[Translation]

June 7, 2019

To Shareholders with Voting Rights:

Disclosures on the Internet pursuant to Laws and Regulations and the Articles of Incorporation
regarding the Notice of the 158th Ordinary General Meeting of Shareholders

 Consolidated Financial Statements
Consolidated Statements of Changes in Equity･･･････････････

Pages 1

Notes to Consolidated Financial Statements･････････････････

Pages 2

 Non-Consolidated Financial Statements
Non-Consolidated Statements of Changes in Equity･･･････････

Pages 12

Notes to Non-Consolidated Financial Statements･････････････

Pages 13

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

SEIKO HOLDINGS CORPORATION

-1[Translation]
Consolidated Statements of Changes in Equity(From April 1, 2018 to March 31, 2019)
Millions of yen
Shareholders' equity
Capital stock

Balance at beginning of current period
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Net changes of items other thanshareholders' equity
Total changes of items during period
Balance at end of current period

Retainedearnings

Capital surplus

10,000

7,245

Total
shareholders'equityTreasury shares

67,975-334

84,886-1-3,100
9,249
-1

-1
-335

6,147
91,034-3,1009,249

10,000

7,245

6,148
74,124

Millions of yen
Accumulated other comprehensive income
Valuationdifference on
available-forsale securities

Balance at beginningof current period
Changes of items
during period
Dividends ofsurplusProfit attributableto owners of parent
Purchase oftreasury shares
Net changes of
items other thanshareholders' equity
Total changes of items
during period
Balance at end ofcurrent period

11,639Deferred
gains orlosses onhedges-294

Revaluation
reserve forland

Foreigncurrencytranslation
adjustment

8,190

468

Total
NonRemeasurements accumulated controllingof defined
otherinterests
benefit plans comprehensive
income-879

19,123

Total net
assets1,159 105,170-3,1009,249-1-1,539

190

-

410

2

-936

34

-902

-1,539

190

-

410

2

-936

34

5,245

10,099

-104

8,190

878

-876

18,186

1,194 110,415

-2[Translation]
Notes to Consolidated Financial Statements
1.

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

Matters relating to scope of consolidation
Number of consolidated subsidiaries: 56
SEIKO WATCH CORPORATION, Seiko Instruments Inc., Morioka Seiko Instruments,
SEIKO Solutions Inc., Seiko Clock Inc., WAKO Co., Ltd., Grand Seiko Corporation ofAmerica, Seiko Watch of America LLC, SEIKO U.K. Limited, SEIKO Hong Kong Ltd.,
Dalian Seiko Instruments Inc., Seiko Instruments (Thailand) Ltd., Seiko Instruments
Singapore Pte. Ltd., SEIKO Precision (Thailand) Co., Ltd., and others.
In the 2nd quarterly consolidated accounting period, Grand Seiko Corporation of America andSeiko Watch of America LLC were newly established as consolidated subsidiaries. In the 3rdquarterly consolidated accounting period, SEIKO Corporation of America, a consolidated
subsidiary, transferred its sales operation for luxury watches to Grand Seiko Corporation ofAmerica and was absorbed and merged into Seiko Watch of America LLC.
SII Insurance Service Inc. was excluded from the scope of consolidation from the 1st quarterly
consolidated accounting period, as it became insignificant following the commencement of its
liquidation proceedings.
Non-consolidated subsidiaries:
AOBA WATCH SERVICE Co. Ltd. and others are of a small scale in terms of net sales, total
assets, profit and loss, and retained earnings, and none of them have any material impact on
the consolidated financial statements. Therefore, they were excluded from the scope of
consolidation.

(2)

Matters relating to the application of the equity method
Number of affiliates accounted for by the equity method:
6
SEIKO OPTICAL PRODUCTS CO., LTD., OHARA INC., ABLIC Inc., and others.
Non-consolidated subsidiaries and affiliates not accounted for by the equity method:
AOBA WATCH SERVICE 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 movingaverage method (for values stated on the balance
sheet, writing down the book values in response
to decreased profitability)(ii) Securities
Available-for-sale securities
Market value method based on the market price
Securities with market value
as of the consolidated closing date (differencesin valuation are included directly in net assets
and the costs of securities sold are calculatedusing the moving-average method)
Stated at cost using the moving-average method
Securities without market value

-3(iii) Derivatives(4)

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

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

Accounting standards for significant allowances and provisions(i) Allowance for doubtful accounts
In order to prepare for possible losses on
uncollectible receivables held, estimateduncollectible amounts are posted: for general
receivables, according to the historical percentage
of uncollectibles, and for doubtful receivables,
considering the probability of collection.
(ii) Allowance for investment loss of In order to prepare for possible losses oninvestments to subsidiaries and affiliates, an
subsidiaries and affiliates
amount deemed necessary is provided after
considering the financial position of each company
and based on a respective review. The allowance
for investment loss of subsidiaries and affiliates of
4 million yen is directly reduced from the amountof 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
to the consolidated fiscal year under review.
(iv) Provision for goods warranties
To provide for warranties of the goods sold at someof the consolidated subsidiaries outside Japan,
respective estimated amount based on the pastexperience is posted.

-4(v) Provision for loss on lease
contracts

To provide for the loss expected to incur during thenon-cancellable periods, an amount equivalent to
the portion of rents for the real estate deemed likely
to be non-performing up to the expiry of leaseagreements is posted.

(vi) Provision for environmental
measures

In order to prepare for possible expenditure aimed
at future environmental measures, an estimatedamount to be incurred is posted.
In order to prepare for possible losses relating togift certificates collected after cancelling their
inclusion in liabilities, provision is made for an
estimated redemption amount according to thehistorical percentage of collection of such gift
certificates.
Some of the domestic consolidated companies
passed a resolution to discontinue their respective
directors’ retirement benefit systems during the
fiscal year ended March 2005 and that ended
March 2014. Accordingly, the amount of
retirement benefits for incumbent officers is posted
corresponding to the terms of office till the end of
the Ordinary General Meeting of Shareholders
during the relevant consolidated fiscal year.
To provide for the loss relating to the businesswithdrawal, which arose in the past but is expected
to incur in future, an estimated amount of such loss
is posted.

(vii) Provision for gift certificate
exchange losses(viii) Provision for retirement
benefits for directors (and otherofficers)(ix) Provision for loss on businesswithdrawal(6)

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

(7)

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

-5(8)

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

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

Accounting for employees’ retirement benefits
In order to prepare to pay retirement benefits to employees, the net defined benefit liability isposted based on the estimated amount of retirement benefit obligations minus the amount ofplan assets as of the end of the consolidated fiscal year under review. To calculate retirement
benefit obligations, the benefit formula method is adopted as a method to attribute theestimated retirement benefits to the periods up to the end of the consolidated fiscal year underreview. The actuarial differences that resulted are recognized in the following consolidated
fiscal year by the straight-line method over various periods (5 to 9 years) that are not morethan the average remaining service period of employees at the time of the accrual of adifference. Prior service costs are basically recognized by the straight-line method overvarious periods that are not more than the average remaining service period of employees at
the time of the accrual thereof. Unrecognized actuarial differences and unrecognized priorservice costs after tax effect adjustment are posted in “Remeasurements of defined benefit
plans”, “Accumulated other comprehensive income” in “Net assets”.

(10)

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

-6(11)

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

(12)

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

2.

Notes to Changes in Presentation Method
Changes associated with “Partial Amendments to Accounting Standard for Tax EffectAccounting”
The Company adopted “Partial Amendments to Accounting Standard for Tax EffectAccounting” (ASBJ Statement No. 28, issued on February 16, 2018) from the beginning of the
fiscal year under review, resulting in a change in presentation method whereby deferred tax
assets and deferred tax liabilities is presented under investments and other assets, and under
non-current liabilities respectively.
(Consolidated statements of income)(1)“House rent and other rental revenues” which were separately itemized in “Non-operating
income” in the previous fiscal year are included in “Other” under “Non-operating income” dueto its decreased financial significance.
“House rent and other rental revenues” in the fiscal year under review is 465 million yen,

(2)

“Royalty income” which was separately itemized under “Non-operating income” in theprevious fiscal year is included in “Other” under “Non-operating income” due to its decreased
financial significance.
“Royalty income” in the fiscal year under review is 393 million yen.

(3)

“Foreign exchange losses” that were separately itemized under “Non-operating expenses” inthe previous fiscal year are included in “Other” under “Non-operating expenses” in the fiscal
year under review due to its decreased financial significance.
“Foreign exchange losses” in the fiscal year under review are 79 million yen.

3.

Notes to Consolidated Balance Sheet(1)

Assets provided as security and secured obligations
Assets provided as security
Cash and deposits
Deposits (Investments andother assets)
Total

28 million yen
404 million yen
432 million yen

-7Secured obligations
Accounts payable - other
Gift certificates (Current
liabilities; Other)
Total
(2)

1 million yen
78 million yen
80 million yen

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

5 million yen(3)

Amount of discount on negotiable instruments receivable(4)

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

813 million yen

Method of revaluation

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

Date of revaluation:

March 31, 2001

(5)

Out of investment securities, 440 million yen is for lending stock.

4.

Notes to Consolidated Statements of Changes in Equity(1)

Matters relating to type and total number of issued shares, and type and number of treasury
shares(Thousands of shares)
Number of
Number ofshares decreased shares at the endof theduring theconsolidated
consolidated
fiscal year under fiscal year underreview
review

Number ofshares at the
beginning of theconsolidated
fiscal year underreview

Number ofshares increased
during theconsolidated
fiscal year underreview

Issued shares
CommonsharesTotal

41,404――

41,404

41,404――

41,404

Treasury shares
Commonshares (Note)
Total

188

0

―

188

188

0

―

188

-8-

(Note) The number of common shares held as treasury shares at the end of the consolidated fiscal year
under review includes 108 thousand shares of the Company held in the Board Benefit Trust (BBT).
0 thousand shares of increase in common shares held as treasury shares is due to the purchase of
fractional shares.
(2)

Matters relating to dividend(i)Amount of dividend paid

Resolution
Ordinary
GeneralMeeting of
Shareholders on
June 28, 2018
Board ofDirectors
meeting on
November 13,
2018Type ofsharesTotal dividend(million yen)

Dividend pershare (yen)Common
share

1,550

37.50

March 31,2018

June 29, 2018

Common
share

1,550

37.50

September 30,
2018

December 5,
2018

Record date

Effective date

(Note 1) The total amount of dividend approved by a resolution of the Ordinary General Meeting of
Shareholders on June 28, 2018 includes a dividend of 4 million yen payable for the Company shares
held in the Board Benefit Trust (BBT).
(Note 2) The total amount of dividend approved by a resolution of the Board of Directors meeting on
November 13, 2018 includes a dividend of 4 million yen payable for the Company shares held in the
Board Benefit Trust (BBT).
(ii)

Dividend for which the record date falls in the consolidated fiscal year under review
but the effective date comes after the end of that consolidated fiscal year
Total
SourceDividend
Effective
Type ofdividendforper share
Record date
Resolution
dateshares(million
dividend(yen)
yen)
Ordinary
GeneralMarch 31,
June 28,
Retained
Common37.50
1,550
Meeting of
2019
2019
earnings
Share
Shareholders on
June 27, 2019
(Note) The total amount of dividend proposed for approval by a resolution of the Ordinary General
Meeting of Shareholders on June 27, 2019 includes a dividend of 4 million yen payable for theCompany shares held in the Board Benefit Trust (BBT).
5.

Notes to Financial Instruments(1)

Matters relating to status of financial instruments
The Company Group raises funds (mainly borrowing from banks) necessary in light ofrespective business plans of business companies. Temporary surplus funds are invested in
more safe financial assets.

-9-Notes and accounts receivable - trade (which are operating receivables) are exposed tocustomers’ credit risks; as such, the Company controls each customer’s due date and balance,
and understands major customers’ credit status. Exchange-rate fluctuation risks for foreign
currency operating receivables due to the Company’s global development are almost set off by
the risks resulting from foreign currency operating payables, some of which are hedged using
forward exchange contracts. Investment securities are mainly shares of customers, andexposed to market price fluctuation risks.
Most of the notes and accounts payable - trade (which are operating payables) are due within
one year. Loans payable are mainly to raise funds for operating transactions, and interest-rate
swaps are used to hedge part of exchange-rate fluctuation risks.
Derivatives include forward exchange contracts to hedge exchange-rate fluctuation riskspresent in foreign currency receivables/payables, and interest-rate swaps to hedge fluctuation
risks of interest rates payable on loans payable.
(2)

Matters relating to market value, etc. of financial instruments
Amounts posted on the Consolidated Balance Sheet, market values, and the corresponding
differences between the two as of March 31, 2019, are as follows.
Items, for which ascertaining market values is extremely difficult, are not included in the tablebelow.
(Millions of yen)Amounts posted on
Market value
Difference
the Consolidated(*)
Balance Sheet (*)(1) Cash and deposits
33,84433,844(2) Notes and accounts receivable trade37,45637,456-(3) Accounts receivable - other

3,116

3,116

-

18,217
20,70013,09920,700-5,118(5) Notes and accounts payable trade(26,449)(26,449)(6) Electronically recorded
obligations - operating(6,438)(6,438)-(7) Short-term loans payable(49,610)(49,610)-(8) Current portion of long-termloans payable(19,698)(19,717)-19(9) Accounts payable - other(12,402)(12,402)-(10) Long-term loans payable(35, 106)(35, 245)

-139

(130)

-

(4) Investment securities(i) Shares of subsidiaries andassociates(ii) Available-for-sale securities(11) Derivatives(*) Items posted as liabilities are enclosed in brackets.

(130)- 10 -

(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.
(5) Notes and accounts payable - trade, (6) Electronically recorded obligations - operating, (7)Short-term loans payable, and (9) Accounts payable - other:
These are settled within a short time frame and therefore have a market value nearly
equivalent to their book value; as such, these are posted according to their book value.
(8) Current portion of long-term loans payable, and (10) Long-term loans payable:
The market value of long-term loans payable is calculated by taking into account the total
amount of principal and interest and discounting it by the assumed interest rate that would beapplied when new borrowings are conducted. The market value of long-term loans payablethat are subject to exceptional accounting treatment for interest-rate swaps is calculated bydiscounting the total amount of principal and interest, which is treated as one with the interestrate swap in question, by a logically estimated interest rate that would be applied when similarborrowings are conducted.
(11) Derivatives:
Derivatives conducted through exceptional accounting treatment of interest-rate swaps aretreated as being one with the long-term loans payable under the relevant hedge. As such, themarket value of such transactions is presented as being included in the market value for the
long-term loans payable concerned.
(Note 2)Unlisted shares (posted as 421 million yen on the Consolidated Balance Sheet) and shares ofunlisted subsidiaries and associates (posted as 6,573 million yen on the Consolidated Balance
Sheet) have no market price, and it is recognized that ascertaining their market value isextremely difficult. As such, these items are not included in “(4) Investment securities”.
6.

Notes to Leased Property
The Company and some of its subsidiaries own real property for lease and others in Tokyo andother regions. Income or expenses from the leased property during the fiscal year ended
March 2019 was 237 million yen (rent income was posted as non-operating income andexpenses are posted as non-operating expenses.)
The amount posted on the Consolidated Balance Sheet, major changes during the consolidated
fiscal year under review, market value on the consolidated closing date, and the calculation
method of such market value are as follows:- 11 (Millions of yen)Amounts posted on the Consolidated Balance Sheet
Balance at the
beginning of theconsolidated fiscal
year under review

Amount ofincreases/decreases
during theconsolidated fiscal
year under review

14,284(Note 1)
(Note 2)

(Note 3)

7.

Balance at the end of
the consolidated
fiscal year underreview

Market value on the
consolidated closing
date

15,583

15,695

1,299

Amounts posted on the Consolidated Balance Sheet were the acquisition costs
minus accumulated depreciation and accumulated impairment loss.
The change during the consolidated fiscal year under review is mainly due tothe reclassification of leased property from commercial real estate to rental
real estate (834 million yen) and an increase in the rate of rent (545 million
yen).
Calculation method of market value
Basically the amount based on a real-estate appraisal report prepared by a realestate appraiser.

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

2,649.99 yen
224.42 yen
9,249 million yen
9,249 million yen
41,215 thousand
shares(Note 1) For the purpose of calculating the net income per share, the treasury shares remaining
in trust posted as treasury shares in the “Shareholders' equity” section are included in
the treasury shares deducted in the calculation of the average number of shares during
the fiscal year under review. For the purpose of calculating the net assets per share,
the treasury shares so remaining in trust are included in the treasury shares deductedfrom the total number of shares issued and outstanding at the end of the fiscal year
under review.
For the purpose of calculating the net income per share, the average number oftreasury shares, so deducted, during the fiscal year under review was 108 thousand
shares, and for the purpose of calculating the net assets per share, the number oftreasury shares, so deducted, as at the end of the fiscal year under review was 108
thousand shares.
8.

Notes to Significant Post-Balance Sheet Events
Not applicable.

9.

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

- 12 [Translation]
Non-Consolidated Statements of Changes in Equity(From April 1, 2018 to March 31, 2019)
Millions of yen
Shareholders' equity
Capital surplus
Retained earnings

Balance at beginning ofcurrent period
Changes of items during
periodDividends of surplus
ProfitPurchase of treasury
sharesNet changes of items
other than shareholders'equityTotal changes of items
during period
Balance at end of current
periodOther
Total
retained
Treasury sharehol
earnings
Legal
Total
ders'
retained Retained retained shares
equityearnings earnings earnings
brought
forwardCapital
stock

Legal
capitalsurplus

OthercapitalsurplusTotal
capitalsurplus10,000

2,378

4,246

6,625

121

21,053

21,174-3,1003,719-3,1003,719-307

37,492-3,100
3,719
-1

-1

−

−

−

−

−

619

619

-1

617

10,000

2,378

4,246

6,625

121

21,672

21,793-309

38,109Millions of yen
Valuation and translation adjustments
Valuationdifference on
available-forsale securities

Balance at beginning of current
periodChanges of items during period
Dividends of surplus
ProfitPurchase of treasury shares
Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at end of current period

10,550

Deferred gains
Total valuation
Revaluation
or losses on
and translation
reserve for land
hedgesadjustments
-196

8,190

18,544

Total net assets

56,036-3,1003,719-1-1,6317−-1,623-1,623-1,6317−-1,623-1,006

8,918

-188

8,190

16,92055,029- 13 [Translation]
Notes to Non-Consolidated Financial Statements
1.

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

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

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

(3)

(4)

Derivatives:
Market value method

Depreciation methods for non-current assets(i)

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

(ii)

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

(iii)

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

Accounting standards for significant allowances and provisions(i)

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

(ii)

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

- 14 -

(5)

(6)

(iii)

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

(iv)

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

(v)

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

(vi)

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

Hedge accounting method(i)

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

(ii)

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

(iii)

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

(iv)

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

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

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

2.

Notes to Changes in Presentation Method<Changes associated with “Partial Amendments to Accounting Standard for Tax EffectAccounting” >The Company adopted “Partial Amendments to Accounting Standard for Tax EffectAccounting” (ASBJ Statement No. 28, issued on February 16, 2018) from the beginning of the
fiscal year under review, resulting in a change in presentation method whereby deferred tax
assets and deferred tax liabilities is presented under investments and other assets, and under
non-current liabilities respectively.
Furthermore, Statements in the Commentary on “Accounting Standards for Tax EffectAccounting” (Note 8) (1) prescribed in Section 4 of the “Partial Amendments to AccountingStandard for Tax Effect Accounting”, were added to the Notes to tax effect accounting.
<Non-Consolidated Statements of Income>In the previous fiscal year “House rent and other rental revenues”, were offset with “Rental
expenses on real estate” and then included in “Other” under “Non-operating income. In thefiscal year under review, however, “Rental expenses on real estate” were offset with “Houserent and other rental revenues”, and then separately itemized in “Non-operating expenses” dueto its increased financial significance.

3.

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

Accumulated depreciation of Property, plant and equipment(2)

Monetary claims, monetary debts and transactions with subsidiaries and associates(i)
Short-term receivables
51,685 million yen(ii)
Short-term payables
4,595 million yen(iii)
Long-term receivables
10,108 million yen(iv)Long-term payables
1,487 million yen(v)
Operating revenue
10,963 million yen(vi)Operating expenses
2,619 million yen(vii)
Transactions other than operating transactions
3,051 million yen(3)

Revaluation of land for business use

9,236 million yen

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

March 31, 2001

(ii)

Method of revaluation:
Land for business use was evaluated based on the main-street land price set forth in
Article 2, item 4 of the “Order for Enforcement of the Act on Revaluation of Land
(Cabinet Order No. 119 promulgated on March 31, 1998), and that land without a- 16 main-street land price was evaluated based on the assessed value of fixed assets as set
forth in item 3 thereof, with reasonable adjustment.
(4)

Notes to lending stock
Out of shares of subsidiaries and associates, 46 million yen is for lending stock.

(5)

Notes to Statements of Income“Provision of allowance for investment loss of subsidiaries and associates” under“Extraordinary losses” consists of provision of allowance for doubtful accounts for
subsidiaries and associates (379 million yen), reversal of provision of allowance for doubtful
accounts for subsidiaries and associates (294 million yen) and provision for loss of
subsidiaries and associates (205 million yen).

(6)

Notes to Statements of Changes in Equity
Type and number of treasury shares at the end of the fiscal year under review
Common shares
167,563 shares
The number of shares above includes 108,000 shares of the Company held in the Board
Benefit Trust (BBT) as a result of the introduction of the BBT plan.

4.

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

24 million yen
3,108 million yen
6,103 million yen
1 million yen
759 million yen
713 million yen
1,212 million yen
15 million yen
1,995 million yen
290 million yen
14,225 million yen-1,635 million yen-11,464 million yen-13,100 million yen
1,124 million yen

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

20 million yen
3,936 million yen
80 million yen
4,037 million yen-2,912 million yen

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

5.

Notes to Transactions with Related Parties(1)

Parent company and major corporate shareholders

Attributes Name of company

Ratio of voting
rights held (%)

Relationshipwith related
partyContent oftransaction(Direct)
Major
10.8
Property
Property
shareholder
Sanko Kigyo K.K. (Closer parties orlease-in, etc. lease-in(company,
agreed parties)
etc.)
5.4

(2)

Transaction
amount(million yen)

Item

Term-endbalance(millionyen)

975

Accruedexpenses

8

Item

Term-endbalance(millionyen)

Subsidiaries and associates, etc.

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

SEIKO WATCHCORPORATION(direct) 100.0

Interlocking
directorate

Content oftransaction
Royalty
incomeManagement
fee income

Subsidiary

WAKO Co., Ltd.

(direct) 100.0

Interlocking
directorate

Property
lease-out

Transaction
amount(million yen)Accounts
2,210 receivable otherAccounts
1,229 receivable other833

Accruedincome(Note 1) Transaction terms and policies to determine them
1)
The terms for property lease-in are determined based on the same standards as forgeneral transaction terms after considering market price. In the Statements ofIncome, the property rents payable are offset with property rents receivable.
2)
Royalty income is determined based on the standards similar to general transaction
terms.
3)
Management fee income is determined by the Company and relevant consolidated
subsidiary upon mutual consultation after considering the content of business
operations.
4)Regarding property rents receivable, those of owned property leased out for businessuse are determined linked to relevant income, and those leased out as office or the like

1,210

2

114

- 18 are determined based on a professional valuation. In the Statements of Income,property rents receivable are offset with property rents payable.
(Note 2) Transaction amounts do not include consumption tax, etc.; the term-end balance includes
consumption tax, etc.

6.

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

1,334.48 yen
90.21 yen
3,719 million yen
3,719 million yen
41,236 thousand shares(Note 1) For the purpose of calculating the net income per share, the treasury shares remaining
in trust posted as treasury shares in the “Shareholders' equity” section are included in
the treasury shares deducted in the calculation of the average number of shares during
the fiscal year under review. For the purpose of calculating the net assets per share,
the treasury shares so remaining in trust are included in the treasury shares deductedfrom the total number of shares issued and outstanding at the end of the fiscal year
under review.
For the purpose of calculating the net income per share, the average number oftreasury shares, so deducted, during the fiscal year under review was 108 thousand
shares, and for the purpose of calculating the net assets per share, the number oftreasury shares, so deducted, as at the end of the fiscal year under review was 108
thousand shares.

7.

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

8.

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