEIKO brand and the WAKO brand,
respectively.
The Company also engaged in aggressive
branding activities through sports, music and social
contribution to raise the value of the SEIKO brand.

Audit Report

Business ReportNon-consolidated
Financial Statements(ii) Issues to realize the qualitative reinforcement of theGroup’s management foundation
In an effort to improve its financial constitution, theCompany continued to reduce loans, up to the point
where the total amount of its long- and short-termloans payable and lease obligations became 127.5
billion yen. As a result, the Company was able torealize further reductions in interest-bearing liabilities
and exceeded the net D/E ratio in the Medium-Term
Management Plan. In addition, the equity capital ratio
was 28.7%, which was above the level contemplated
in the Medium-Term Management Plan.
In promoting the utilization of human resources,
the Company proactively advanced measures to raise
global human resources and executive candidates
who will lead the next generation, and to appoint
female managers.
In order to strengthen the role of the holding
company, the Company successfully promoted
improved profitability related to the businesses thatneed to be addressed by reinforcing strategic
decision-making in Group management and operatingcompany support functions.

Consolidated Financial
Statements(i) Basic strategy for maximizing segment profitability
The Company conducted marketing activities inmarkets in Japan, Europe, North America and Asia toenhance and expand the Watches segment, focusing
on the Grand Seiko, a high-end product, the ASTRON,
which is the world’s first GPS solar watch, and the
PROSPEX sports watch for serious sports enthusiasts.
The Company also furthered investments for future
expansion, by continuing to increase its advertisingand promotion expenses. Sales in the Watches
segment exceeded the Medium-Term Management
Plan, and the operating income also mostly achieved
the above level. Accordingly, the percentage of sales in
the Watches segment, the Group’s core business, tothe entire sales increased further to 55% from 54% in
the previous fiscal year. As a result, the Company has
been able to successfully develop a foundation to
maximize profitability.
In the Electronic Devices segment in which theCompany sought to establish a stable earnings
structure, profitability significantly increased from theprevious fiscal year, mainly due to improvements in
unprofitable businesses. However, both sales andearnings were not able to achieve the Medium-Term
Management Plan.
In the Systems Solutions Business, the Systems
Application Business of Seiko Instruments Inc. wasintegrated into Seiko Solutions Inc. in the previous
fiscal year, whereby a framework was established tooffer, as a total service, technologies and knowhow
held by both companies. However, this has not
resulted in growing sales.

Business Report

Developments in the fiscal year ended March
31, 2016

Reference Documents for the
General Meeting of Shareholders

2,020Interest-bearing liabilities

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS(iv)Balance sheet items

20

Sixth Medium-Term Management Plan (from the fiscal year ending March 31, 2017 through the fiscal year ending March 31, 2019)
The Company formulated the Sixth Medium-Term(iii) The Systems Solutions Business will reinforce its

Management Plan beginning in the fiscal year ending

business foundation as a third mainstay business

March 31, 2017, as described below.

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

Long-term vision

constitution (stabilization of profitability)

The Seiko Holdings Group has established its long-term
vision of what the Group aims to be 10 years in the
future, based on the Group slogan, ’SEIKO Moving

Reinforcing the management foundation(i) Reinforcing corporate communication

Ahead, Touching Hearts’.

(ii) Continuing the basic policy for capital andfinancial measures

We aim to be a trend-setting and innovative
global group that shares excitement withall its stakeholders around the world by
providing products and services that exceed
the highest expectations of our customers.

Basic policy
The Company will “reinforce profitability and investment
for growth,” and “reinforce the management foundation”
to become a highly profitable group centered on the
Watches segment.

Reinforcing profitability and investment for growth(i) The Watches segment will be steered toward further
g 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
expansion)(ii) The Electronic Devices segment will generate profits
by focusing management resources on core businesssectors (profitability improvement)

21

Business Report(iii) Reinforcing corporate governance(iv)Reinforcing organizational and group functions,and continuing the basic policy for personnel
measures(i) Consolidated income forecast(Billions of yen)

Actual
FY2015

Medium-Term Management Plan
FY2018

Forecast (For reference)
FY20162,900

Operating income

133

170

120

Ordinary income

118
4.0%

180
5.8%

120
4.1%

Net income attributable to ownersof parent

121
4.1%

125
4.0%

100
3.4%

(ii) Net sales by segment

(Billions of yen)

Actual
FY2015

Medium-Term Management Plan
FY2018

Forecast (For reference)
FY2016

1,900

1,600

Electronic Devices Business

949

750

900

Systems Solutions Business

194

250

200

Others

282

300

290

2,967

3,100

2,900

Consolidated total(Billions of yen)

Actual
FY2015

Medium-Term Management Plan
FY2018

Forecast (For reference)
FY2016

127

170

120

Electronic Devices Business

29

25

30

Systems Solutions Business

3

15

10

Others

9

10

10

133

170

120

Consolidated total

Audit Report

Watches Business

Non-consolidated
Financial Statements(iii) Operating income by segment

Consolidated Financial
Statements

1,644

Watches BusinessBusiness Report

3,100

Reference Documents for the
General Meeting of Shareholders

2,967

Net sales

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Target figures under the Sixth Medium-Term Management Plan

Business Report22

(iv)Balance sheet items

(Billions of yen)

Actual
FY2015

Medium-Term Management Plan
FY2018

Total assets

3,291

3,400

Net assets

1,026

1,200

Equity capital ratio

28.7%

35%

Net interest-bearing liabilities

884

750

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

(4) Capital expenditures
The Company invested 2,046 million yen in the Watches Business, 4,387 million yen in the Electronic Devices Business,and 964 million yen in the Systems Solutions Business respectively, primarily to reinforce and renew manufacturing andother facilities.

23

Business ReportNOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS(5) Trends in assets and profit/loss
The operating results and assets in the fiscal year ended March 31, 2016 and the past three years are as follows.
(i) Consolidated
FY2012

Net sales(Billions of yen)

FY2014

283,790308,286

293,472

296,705

3,243

10,165

12,373

11,879

5,527

7,422

21,77812,142

29

36

105

59

355,308

366,753

333,701

329,11540,80164,766

92,589102,692

189

304

438

457

Ordinary income(Billions of yen)

3,082

2,934

Profit attributable to owners of parent

118

217

101

2,967

(Billions of yen)

121
32

FY2013

FY2014

Total assets

FY2015(Billions of yen)

FY2012FY2013

FY2014

Net assets

3,337

3,291

FY2013

FY2014FY2015

1,026

Audit Report

3,667

FY2012(Billions of yen)

925
3,553

FY2015

74

647
408

FY2012FY2013

FY2014FY2015FY2012FY2013

Non-consolidated
Financial Statements

FY2012

55

Consolidated Financial
Statements

123
2,837

FY2015Business Report

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)Book-value per share(Yen)

FY2013

Reference Documents for the
General Meeting of Shareholders

Item

FY2014FY2015Business Report24

(ii) Non-consolidated
Item

FY2012

Operating revenue(Millions of yen)
Ordinary Income(Millions of yen)
Net income(Millions of yen)
Earnings per share(Yen)
Total assets(Millions of yen)
Net assets(Millions of yen)Book-value per share(Yen)

FY2013

FY2014FY2015

8,748

10,836

9,972

11,984

1,837

3,390

1,730

4,393

2,799

3,349

14,953

3,370

15

16

72

16

162,190

181,108

158,703

147,145

24,76940,23056,26754,964

120

195

272

266

Note 1 “Earnings 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 earnings per share and of net assets are calculated by deducting
the number of treasury shares from the average number of shares during the fiscal year and the total number of outstanding shares, respectively.

Operating income

10887(Billions of yen)

Ordinary income(Billions of yen)

119

Net income

149

43

99
33
18

17
27

FY2012FY2013

FY2014

Total assets

1,621

FY2015(Billions of yen)

1,811

1,587

FY2012FY2013

FY2014

Net assets

1,471

FY2015(Billions of yen)

562

549

FY2014FY2015402
247

FY201225

Business Report(Billions of yen)

FY2013

FY2014FY2015FY2012FY2013

FY201233

33

FY2013

FY2014FY2015NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS(6) Status of major parent companies and subsidiaries(i) Relationship with parent companies
Not applicable.

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

100.0%(*)

Sales of watches and other products

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

HK$128,700,000

100.0%(*)

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 1: Companies asterisked in the “Capital Contribution Ratio” column are wholly owned by the Company, including indirect holdings.
Note 2: The status of a specified wholly-owned subsidiary as of the last day of the fiscal year ended March 31, 2016 is as follows:
Seiko Instruments Inc.

Address of the specified wholly-owned subsidiary

8, Nakase 1-chome, Mihama-ku, Chiba-shi, Chiba, Japan

Book value of shares of the specified whollyowned subsidiary in the books of theCompany and its wholly-owned subsidiaries

33,783 million yen

Total assets of the Company

147,145 million yen(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:
Details of Business Activities

Main merchandise and products

Manufacturing and sales

Watches, watch movements

Electronic Devices Business

Manufacturing and sales

Semiconductors, quartz crystals, micro batteries and materials, printers, harddisk drive components, shutters for cameras

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 Report

Audit Report

Business Segment
Watches Business

Non-consolidated
Financial Statements

Name of the specified wholly-owned subsidiary

Consolidated Financial
Statements

Seiko Instruments (H.K.) Ltd.

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

Business Report

US$111,000

SEIKO Hong Kong Ltd.

SEIKO Corporation of America

Reference Documents for the
General Meeting of Shareholders(ii) Status of major subsidiaries

26

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

Location

Watches Business

Minato-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 13,437 (a decrease of 128 from theprevious fiscal year-end).

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

Lenders

27

Outstanding Balance of Loans

Mizuho Bank, Ltd.

47,088

Sumitomo Mitsui Banking Corporation

20,187The Chiba Bank, Ltd.

9,963

Aozora Bank, Ltd.

8,430

Business Report(1) Total number of shares authorized to be issued
		746,000,000 shares
		The Company, etc. (3 shareholders)
539,824shares (0.3%)
Financial institutions (43 shareholders)
44,138,156shares (21.3%)

Securities companies (59 shareholders)
7,271,095shares (3.5%)
Other domestic corporations(134 shareholders)
34,481,314 shares (16.7%)(including 282,415 treasury shares)

Foreign corporations, etc.
(210 shareholders)
36,928,826 shares (17.8%)

207,021,309 shares(3) ‌Number of shareholders at the end of the
fiscal year ended March 31, 2016
11,200(4) Major shareholders (top 10)
Name

Individuals and others(10,751 shareholders)
83,662,094 shares (40.4%)* The “Company, etc.” refers to shares owned by the Company and its subsidiaries
and affiliates.

Number of shares held

Percentage of shares held

(shares)

(%)

11.5
8.7

Shinji Hattori

11,396,448

5.5

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

10,916,000

5.3

The Dai-ichi Life Insurance Company, Limited

9,000,000

4.4

Hideo Hattori

8,104,276

3.9

Japan Trustee Services Bank, Ltd. (Trust Account)

4,531,000

2.2

Hirohisa Hattori

3,426,876

1.7

MSCO CUSTOMER SECURITIES

3,319,000

1.6

CHASE MANHATTAN BANK GTS CLIENTS ACCOUNT ESCROW

2,722,287

1.3

Non-consolidated
Financial Statements

23,677,501
18,069,542

Consolidated Financial
Statements

Sanko Kigyo K.K.
Etsuko Hattori

Business Report		Reference Documents for the
General Meeting of Shareholders(2) Total number of shares issued and outstanding

Breakdown by type of shareholder

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Matters related to the Company shares

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

Audit Report

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

Business Report28Matters related to officers(1) Name, etc. of Directors and Corporate Auditors (as of March 31, 2016)
Name

Shinji Hattori

Position and responsibility at the Company
Chairman & Group CEO

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

Yoshinobu Nakamura President
Akio Naito

Executive Director in charge of Finance & Accounting,Corporate Strategy & Planning, and Legal & Intellectual Property

Hirohiko Umemoto Director in charge of Watches Business

Chief Operating Officer of SEIKO WATCH CORPORATION
Senior Executive Director of SEIKO INSTRUMENTS INC.

Shuji Takahashi

Director in charge of Public Relations andSecretariat, and Brand Promotion

Director, Senior Executive Vice President of SEIKO WATCHCORPORATION

Akihiro Okuma

Director in charge of Human Resources,
General Affairs, and IT Planning

Director and Managing Executive Officer of SEIKO Solutions Inc.

Hitoshi Murakami

Director

President of SEIKO INSTRUMENTS INC.

Shuntaro Ishii

Director

Director, Executive Vice President of SEIKO INSTRUMENTS INC.

Yoshihide Fujii

Director

Chairman of SEIKO INSTRUMENTS INC.
Chairman of SII SEMICONDUCTOR CORPORATION

Satoshi Doi

Director

Executive Director of Sanko Kigyo K.K.

Akio Harada

Director(Outside) Audit & Supervisory Board Member of Shiseido Company, Limited(Outside) Director of Sumitomo Corporation(Outside) Director of Yamazaki Baking Co., Ltd.
Representative director of Japan Criminal Policy Society, generalincorporated foundation
Representative director of International Civil and Commercial Law Centre
Foundation, public interest incorporated foundation
Chairman, Management Committee, Nuclear Damage Compensation andDecommissioning Facilitation Corporation
LawyerCarsten Fischer

Director

Masatoshi Suzuki

Standing Corporate Auditor

Seiichi MikamiStanding Corporate Auditor(Outside) Corporate Auditor of OHARA INC.

Tomijiro Morita

Corporate Auditor

Senior Advisor to The Dai-ichi Life Insurance Company, Limited(Outside) Director of Odakyu Electric Railway Co., Ltd.
(Outside) Director of Hotel Okura Co., Ltd.

Yoshiaki Yamauchi Corporate Auditor(Outside) Audit & Supervisory Board Member of STANLEY ELECTRIC CO., LTD.
Certified public accountant

Yoshiro Aoki
29

(Outside) Director of OHARA INC.

Business Report

Corporate Auditor

Classification

Number of payees

Director

12

Amount of compensation, etc.

Remarks

200,700,000 yen

558,350,000 yen

Total

17

259,050,000 yen

Business Report

Corporate Auditor

Reference Documents for the
General Meeting of Shareholders(2) Amount of compensation, etc. for Directors and Corporate Auditors

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Note 1: Messrs. Akio Harada and Carsten Fischer, Directors, are outside directors set forth in Article 2, item 15 of the Companies Act.
Note 2: ‌Messrs. Tomijiro Morita, Yoshiaki Yamauchi, and Yoshiro Aoki, Corporate Auditors, are outside company auditors set forth in Article 2, item 16 of theCompanies Act.
Note 3: ‌The Company has reported to the Tokyo Stock Exchange Messrs. Akio Harada and Carsten Fischer, Directors, and Mr. Yoshiaki Yamauchi,
Corporate Auditor, as independent officers.
Note 4: Mr. Yoshiaki Yamauchi, Corporate Auditor, is a certified public accountant, and has high-degree knowledge about finance and accounting.
Note 5: ‌The Dai-ichi Life Insurance Company, Limited, at which Mr. Tomijiro Morita, outside company auditor, concurrently holds a position, is the lender of
the Company. There are no other special relationships of interest between the Company and the entities at which outside directors or outsidecompany auditors hold concurrent positions.

(3) Matters related to outside officers
Main activities of outside officers
Name

Main activities

Director

Carsten Fischer

He attended 9 of the 10 Board of Directors meetings held after his assumption of office of
Director in June 2015, and made necessary remarks on discussion items and deliberation
items, mainly based on his broad experience through management of global companies andas a marketing expert.

Corporate Auditor

Tomijiro Morita

He attended 11 of the 13 Board of Directors meetings, and 8 of the 10 Board of Corporate
Auditors meetings held during the fiscal year ended March 31, 2016, and made remarks, asnecessary, mainly based on his broad experience through management of insurancecompanies.

Corporate Auditor

Yoshiaki Yamauchi

He attended 12 of the 13 Board of Directors meetings and 8 of the 10 Audit Committee
meetings held during the fiscal year ended March 31, 2016, and made remarks, asnecessary, 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 10 Board of Corporate Auditors
meetings held during the fiscal year ended March 31, 2016, and made remarks, asnecessary, mainly based on his broad experience through management of companies.

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

536,450,000 yen

3,600,000 yen
Business Report

Audit Report

He attended 11 of the 13 Board of Directors meetings held during the fiscal year ended
March 31, 2016, and made necessary remarks on discussion items and deliberation items,
mainly from the expert viewpoint of a lawyer.

Non-consolidated
Financial Statements

Akio Harada

Director

Consolidated Financial
Statements

Classification

30

Matters related to the Accounting Auditor(1) Name of the accounting auditor
KPMG AZSA LLC(2) ‌Amount of compensation of 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�������������������������������������������������������������������������������������� 221 million yen(ii) Amount of compensation, etc. (out of (i) above)
payable by the Company to the accounting auditor������������������������������������������������������������������������������������������ 60 million yen(iii) Total amount of monies and other financial benefits
payable by the Company and its subsidiaries to theaccounting auditor������������������������������������������������������������������������������������������ 225 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.

31

Business Report(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, 2015, 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, 2016; 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.

(4) Non-audit operations
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 auditors to properly
perform audits, the Company shall propose a resolution
for dismissal or non-reappointment of the accounting
auditor to the Shareholders Meeting.

Overview of a resolution to establish systems to ensure the proper operations of the Company

Audit Report

Business ReportNon-consolidated
Financial Statements(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.

Consolidated Financial
Statements(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”.

Business Report(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”.

Reference Documents for the
General Meeting of Shareholders(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.

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Systems and policies of the Company

32

(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.
33

Business ReportAudit Report

Business ReportNon-consolidated
Financial Statements(2) Risk management system(i)	The Company convenes the Risk Management Committee chaired by the President four times a year to discuss
the Company Group’s risk management system and various risk issues.
	The Committee also discusses important risks to be addressed horizontally within groups, and approves a plan toaddress them, and reports the results to the Board of Directors.
(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.

Consolidated Financial
Statements(1) System for compliance with corporate ethics and laws and regulations(i)	The Company convenes a Corporate Ethics Committee chaired by the President twice a year to discuss corporate
ethical issues and the system for compliance with corporate ethics, including operating companies, and reports theresult of discussions to the Board of Directors.
(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, 2016, the Company provided
training sessions titled “Fraud Risk” for standing officers and “Specified Personal Information Protection Act” for all
employees.

Business Report

Overview of the implementation status of the system to ensure proper operations

Reference Documents for the
General Meeting of Shareholders(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.

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS(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.

34

(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 41 meetings during the fiscal year ended
March 31, 2016.
(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, 2016, theCompany has dispatched ten Directors, two Corporate Auditors, and six 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, 2016, six 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, 2016, briefings were held to discuss topics such as “My Number System”, “Changes in
Accounting Standards/Tax Revision”, and “Act on Promotion of Women’s Participation and Advancement in the
Workplace”.
(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.

35

Business ReportConsolidated Balance Sheet (As of March 31, 2016)(Millions of yen)

Item

AmountItem(Assets)
I. Current assets:(

159,649)

Notes and accounts receivables - trade41,623Merchandise and finished goods

42,081Work in process

13,315

Raw materials and supplies

9,799

Accounts receivable - other

3,753

Deferred tax assets

4,966

Other

6,466

Allowance for doubtful accounts∆1,488

II. Non-current assets:
1. Property, plant and equipment:(

169,466)(

94,934)70,424

Machinery, equipment and vehicles

80,454Tools, furniture and fixtures

30,654

Other

2,983

Accumulated depreciation∆140,016
48,674

Construction in progress

1,758

2. Intangible assets:(

15,925)

Goodwill

7,663

Other

8,262

3. Investments and other assets:

Net defined benefit asset

58,606)42,407
479

Deferred tax assets

8,966

Other

6,952

Allowance for doubtful accounts∆199

Total assets

329,115((

74,411)
10,0007,246
57,323∆158
20,110)10,719
∆28
8,190
1,647
∆417
8,170)
102,692
329,115

Consolidated Financial Statements

Audit Report

Investment securities((

Non-consolidated
Financial Statements

Land

Consolidated Financial
Statements

Buildings and structures(

139,789)
24,267
7,766
39,56535,342
15,442
1,851
19
4,054
468
297
16
10,696
86,633)49,811
9,232
3,614
244
98
87
84
72
17
17,011
459
5,898
226,423

Business Report

39,131(

Reference Documents for the
General Meeting of Shareholders

Cash and deposits(Liabilities)
I. 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
Other provision
Asset retirement obligations
Other
II. Non-current liabilities
Long-term loans payable
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Provision for environmental measures
Provision for gift certificate exchange losses
Provision for loss on business withdrawal
Provision for long-term goods warranties
Provision for directors’ retirement benefits
Other provision
Net defined benefit liability
Asset retirement obligations
Other
Total liabilities(Net assets)
I. Shareholders’ equity:
1 Capital stock
2 Capital surplus
3 Retained earnings
4 Treasury shares
II. Accumulated other comprehensive income:1 Valuation difference on available-for-sale securities
2 Deferred gains or losses on hedges
3 Revaluation reserve for land
4 Foreign currency translation adjustment
5 Remeasurements of defined benefit plans
III. Non-controlling interests
Total net assets
Total liabilities and net assets

AmountNOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Consolidated Financial Statements36Consolidated Statements of Income (From April 1, 2015 to March 31, 2016)(Millions of yen)

Item

AmountI. Net sales

296,705

II. Cost of sales

188,164

Gross profit

108,540

III. Selling, general and administrative expenses

95,233Operating income
IV. Non-operating income:

13,307(

Interest income

184

Dividend income

855

House rent and other rental revenues

381

Other
V. Non-operating expenses:

2,190
(

2,144

Foreign exchange losses

1,009

Other

1,887

Ordinary income

11,879(Gain on sales of non-current assets
VII. Extraordinary losses:
Business structure improvement expenses

499)
499

(

3,532)
2,384

Restructuring expenses

473

Impairment loss

410

Loss on sales of non-current assets

147

Loss on retirement of non-current assets

116

Profit before income taxes

Consolidated Financial Statements

5,041)

Interest expenses

VI. Extraordinary income:37

3,612)

8,846

Income taxes - current

3,779

Income taxes - deferred∆7,014

Profit12,081

Profit attributable to non-controlling interests∆60

Profit attributable to owners of parent

12,142

(Millions of yen)

Shareholders’ equity
Capital stock

Capital surplus

10,0007,414

Retained earnings
47,765

Treasury shares

Total shareholders’ equity∆151

65,027∆2,584

Profit attributable to owners of parent∆2,584

12,142

12,142
∆6

∆6

∆167

∆167

—

∆167

9,558

∆6

9,383

10,0007,246

57,323∆158

74,411Business Report

Purchase of treasury shares
Change in treasury shares ofparent arising from transactions
with non-controlling shareholders
Net changes of items otherthan shareholders’ equity
Total changes of items during theconsolidated fiscal year
Balance at end of current period

Reference Documents for the
General Meeting of Shareholders

Balance at beginning of current period
Changes of items during theconsolidated fiscal year under review
Dividends of surplus

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Consolidated Statements of Changes in Equity (From April 1, 2015 to March 31, 2016)(Millions of yen)

Deferred
gains orlosses onhedges

Revaluation
reserve forland

Foreigncurrencytranslation
adjustment

Remeasurementsof defined benefit
plans

13,007

39

7,991

4,796

∆452

NonTotal accumulated
controllingothershareholders’comprehensive
interests
income25,383

2,178

Total net
assets

92,589∆2,584

Profit attributable to owners of parent

12,142

Purchase of treasury shares
Change in treasury shares ofparent arising from transactions
with non-controlling shareholders
Net changes of items otherthan shareholders’ equity
Total changes of items during theconsolidated fiscal year
Balance at end of current period∆6∆167∆2,288∆68

198∆3,14934∆5,272

5,991

Non-consolidated
Financial Statements

Balance at beginning of current period
Changes of items during theconsolidated fiscal year
Dividends of surplus

Valuationdifference on
available-forsale securities

Consolidated Financial
Statements

Accumulated other comprehensive income

719

∆68

198

∆3,14934∆5,272

5,991

10,102

10,719

∆28

8,190

1,647

∆417

20,1108,170

102,692

Consolidated Financial Statements

Audit Report∆2,28838

Notes to Consolidated Financial Statements

Notes to Important Matters that are the Basis for Preparation ofConsolidated Financial Statements(1) Matters‌relating to scope of consolidation
Number of consolidated subsidiaries: 63
SEIKO WATCH CORPORATION, SEIKO INSTRUMENTS
INC., MORIOKA SEIKO INSTRUMENTS INC., SEIKOPRECISION INC., SEIKO SOLUTIONS INC., SEIKO
CLOCK INC., WAKO Co., Ltd., SEIKO Corporation ofAmerica, SEIKO U.K. Limited, SEIKO Hong Kong Ltd.,
S.I.E. Netherlands B.V., Dalian Seiko Instruments Inc.,
Seiko Instruments (Thailand) Ltd., Seiko Instruments
Singapore Pte. Ltd., SEIKO Precision (Thailand) Co., Ltd.,and others.
SII SEMICONDUCTOR CORPORATION was includedin the scope of consolidation as from the 2nd quarter
consolidated accounting period due to incorporation. SII
Semiconductor U.S.A. Corporation and SII
Semiconductor Hong Kong Limited were included in thescope of consolidation as from the 4th quarterly
consolidated accounting period due to incorporation.
SEIKO I INFOTEC INC. was excluded from the scopeof consolidation as from the 3rd quarterly consolidated
accounting period due to the sale of shares in it held by
the Company.
Non-consolidated subsidiaries:
Aoba Watch Service Co., Ltd. and others are of a small
scale in terms of sales, total assets, net income 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: 4
SEIKO OPTICAL PRODUCTS CO., LTD., OHARA INC.,
and others.

39

Consolidated Financial Statements

Non-consolidated subsidiaries and affiliates notaccounted 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.

(3) ‌Standards and methods for evaluating
significant assets(i) Inventories
Basically stated at cost using the moving-averagemethod (for values stated on the balance sheet,writing down the book values in response to
decreased profitability)(ii) Securities
Bond held to maturity
Amortized cost method (straight-line method)
Available-for-sale securities
Securities with market valueMarket value method based on the market priceas of the consolidated closing date (differences invaluation are included directly in net assets andthe costs of securities sold are calculated using
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 (excluding leased
assets)As for domestic consolidated companies, basicallythe straight-line method is used for buildings(excluding equipment attached to buildings), and thedeclining-balance method for those other thanNon-consolidated
Financial Statements

Accounting standards for the amount of completed workand 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 isused, and for other portions of work, a work-completion
method is used.

Consolidated Financial
Statements(6) ‌Accounting standards for significant
income and expenses

Business Report
Audit Report(i) Allowance for doubtful accounts
In order to prepare for possible losses on uncollectible
receivables held, estimated uncollectible amounts areposted: for general receivables, according to thehistorical percentage of uncollectibles, and for
doubtful receivables, considering the probability ofcollection.
(ii)	Provision for loss on investments to subsidiaries
and affiliates
In order to prepare for possible losses on investments
to subsidiaries and affiliates, an amount deemednecessary 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 of 4 million yen is directlyreduced from the amount of investment securities.
(iii)Provision for bonuses
In order to prepare for payment of bonuses to
employees, a provision is made based on theestimated bonus payments, which are attributable tothe consolidated fiscal year under review.

Reference Documents for the
General Meeting of Shareholders(5) ‌Accounting standards for significant
allowances and provisions(iv)Provision for merchandize warranties
As for some of the consolidated subsidiaries outside
Japan, an amount estimated according to theirrespective historical percentages is posted.
(v) Provision for environmental measures
In order to prepare for possible expenditure aimed atfuture environmental measures, an estimated amountto be incurred is posted.
(vi)Provision for gift certificate exchange losses
In order to prepare for possible losses relating to gift
certificates collected after cancelling their inclusion in
liabilities, provision is made for an estimatedredemption amount according to the historicalpercentage of collection of such gift certificates.
(vii) Provision for loss on business withdrawal
In order to prepare for possible losses relating to thebusiness withdrawal, an estimated loss amount isposted.
(viii) Provision for directors’ retirement benefits
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 forincumbent officers is posted corresponding to theterms of office till the end of the ordinary GeneralM e e t i n g o f S h a re h o l d e r d u r i n g t h e re l e v a n t
consolidated fiscal year.

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

buildings; as for consolidated subsidiaries outside
Japan, basically the straight-line method is used. As
for domestic consolidated companies, a useful life
and a residue value are basically evaluated using thesame 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 isbasically evaluated using the same standards as set
forth in the Corporation Tax Act. However, as forsoftware for in-house use, the straight-line method isused with a usable period of 5 years.
(iii)Leased assets‌L eased assets relating to finance lease withtransfer of ownership
The same depreciation method as applied to theproperty, etc. owned by the Company is used.
‌L ease assets relating to finance lease withouttransfer of ownership
The straight-line method is used with a useful life of
the lease period and with a residue value of zero.

Consolidated Financial Statements40

(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 aretreated as income or loss. The assets and liabilities ofsubsidiaries 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, andtranslation differences are included in “Foreign currencytranslation adjustment” and “Non-controlling interests” of
the “Net assets”.

(8) ‌Significant hedge accounting methods(i) Hedge accounting method
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, and with regard tointerest-rate swaps that meet the requirements for
exceptional accounting (“tokurei-shori”), exceptional
accounting is employed.
(ii) Means of hedging and hedged items
Forward exchange transactions to hedge foreignexchange-rate fluctuation risks regarding foreign
currency-denominated trade payables andreceivables; and interest-rate swaps to avoid
fluctuation risks regarding loans payable on floatinginterest rates.
(iii)Hedging policy
Derivatives are used to avoid exchange-rate
f l u c t u a t i o n r i s k s p re s e n t i n f o re i g n c u r re n c yreceivables/payables, and interest fluctuation riskspresent in loans payable, to the extent of actual
demands, and are not used to conduct speculativetransactions. Derivatives are managed in accordancewith the internal rules of each company.
(iv)Assessment of hedge effectivenessFor interest-rate swaps, hedge effectiveness is
assessed by analysis of the percentage between theaccumulated cash flow changes of hedged items and41

Consolidated Financial Statements

the accumulated cash flow changes by means ofhedging.

(9) ‌Accounting for employees’ retirement
benefits
In order to prepare to pay retirement benefits toemployees, liabilities related to retirement benefits areposted based on the estimated amount of retirement
benefit obligations minus the amount of plan assets as ofthe 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 theend of the consolidated fiscal year under review. The
actuarial differences that resulted are recognized in thefollowing consolidated fiscal year by the straight-line
method over various periods (5 to 10 years) that are notmore than the average remaining service period of
employees at the time of the accrual of a difference.
Unrecognized actuarial differences after tax effectadjustment 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 areaccounted for by the tax exclusion method.

(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.

<Consolidated Statements of Income>“House rent and other rental revenues” that was
included in “Other” of “Non-operating income” in the
consolidated fiscal year ended March 31, 2015 was
separately itemized as from the consolidated fiscal year
under review because the amount became moresignificant.
“House rent and other rental revenues” in the
consolidated fiscal year under review was 301 million
yen.

Consolidated Financial
Statements<Consolidated Balance Sheet>“Leased assets” in “Property, plant and equipment”,
which was separately itemized in the consolidated fiscal
year ended March 31, 2015 was included in “Property,
plant and equipment” and presented as “Other” as fromthe consolidated fiscal year under review because theamount became less significant.
“Leased assets” in the consolidated fiscal year underreview was 2,983 million yen.

Business Report

The “Accounting Standards for Business Combination”(Corporate Accounting Standards No. 21 dated
September 13, 2013; the “Accounting Standards for
Business Combination”), the “Accounting Standards for
Consolidated Financial Statements” (Corporate
Accounting Standards No. 22 dated September 13,
2013; the “Consolidated Accounting Standards”) andthe “Accounting Standards for Business Divestitures”( C o r p o r a t e A c c o u n t i n g S t a n d a rd s N o . 7 d a t e d
September 13, 2013; the “Accounting Standards for
Business Divestitures”) are applied from the consolidated
fiscal year under review. Differences due to changes in
the Company’s interests in subsidiaries which remain
controlled by the Company are posted as capitalsurplus, and expenses related to acquisition of such
subsidiaries are posted as expenses during theconsolidated fiscal year in which such expenses
accrued. In addition, regarding business combinations
to be conducted after the beginning of the consolidated
fiscal year under review, the accounting policy has beenchanged so that revisions in the appropriated amount ofacquisition costs after fixing interim accounting can bereflected on the Consolidated Financial Statements forthe consolidated fiscal year in which the relevantbusiness consolidation date falls. Further, there is achange in the presentation method of net income, and achange in the presentation from “Minority Interests” to“Non-controlling interests”.
The Accounting Standards for Business Combinationand others are applied in accordance with transitional
measures set forth in Paragraph 58-2(4) of the
Accounting Standards for Business Combination,
Paragraph 44-5(4) of Consolidated AccountingStandards, and Paragraph 57-4(4) of the AccountingStandards for Business Divestitures, from the beginningof the consolidated fiscal year under review into the
future.
None of these changes has any material impact on
the Consolidated Financial Statements during theconsolidated fiscal year under review.

Reference Documents for the
General Meeting of Shareholders

Notes to Changes in Presentation
MethodNOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Notes to Changes in Accounting
PolicyNon-consolidated
Financial Statements

Audit Report
Consolidated Financial Statements

42

Notes to Consolidated Balance Sheet(1) ‌Assets provided as security andsecured obligations
Assets provided as security
Cash and deposits

4,282 million yen

Notes and accounts receivables - trade

2,751 million yen

Merchandise and finished goods

1,856 million yen

Work in process

3,465 million yen

Securities with remaining maturities of
one year or less (other current assets)

169 million yen(2) ‌Guarantee obligation
Guarantees and quasi-guarantees 41 million yen(3) ‌Amount of discount on negotiable
instruments receivable
609 million yen(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

Buildings

3,041 million yen

Land11,763 million yen“Deferred tax liabilities for land revaluation” ofInvestment securities

29,599 million yen“Liabilities” and the balance thereof is posted as

Total

56,930 million yen

Other than the above items, shares in consolidated
subsidiaries (11,100 million yen) that were offset anddeleted due to consolidation are provided as security.
Secured obligations
Short-term loans payable

21,700 million yen

Current portion of long-term loans payable 16,449 million yen
Long-term loans payable

33,330 million yen

Accounts payable - other1 million yen

Gift certificates (other current liabilities)

97 million yen

Total

71,579 million yen

differences which correspond to taxes are posted as“Revaluation reserve for land” of “Net assets”.
(i) 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 Revaluationof Land (Cabinet Order No. 119 promulgated on
March 31, 1998), and that land without a main-street
land price was evaluated based on the assessedvalue of fixed assets as set forth in item 3 thereof,
with reasonable adjustment.
(ii) Date of revaluation:
March 31, 2001

(5) Out of investment securities, 169 million yen is forlending stock.

43

Consolidated Financial Statements

(1) ‌Matters relating to type and total number of issued shares, and type and number oftreasury shares
Number of shares at the
beginning of the consolidated
fiscal year under review

Number of shared increased
during the consolidated fiscal
year under review

Number of shared decreased Number of shares at theduring the consolidated fiscal end of the consolidated
year under review
fiscal year under review

Issued shares
207,021——207,021

Total

207,021——207,021

Common shares (Note)

377

9

—

387

Total

377

9

—

387

Treasury sharesBusiness Report

Common shares

Reference Documents for the
General Meeting of Shareholders(Thousands of shares)

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Notes to Consolidated Statements of Changes in Equity(Note) The increase in common shares (9,000 shares) is the result of the purchase of fraction shares.

Consolidated Financial
Statements(2) Matters relating to dividend of surplus
Amount of dividend paid
Total dividend

Dividend per share(million yen)

(yen)Type of shares

Annual shareholders’meeting on June 26, 2015

Common share

1,550

Board of Directors’ meeting
Common shareon November 10, 2015

1,033

Record date

Effective date

7.50

March 31, 2015

June 29, 2015

5.00

September 30, 2015

December 10, 2015

Non-consolidated
Financial Statements

Resolution‌Dividend for which the record date falls in the consolidated fiscal year under review but the

Resolution

Type ofsharesAnnual shareholders’meeting on June 26, 2016

Commonstock

Total dividend(million yen)

1,550

Source fordividend
Retainedearnings

Dividend per share
(yen)

7.50

Record date

Effective date

March 31, 2016

June 30, 2016

Consolidated Financial Statements

Audit Reporteffective date comes after the end of that consolidated fiscal year

44Notes to Financial Instruments
Most of the notes and accounts payable - trade(1) ‌Matters relating to status of financial
instruments(which are operating payables) are due within one year.

The Company Group raises funds (mainly borrowing

transactions, and interest-rate swaps are used to hedge

from banks) necessary in light of respective businesspart of exchange-rate fluctuation risks.

plans of business companies. Temporary surplus funds
are invested in more safe financial assets.

Loans payable are mainly to raise funds for operating

Derivatives include forward exchange contracts tohedge exchange-rate fluctuation risks present in foreign

Notes and accounts receivables - trade (which are

currency receivables/payables, and interest-rate swaps

operating receivables) are exposed to customers’ credit

to hedge fluctuation risks of interest rates payable onrisks; as such, the Company controls each customer’sloans payable.

due date and balance, and understands major
customers’ credit status. Exchange-rate fluctuation risks
for foreign currency operating receivables due to theCompany’s global development are almost set off by therisks resulting from foreign currency operating payables,

Amounts posted on the Consolidated Balance Sheet,some of which are hedged using forward exchange

market values, and the corresponding differences

contracts. Investment securities are mainly bonds held

between the two as of March 31, 2016, are as follows.

to maturity or shares of customers, and exposed tomarket price fluctuation risks.

45(2) ‌Matters relating to market value, etc. offinancial instruments

Consolidated Financial Statements

Items, for which ascertaining market values are
extremely difficult, are not included in the table below.

Market value (*)

Difference

39,131

39,131—(2) Notes and accounts receivable - trade41,623

41,623—(3) Accounts receivable - other

3,753

3,753

—

(4) Investment securities(i) Bonds held to maturity(ii) Shares in subsidiaries and affiliates(iii) Available-for-sale securities

169
17,422
22,146

171
5,598
22,146

1∆11,824—(5) Notes and accounts payable - trade(24,267)(24,267)—(7,766)(7,766)—(7) Short-term loans payable(39,565)(39,565)—(8) Current portion of long-term loans payable(35,342)(35,461)∆118(9) Accounts payable - other(15,442)(15,442)—(10) Long-term loans payable(49,811)(50,104)

∆293

(286)

(286)

—

(11) Derivatives

Non-consolidated
Financial Statements

Audit Report(Note 1)
Calculation methods for the market value of financial instruments and transactions involving securities and derivatives(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, bonds are based on their quotes from counterparty financial institutions.
(5) Notes and accounts payable - trade, (6) Electronically recorded obligations, (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 theassumed interest rate that would be applied when new borrowings are conducted. The market value of long-term loans payable that are subject to
exceptional accounting treatment for interest-rate swaps is calculated by discounting the total amount of principal and interest, which is treated as one
with the interest-rate swap in question, by a logically estimated interest rate that would be applied when similar borrowings are conducted.
(11) Derivatives
Derivatives conducted through exceptional accounting treatment of interest-rate swaps are treated as being one with the long-term loans payable under
the relevant hedge. As such, the market value of such transactions is presented as being included in the market value for the long-term loans payable
concerned.

Consolidated Financial
Statements(*) Items posted as liabilities are enclosed in brackets.

Business Report(6) Electronically recorded obligations

Reference Documents for the
General Meeting of Shareholders(1) Cash and deposits

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS(Millions of yen)Amounts posted on theConsolidated Balance Sheet (*)(Note 2)Unlisted shares (posted as 118 million yen on the Consolidated Balance Sheet) and shares in unlisted subsidiaries and affiliates (posted as 2,720 million yen
on the Consolidated Balance Sheet) have no market price, and it is recognized that ascertaining their market value is extremely difficult. As such, these
items are not included in “(4) Investment securities”.

Consolidated Financial Statements

46

Notes to Leased Property
The Company and some of its subsidiaries own real

as non-operating expenses) and impairment loss was 96

property for lease and others in Tokyo and other regions.

million yen (posted as extraordinary loss).

Income or expenses from the leased property during the

The amount posted on the Consolidated Balancefiscal year ended March 2016 was 282 million yen (rentSheet, major changes during the consolidated fiscal year

income was posted as non-operating income andunder review, market value on the consolidated closing

expenses are posted as non-operating expenses), loss

date, and the calculation method of such market value

on sales of non-current assets was 90 million yen (posted

are as follows:(Millions of yen)Amounts posted on the Consolidated Balance Sheet
Balance at the beginning of theAmount of increase/decrease during theBalance at the end of theconsolidated fiscal year under review consolidated fiscal year under review consolidated fiscal year under review
14,705∆657

14,047

Market value on the
consolidated closing date
14,086(Note 1) ‌Amounts posted on the Consolidated Balance Sheet were the acquisition costs minus accumulated depreciation and accumulated impaired loss.
(Note 2) ‌Major reasons for increase/decrease during the consolidated fiscal year under review is the decrease due to sale of real property (740 million yen).
(Note 3) ‌Calculation method of market value
Basically the amount based on a real-estate appraisal report prepared by a real-estate appraiser.

Notes to Per-Share Information
Net assets per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457.44 yen
Profit per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58.76 yen(as calculation basis) Profit attributable to parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,142 million yen
Profit attributable to parent, available to common shares. . . . . . . . . . . . . . . 12,142 million yen
Average number of shares during the fiscal year under review . . . . . . . . . . . .  206,638 thousand shares

47

Consolidated Financial Statements

During the consolidated fiscal year under review, the Company Group posted impairment loss on the following asset
groups:Nasushiobara-shi, Tochigi,
and others

Assets for business use,
and others

Assets for business use

Type

Impaired loss

Building and structures

24 million yen

Machinery, equipment and vehicles

128 million yen

Tools, furniture and fixtures

42 million yen

Tangible non-current assets (other)

1 million yen

Land

84 million yen

Construction in progress

49 million yen

Intangible non-current assets (other)

21 million yen

Machinery, equipment and vehicles

57 million yen

and such decrease was posted as impairment loss of

based on a management accounting business unit, andextraordinary losses.

leased property, underutilized property, and property forsale are grouped based on individual property.

The recoverable amount for the relevant asset group
was measured based on use value or true cash value;use value was calculated by discounting future cash flow

belonging to business operations whose future cash flowby 4.25% while true cash value was calculated using

is not likely to be collected due to lowered profitability

market value, etc. based on the assessed value of theresulting from changes in the market environment, their

fixed asset.

Non-consolidated
Financial Statements

In the Electronic Devices Business, for the assets

Consolidated Financial
Statements

In principle, the Company Group groups its assets

Business Report

China

Use

Reference Documents for the
General Meeting of Shareholders

Location

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Notes to Impairment Lossbook values were decreased to the recoverable amount,

Audit Report
Consolidated Financial Statements

48

Notes to Business Combination
and Business Divestitures
Transactions under common control(1) Outline of transaction

Development Bank of Japan Inc. (“DBJ”) and SII, underwhich both companies will work to operate SSJ, and with
an option that after the lapse of two years, some of SSJ
shares held by SII will be further transferred to DBJ. They
aim to establish a smooth management and operation
system for the Business by SII continuously holding

Name and description of target businesscertain interests in SSJ, to develop SSJ and expand

Name of business: Semiconductor business of SEIKO

earnings by working with DBJ, and to contribute to the

INSTRUMENTS INC. (the Company’s consolidated

enhanced mid- and long-term corporate value of SII andsubsidiary)

the Company Group as a whole.

Description of business: Mainly manufacture and saleof analogue semiconductors

Date of business combination
January 5, 2016

Legal form of business combination(2) ‌Outline of accounting conducted forbusiness combination
Pursuant to the “Accounting Standards for Business
Combination” and the “Guidance on AccountingStandard for Business Combinations and BusinessCompany split where SEIKO INSTRUMENTS INC. (theDivestitures”, the business combination was treated as a

Company’s consolidated subsidiary) is the split company

common control transaction.

and SII SEMICONDUCTOR CORPORATION (theCompany’s consolidated subsidiary) is the succeedingcompany

Name after business combination
SII SEMICONDUCTOR CORPORATION (the Company’s

Notes to Significant
Post-Balance Sheet Events
Not applicable.

consolidated subsidiary)‌O ther matters relating to the outline oftransaction

49

Presentation of Amounts

An agreement was executed to transfer the

In the Consolidated Balance Sheet, Consolidated

semiconductor business of SEIKO INSTRUMENTS INC.

Statement of Income, Consolidated Statements of(“SII”) (the “Business”) to SII SEMICONDUCTOR

Changes in Equity, and Notes to Consolidated Balance

CORPORATION (“SSJ”), a new semiconductor business

Sheet, any amount less than one million yen iscompany based on a co-investment between

discarded.

Consolidated Financial Statements

Non-Consolidated Balance Sheet (As of March 31, 2016)(Millions of yen)

Item

AmountItem(Assets)
Current assets:

Prepaid expenses

8,610
528

Short-term loans receivable

20,149Accounts receivable - other

6,459

Deferred tax assets

407

Other

361

Property, plant and equipment
Buildings∆21
110,650
22,966
4,055

Furniture and fixtures
Land

671
18,17514

Construction in progress48

Intangible assets:

2,585

Leasehold

1,952
15

Software

597

Other

20

Investments and other assets:

85,098Investment securities

21,823

Shares of subsidiaries and affiliates

60,1790Long-term loans receivable from subsidiaries and affiliates

10,800Bankruptcy and reorganization claims

10Long-term prepaid expenses

6

Guaranty money deposited
Other

2,963
173

Allowance for doubtful accounts∆10,859

Total assets

147,145

Total liabilities and net assets

20,220∆131
18,129
9,942
∆3
8,190
54,964

Audit Report

Contributions in subsidiaries and affiliates

36,835
10,000
6,625
2,378
4,246
20,342121

Non-consolidated
Financial Statements

Trademark rights

Consolidated Financial
Statements

Leased assets

56,13923,423
18,829
1
1,884
192
3
11,454238
99
9
336,041
22,999
12
4,414
3,614
3
830
9
19
3,995
143
92,181Business Report

Allowance for doubtful accounts
Non-current assets:(Liabilities)
Current liabilities:
Short-term loans payable
Current portion of long-term loans payable
Lease obligations (current)
Accounts payable - otherAccrued expenses
Income taxes payable
Deposit received
Unearned income
Provision for bonuses
Asset retirement obligations (current)
Other
Non-current liabilities
Long-term loans payable
Lease obligations (non-current)
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Provision for directors’ retirement benefits
Provision for loss on subsidiaries and affiliates
Provision for environmental measures
Asset retirement obligations (non-current)
Guarantee deposits received
Other
Total liabilities(Net assets)
Shareholders’ equity:
Capital stock
Capital surplus
Capital reserve
Other capital surplus
Retained earnings
Retained earnings reserve
Other retained earnings
Retained earnings carried forward
Treasury shares
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Total net assets

Reference Documents for the
General Meeting of Shareholders

Cash and deposits

36,495

AmountNOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Non-consolidated Financial Statements

147,145

Non-consolidated Financial Statements

50

Non-Consolidated Statements of Income (From April 1, 2015 to March 31, 2016)(Millions of yen)

Item
Operating income:

6,951

Proceeds from management guidance

2,168Royalty revenue

2,864

Operating expenses:

7,892

Operating income

4,091

Non-operating income:

1,704Interest income

465

Dividend income

840

Service contract fee

179

Other

218

Interest expenses

1,403
1,061

Property lease expenses

245

Other

96
Ordinary income

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

4,393
481
481
3,025

Provision of reserve for loss on investments to subsidiaries and affiliates

2,270

Loss on valuation of shares of subsidiaries and affiliates

750

Loss on valuation of golf-club membership

5

Profit before income taxes

1,849

Income taxes - current∆2,003

Income taxes - deferred

482

ProfitNon-consolidated Financial Statements

11,984

Dividend received from subsidiaries and affiliates

Non-operating expenses:

51

Amount3,370

(Millions of yen)

Shareholders’ equity
Capital surplus
Other capital

Total capitalreserve

surplussurplus

2,378

4,246

6,625

Retainedearnings
reserve

Other retained
earnings

Total retained

Retained earnings

earnings

carried forward

121

19,555

Dividends of surplus∆2,584∆2,584

Profit

3,370

3,370

Changes of items during period

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

—

—

—

—

—

786

786

10,000

2,378

4,246

6,625

121

20,22020,342

TreasurysharesBalance at beginning of current period∆125

Valuation and translation adjustments

Total
Valuation difference Deferred gains
shareholders’ on available-foror losses on
equitysale securities
hedges36,055

12,244∆24

Revaluation
reserve for
land
7,991

Total valuationand translation
adjustments

Total net
assets

20,211

56,267

Dividends of surplus∆2,584∆2,584

Profit

3,370

3,370

∆6

∆6

Purchase of treasury shares∆6

Net changes of items other thanshareholders’ equity during period∆2,30220

198∆2,082∆2,082∆6780∆2,30220

198∆2,082∆1,302

Balance at end of current period∆131

36,835

9,942

∆3

8,190

18,12954,964Non-consolidated Financial Statements

Audit Report

Total changes of items during period

Non-consolidated
Financial Statements

Changes of items during period

Consolidated Financial
Statements(Millions of yen)

Shareholders’ equity

Business Report

19,434

Balance at beginning of current period

10,000CapitalReference Documents for the
General Meeting of Shareholders

Capital stock

Retained earnings

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

Non-Consolidated Statements of Changes in Equity (From April 1, 2015 to March 31, 2016)52

Notes to Non-Consolidated Financial Statements

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 asof the closing date (differences in valuation are
included directly in net assets and the costs of
securities sold are calculated using the movingaverage method)
Securities without market value:
Stated at cost using the moving-average method(2) ‌Standards and methods for evaluating
derivatives(i) Derivatives:
Market value method(3) ‌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 to buildings), and thedeclining-balance method for those other thanbuildings. A useful life and a residue value are
evaluated using the same standards as set forth in
the Corporation Tax Act.
53

Non-consolidated Financial Statements(ii) Intangible non-current assets (excluding leased
assets)
The straight-line method is used. A useful life isevaluated using the same standards as set forth in
the Corporation Tax Act. However, as for software forin-house use, the straight-line method is used with ausable period of 5 years.
(iii)Leased assets
Lease assets relating to finance lease without transferof ownership:
The straight-line method is used with a useful life of
the lease period and with a residue value of zero.

(4) ‌Accounting standards for significant
allowances and provisions(i) Allowance for doubtful accounts:
In order to prepare for possible losses on uncollectible
receivables held, estimated uncollectible amounts areposted: for general receivables, according to thehistorical percentage of uncollectibles, and for
doubtful receivables, considering the probability ofcollection.
(ii) Provision for bonuses:
In order to prepare for payment of bonuses to
employees, a provision is made based on theestimated bonus payments, which are attributable tothe fiscal year under review.
(iii)Provision for directors’ retirement benefits
At the Board of Directors meeting held on May 11,
2 0 0 4 , t h e C o m p a n y p a s s e d a re s o l u t i o n t oNon-consolidated Financial Statements

Audit Report

Consolidated tax system is applied.

Non-consolidated
Financial Statements(7) ‌Other Important Matters that are theBasis for Preparation of Financial
Statements

Consolidated Financial
Statements

Consumption taxes and local consumption taxes areaccounted for by the tax exclusion method.

Business Report(i) Hedge accounting method
Deferred hedge accounting is employed. However,with regard to forward exchange contracts that meetthe requirements for deferral hedge accounting(“furiate-shori”), deferral hedge accounting is
employed; with regard to interest-rate swaps that(6) ‌Accounting for consumption tax, etc.

Reference Documents for the
General Meeting of Shareholders(5) ‌Hedge accounting method

meet the requirements for exceptional accounting(“tokurei-shori”), exceptional accounting is employed.
(ii) Means of hedging and hedged items:
Forward exchange transactions to hedge foreignexchange-rate fluctuation risks regarding foreign
currency-denominated trade payables andreceivables; and interest-rate swaps to avoid
fluctuation risks regarding borrowings on floatinginterest rate.
(iii)Hedging policy
Derivatives are used to avoid exchange-ratefluctuation risk present in trade payables and interest
fluctuation risk present in borrowings and othermeans of fund raising, to the extent of actual
demands, and are not used to conduct speculativetransactions. Derivative transactions are managed inaccordance with internal rules of each company.
(iv)Assessment of hedge effectivenessFor interest-rate swaps, hedge effectiveness is
assessed by analysis of the percentage between theaccumulated cash flow changes of hedged items andthe accumulated cash flow changes by means ofhedging.

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

discontinue its directors’ retirement benefit system. In
c o n n e c t i o n w i t h t h i s , re t i re m e n t b e n e f i t s f o r
incumbent officers are expected to be continuously
paid pursuant to the abolished Directors’ Retirement
Benefit Rules; as such, the amount therefor is posted
corresponding to their terms of office till the end of theordinary General Meeting of Shareholders held on
June 29, 2004.
(iv)Provision for loss on investments to subsidiaries
and affiliates:
In order to prepare for possible losses on investments
to subsidiaries and affiliates, an amount deemednecessary 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 of 2,124 million yen is
directly reduced from the amount of shares insubsidiaries and affiliates.
(v) Provision for loss on subsidiaries and affiliates:
In order to prepare for possible losses exceeding thebook value of investments to any subsidiary oraffiliate, an amount deemed necessary is provided forthe loss exceeding the amount of receivables fromsuch subsidiary or affiliate.
(vi)Provision for environmental measures:
In order to prepare for possible expenditure aimed atfuture environmental measures, an estimated amountto be incurred is posted.

54

Notes to [Non-Consolidated] Balance Sheet, Statements of Income, andStatements of Changes in Equity(1) ‌Assets provided as security andsecured obligations
Assets provided as security

Short-term receivables . . . . . . . . . . . . . . . .  25,725 million yen

Buildings

3,129 million yen

Land11,763 million yen

Investment securities

21,816 million yen

Shares in subsidiaries and affiliates

2,131 million yen

Operating income  . . . . . . . . . . . . . . . . . . . . . .  11,749 million yen

38,840 million yen

Operating expenses  . . . . . . . . . . . . . . . . . . . . .  1,242 million yen

Total

Short-term loans payable

21,700 million yen

Current portion of long-term loans payable

14,449 million yen

Long-term loans payable

15,330 million yen

Total

51,479 million yen(2) ‌Accumulated depreciation of tangible
non-current assets
7,729 million yen(3) ‌Guarantee obligations
Quasi-guarantee 3,662 million yen

Non-consolidated Financial Statements

Short-term payables . . . . . . . . . . . . . . . . . . .  12,661 million yen
Long-term receivables  . . . . . . . . . . . . . . . .  10,800 million yen
Long-term payable . . . . . . . . . . . . . . . . . . . . . . .  1,638 million yen

Transactions other than operating transactions
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2,888 million yen

Secured obligations

55(4) ‌Monetary claims, monetary debts andtransactions with subsidiaries andaffiliates(5) ‌Revaluation of land for business use
Land for business use was revaluated pursuant to the“Act on Revaluation of Land” (Act No. 34 promulgatedon March 31, 1998), and valuation differences whichcorrespond to taxes are posted as “Deferred tax
liabilities for land revaluation” of “Liabilities” and thebalance thereof is posted as “Revaluation reserve forland” 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 Revaluationof Land (Cabinet Order No. 119 promulgated on
March 31, 1998), and that land without a main-street
land price was evaluated based on the assessedvalue of fixed assets as set forth in item 3 thereof,
with reasonable adjustment.

Out of shares in subsidiaries and affiliates, 46 million yen
is for lending stock.

“Provision of reserve for loss on investments to
subsidiaries and affiliates” of “Extraordinary losses”
consists of providing a reserve for loss on investments to
subsidiaries and affiliates (2,120 million yen), an
allowance for doubtful accounts of subsidiaries and(8) ‌Notes to Statements of Changes in
EquityType and number of treasury shares at the end of the
fiscal year under review
Common shares 282,415 sharesBusiness Report

Notes to Tax Effect Accounting

Deferred tax liabilities
29 million yen

Assets for adjustment of profit and loss due to transfer

20 million yen

Allowance for doubtful accounts

3,331 million yen

Valuation difference on available-for-sale securities

4,388 million yen

Loss on valuation of shares in subsidiaries

5,368 million yen

Other

Allowance for loss on investments to subsidiaries and affiliates

650 million yen

Deferred tax liabilities - total

Allowance for loss of subsidiaries and affiliates

254 million yen

Net deferred tax assets (liabilities) ∆4,006 million yen

Impaired loss on non-current assets

713 million yen

Assets for adjustment of profit and loss due to transfer

1,239 million yen

Long-term accounts payable

43 million yen

Reserve for bonuses

110 million yen

Deferred tax assets - subtotal

13,060 million yen

Valuation-related reserves∆12,610 million yen

Deferred tax assets - total

450 million yen

4,456 million yen

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

Audit ReportOther1,319 million yen

47 million yen
Non-consolidated
Financial Statements

Loss carried forward

Consolidated Financial
Statements(1) ‌Breakdown by major reason forincurring deferred tax assets anddeferred tax liabilities
Deferred tax assets

Reference Documents for the
General Meeting of Shareholders(7) ‌Notes to Statements of Income

affiliates (540 million yen), reversal of an allowance for
doubtful accounts of subsidiaries and affiliates (330
million yen), and reversal of a reserve for loss on
subsidiaries and affiliates (60 million yen).

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS(6) ‌Notes to lending stock

million yen.

Non-consolidated Financial Statements56

(2) ‌Amendment to amounts of deferred tax
assets and deferred tax liabilities due tochanges in income tax rate, etc.
The “Act for the Partial Revision of the Income Tax Act,
Etc.” (Act No. 15 of 2016), and the “Act for the Partial
Revision of the Local Tax Act, Etc.” (Act No. 13 of 2016)
were enacted in the Diet session on March 29, 2016,
and a reduction of income tax rate, etc. was to be
implemented as from the fiscal year beginning on April 1,
2016. In this connection, the normal effective statutory
tax rate used to calculate deferred tax assets anddeferred tax liabilities for the fiscal year will change from
32.26% used in the previous fiscal years to 30.86% for

the fiscal years beginning on April 1, 2016 and April 1,2017 for those assets or liabilities expected to becollected or paid therein, and to 30.62% for those
expected to be collected or paid in the fiscal year
beginning on April 1, 2018 and thereafter.
Due to this change in tax rate, the amount of deferred
tax liabilities (net of deferred tax assets) was decreased by
228 million yen, and the amount adjustment for income
tax increased by 6 million yen, and the valuationdifference on available-for-sale securities increased by
235 million yen. Further, deferred tax liabilities uponrevaluation decreased by 193 million yen and therevaluation reserve for land increased by the sameamount.

Notes to Transactions with Related Parties(1) Parent company and major corporate shareholders
Attributes

Name ofcompany

Major
Sanko Kigyo
shareholder
K.K.
(company, etc.)

Ratio of voting rights held(%)

(Direct)(Closer parties or agreed parties)

11.5
5.4

Relationshipwith related
partyContent oftransaction

Property lease,etc.

Property lease

Transaction
amountItem(million yen)

Term-endbalance(million yen)

996

—

—

Transaction
amountItem

Term-endbalance(2) Subsidiaries and affiliates, etc.
Attributes

Name of company

SEIKO WATCHCORPORATION

Ratio of holding of Relationshipvoting rights, etc. with related
party
(%)

(direct)100.0

Interlocking
directorate

Subsidiary(million yen)(million yen)Royalty revenue

2,314

Accounts
receivable- other

1,223

Proceeds frommanagement
guidance

1,310

Accounts
receivable- other60(direct)100.0

Interlocking
directorate

Property rents

821

Accruedincome115

SEIKO Corporation of America (indirect)100.0

Interlocking
directorate

Debt guarantee

2,070

—

—

WAKO Co., Ltd.

57

Content oftransaction

Non-consolidated Financial Statements

Statements of Income, the property lease is offset with property rents, and posted as expenses for leased property.
		 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

are determined based on a professional valuation. In the Statements of Income, property rents are offset with expenses for leased properties.
		 5) Debt guarantee is the guarantee for borrowings from banks.
2. Transaction amounts do not include consumption tax, etc.; the term-end balance includes consumption tax, etc.

Notes to Per-Share Information
Profit per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16.30 yen(as calculation basis) Profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3,370 million yen

Business Report

Net assets per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265.86 yen

Reference Documents for the
General Meeting of Shareholders

considering the content of business operations.
		 4) ‌Regarding property rents, those of owned property leased for business use are determined linked to relevant income, and those leased as office

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS(Note) 1. Transaction terms and policies to determine them		 1) ‌The terms for property lease are determined based on the same standards as for general transaction terms after considering market price. In theProfit from common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3,370 million yen

Notes to Companies subject to Restriction on Consolidated Dividend
fiscal year under review is the last day of the last fiscal year.

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

Non-consolidated Financial Statements

Audit Report

In the Non-Consolidated Balance Sheet, Non-Consolidated Statements of Income, Non-Consolidated Statements ofNon-consolidated
Financial Statements

The Company will become a company subject to restriction on consolidated dividend from when the last day of theConsolidated Financial
Statements

Average number of shares during the fiscal year under review. . . . . .  206,744 thousand shares

58

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 6, 2016
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, 2015 to March 31, 2016
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.

59

Audit ReportCertified copy of audit report (on the non-consolidated financial statements) by the Accounting Auditor
Independent Auditor’s Report

May 6, 2016

Reference Documents for the
General Meeting of Shareholders

The Board of Directors
Seiko Holdings Corporation

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS[Translation]

KPMG AZSA LLC

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 155th fiscal year from April 1, 2015 to March 31, 2016 in accordance with Article 436,
Paragraph 2, Item 1 of the Companies Act.

Audit Report

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.

Non-consolidated
Financial Statements

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.

Consolidated Financial
Statements

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.

Business Report

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

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 Report60[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, 2016 (from April 1, 2015 to March 31, 2016).
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, 2016.

61

Audit ReportConsolidated Financial
Statements

Masatoshi Suzuki [seal]
Standing Corporate Auditor

Business Report

Board of Corporate Auditors
Seiko Holdings Corporation

Reference Documents for the
General Meeting of Shareholders

May 9, 2016

NOTICE OF ORDINARY GENERALMEETING OF SHAREHOLDERS

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.

Seiichi Mikami [seal]
Standing Corporate Auditor
Tomjijiro Morita [seal]
Outside Corporate Auditor

Non-consolidated
Financial Statements

Yoshiaki Yamauchi [seal]
Outside Corporate Auditor
Yoshiro Aoki [seal]
Outside Corporate Auditor

Audit Report
Audit Report62