CITIZEN REPORT
2021

Our Corporate Philosophy“Loved by citizens, working for citizens.”
CITIZEN’s corporate philosophy,“Loved by citizens, working for citizens,”
is to deeply contribute to the lives of people around the world
through the manufacturing of products that are loved andtrusted by citizens.

The CITIZEN Group Corporate Story
The CITIZEN Group was founded in 1918 with the dream of producing a watch made in Japan. We havegrown into a manufacture d’horlogerie capable of integrated in-house manufacture of everything fromindividual parts to completed products. Through our core Watches and Machine Tools businesses, we havecontributed to the lives of people around the world. The company name “CITIZEN” embodies theaspiration of our Corporate Philosophy, “Loved by citizens, working for citizens.” As such, our mission is tobe sensitive to changing times, and to create inspiration for a sustainable future. We will continue to goContents

Guide to Disclosure

02 Value Creation Model

More information

beyond conventional manufacturing as we take on the challenge of creating new value.

04 Message from the President & CEO
10 Sustainable Management

Websitehttps://www.citizen.co.jp/global/

14 FY2020 Full-Year Results and Capital Strategy
16 Our Businesses

Securities
Report*18 Our Business Portfolio
18 Watches

Earnings
Presentation

22 Machine Tools

28 Corporate Governance
31 Message from an Outside Director
32 Management Team
33 Company Information
34 FINANCIAL DATA 2021

Less information

26 Devices and Components /Electronic and Other Products

CITIZENREPORT

CSR
ReportConsolidated
Business
Results
Group Reportto Shareholders*

Financial

Non-financial* Published only in Japanese

Editorial Policy

Forward-Looking Statements

Citizen Watch Co., Ltd. publishes the CITIZEN REPORT to communicate themid- to long-term corporate value of the CITIZEN Group. This report has
been compiled to convey the Group’s position and business direction in plain
terms to stakeholders.

This report contains forward-looking statements regarding the CITIZEN Group’s
future performance. These statements are based on information currently available.
Statements regarding future forecasts involve risks and uncertainties such as
exchange rate fluctuations and changes in demand for products. Readers should
understand that actual Group performance may differ from the outlook provided inthis report.

Note: QR Code is a registered trademark of Denso Wave Incorporated.

CITIZEN REPORT 2021

01

Value Creation Model
The CITIZEN Group was founded in 1918. Under the Corporate Philosophy, “Loved by citizens, working for citizens,” we have grown into a

manufacture d’horlogerie capable of integrated in-house manufacture of everything from individual parts to completed products. Leveraging
the strengths of miniaturization, low power consumption and precision processing—core technologies cultivated in our Watch business—wemanufacture Sustainable Products, through which we contribute to sustainable development for all stakeholders and for society.

External Environment
Changes in lifestyle

Protection of biodiversity

Changes indemographic structure

Resource usage

CITIZEN’s Strengths

Technological progress

Climate change

Inputs (As of March 2021)
Financial Capital
55.8%
48.6%
A

Equity ratio
FY2021 payout ratio (forecast)Credit rating (R&I)

Intellectual Capital

Miniaturization

CITIZEN Group patents held
Over 5,000
CITIZEN Group trademarks held
Over 5,000

Manufactured Capital
FY2020 capital investment

10.9 billion yen
Overseas consolidated subsidiaries 66
Social and Relationship CapitalSocial Contribution Mission Program
Employees participating

164 (FY2019)

Low Power
Consumption

Precision
Processing

Environmental conservation

127 million yen
1,361 million yen

Investment
Costs

Human Capital
17,044

Employees

Ratio of men taking childcare leave(Citizen Watch only)

25.9%

Natural Capital
Scope 1+2 emissions

130,380 t(Across all businesses; emissions derived fromrenewable energy considered to be 0)

Scope 3 emissions

89,375 t (Watch business only)

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CITIZEN REPORT 2021

Sust
ainable Management
Corpo
rate GovernanceOutcomes“Loved by citizens, working for citizens.”

Outputs

Customers

Watches

Employees

Machine Tools

Sustainable
Products

Stakeholder
Engagement

Devices andComponents

Business Partners

Electronic andOther Products
Shareholders and Investors

Community

CITIZEN REPORT 2021

03

Message from the President & CEO“Loved by citizens,working for citizens.”
FY2021 will be pivotal for CITIZEN
for shifting to the offensive witha focus on growth and profit.

Toshihiko Sato
President & CEO
Citizen Watch Co., Ltd.

04

CITIZEN REPORT 2021

Review of FY2020

In FY2020, the CITIZEN Group was among those significantly affected by the COVID-19 pandemic.
In this environment, unprecedented as a crisis for humanity, we faced challenges in continuing to dobusiness while working as a company to prevent infections.
The Watch business saw the largest impact, affected by lockdowns around the world as well as otherissues. Sales dropped significantly, primarily in the Japanese and U.S. markets. Unable to move around,gather or even talk in public, people found their lifestyles drastically altered. The reality is that doing
business solely through traditional brick-and-mortar sales is no longer viable. As the market for analog
watches continues to shrink with the rise of smartwatches, the pandemic has dealt an additional blow tothe business.
Under these conditions, over the past year the Watch business worked to optimize personnel tomatch the scale of analog quartz movement production given the market contraction, instituting
structural reforms and taking other steps to navigate the severe market environment.
Meanwhile, in the Machine Tools business and the Devices and Components business, performanceslowed in the first half due to the impact of COVID-19, but began to pick up starting in the second half.

Toward a Recovery in Performance in FY2021

We believe that FY2021 will be pivotal for getting back on a recovery track, and to do so we need to put
all of our businesses on an offensive footing.
In the Watch business, although an end to the COVID-19 pandemic is still uncertain, the market issteadily recovering, and management is prepared to do whatever is necessary to bring about a recovery
in performance.
The Machine Tools business is seeing a clear recovery in both domestic and international orders, andas one of our core businesses, we expect it to be a significant growth driver. We also expect somepositive results from the Devices and Components business following structural reforms and given thetrend toward recovery in the automotive market.

CITIZEN REPORT 2021

05

Message from the President & CEO

Initiatives in the Watch Business
Expanding Online Sales
As the “new normal” becomes a part of peoples’ lives everywhere, we are seeing the steady proliferationof consumption based on shopping online, which is possible even when visiting a physical store is not.
While working to create strong products, it is also important that we build strong sales channels, andstrengthening online distribution is a pressing issue for us to address, notwithstanding the pandemic. In
the North American market, where we launched a direct-sales e-commerce website for the CITIZEN brandin 2014, our emphasis on detailed services that respond to sales data has brought a steady increase insales, with that market growing into a pillar of sales. In other markets as well, initiatives tailored toindividual regions, and efforts to calibrate product appeal to those markets, will lead to growth.
In Japan, we launched a digital boutique in FY2021. By offering content and experiences that only
CITIZEN can, and by creating new spaces that can emotionally engage people with no previous interestin watches, we will strengthen our ties to customers.

New Challenges Creating a Foundation for Growth in Mechanical Watches
The market for mechanical watches continues to grow even with the rise of smartwatches. The CITIZEN
mechanical models, which features the Caliber 0200 mechanical movement developed in collaboration
with La Joux-Perret of Switzerland (which joined the CITIZEN Group in 2012), generated quite a stir evenprior to their launch in August 2021, and we feel confident about the lineup’s potential. With the
adoption of robotics, AI and other technologies, more and more products are created beyond thetouch of human hands. Mechanical watches are the rare product that, for their delicacy and extreme
precision, are impossible to fabricate without the involvement of people. With these watches, thisindispensable hand-made aspect creates added value, moves emotions and brings joy when worn. With
The CITIZEN mechanical models as a new starting point, we will work to create watches that can bepassed down over generations, as well as to establish the foundation for their further growth.

Further Growth with Eco-Drive
Looking at medium-to-long-term trends in the watch market, we must ask ourselves what kind ofwatches customers will choose. One answer is “sustainable watches.” As an example, Eco-Drive, one of
our core technologies, can power a watch using only a small amount of sunlight or indoor light. In
addition to being good for the environment, Eco-Drive incorporates technologies that enable not only
accurate timekeeping and the convenience of never needing battery replacement, but also a more
beautiful design, miniaturization, a thin form, light weight and multi-functionality. This pursuit has given

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CITIZEN REPORT 2021

watches new added value, and continues to evolve today. Moving forward, I believe we can nurturedemand even further through enhanced marketing and branding.
Products that demonstrate CITIZEN’s uniqueness backed by technology and beauty have stayedstrong. Examples include The CITIZEN, a light-powered Eco-Drive watch that has achieved the world’s
highest level of accuracy—±1 second per year—with no reliance on external time signals; and CITIZEN L,
which features a band made using recycled PET bottle material. Watches have special value in the richemotions they can inspire in the wearer. We will work to more clearly convey brand features, and in sodoing ensure that our passion for watchmaking leads to the creation of value for the customer.

Medium-to-Long-Term Initiatives
The CITIZEN Group Will Unite to Achieve Further Growth
Throughout its history, the CITIZEN Group has overcome innumerable hardships in step with theconstant changes in the social and economic environment. We have been able to do this because the
CITIZEN Group of today was built by employees uniting under the Corporate Philosophy,“Loved by citizens, working for citizens,” bringing their collective strength to bear in invigorating
existing business and taking on the challenges of creating new businesses. “Working for citizens”
means “creating and offering customer value.” Whether in B-to-B or B-to-C markets, we must ultimately
connect everything to “working for citizens.” Our success in achieving business growth will enable us tocontribute to a variety of stakeholders, including customers, shareholders and investors, employees,society and the environment. Moving forward, the Group remains unified in its efforts to achieve further
growth toward “working for citizens.”

Each and Every Small, Delicate Part Produced In-House
I am proud of the CITIZEN brand. As a manufacture d’horlogerie, we are able to produce each andevery small, delicate watch part in-house. I am confident in our strong technical and manufacturing

CITIZEN REPORT 2021

07

Message from the President & CEO

capabilities. By applying the technologies used in creating CITIZEN watches, we expanded ourbusinesses beyond the Watch business, into the Machine Tools business for making tiny parts, and theDevices and Components business that leverages our part machining technology.
The Machine Tools business, born from watch manufacturing, has continued to grow throughrepeated economic cycles, and today is a major pillar of the CITIZEN Group. Going forward, with theglobally expanding trend toward automation of production processes and labor-saving, we expect thatthe addition of proprietary technologies such as low frequency vibration cutting (LFV) technology to ourportfolio will drive further growth.
We have similar expectations for Devices and Components as a business that still has ample
potential for growth. In recent years we have focused on overhauling the business, selecting the optimal
product mix while also implementing structural reforms. From here on, our efforts will be aimed at arecovery. We have been steadily growing sales of automotive components, motors and other products
by incorporating customer requests and offering new value. In addition, we will expand into new
product areas that leverage the technical capabilities of our precision processing.

CITIZEN’s Sustainable Management Vision

There are many customers who need CITIZEN products, from watches, to machine tools, devices andcomponents, and electronic products, among others. Our vision for sustainable management is to offer
value that delights customers while continuing to grow sustainably. This is the value we provide as acompany, and something that aligns with our Corporate Philosophy, “Loved by citizens, working for citizens.”
The manufacture of watches involves two major groups of technologies: processing technologies
and assembly technologies. Watchmaking also involves many types of craftsmanship. The processing
and assembly technologies that go into creating a watch are embedded in the very DNA of the CITIZEN
Group, and we consider them our most important asset. Over the years, we have leveraged this DNA in
our efforts to develop a variety of businesses. The value of these technologies and craftsmanship is not
only reﬂected in business growth, but also in how much they have contributed to citizens everywhere.
As environmental awareness grows globally and initiatives targeting carbon neutrality advance, there

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CITIZEN REPORT 2021

are increasing calls for companies to tie business value to sustainable management. Conventional
manufacturing based on the assumption of disposability will no longer be acceptable. I want us toadvance manufacturing that incorporates not only technical evolution, but also ideas for how tocontinue to use and maintain products.

Toward “Loved by citizens, working for citizens”

Over the past few years, the CITIZEN Group has worked on selection and concentration of products
and businesses, and carried out structural reforms, but from FY2021, we will change course to focus on
future growth. We will shift to the offensive across all businesses and thereby secure growth and profit.
By working continuously to benefit stakeholders we will raise our corporate value as we accelerate
our evolution toward fulfilling our Corporate Philosophy, “Loved by citizens, working for citizens.”

Honoring individuals who inspire society
Citizen Watch established the Citizen of the Year award in 1990. The award marked its 31st year in 2020 with the selection of two
individuals and one group who have given inspiration to people. Each year, award recipients are chosen and commended from among“citizens,” in recognition of the inspiration they have provided to society, or their contributions to the development, happiness or
beautification of their communities. The award is open to people of Japanese nationality or foreign residents of Japan, as either
individuals or groups. In an age in which citizens play an increasingly important role in society, the award takes inspiration from theCompany’s name, aiming to commend citizens from a broad perspective where previously there was a lack of recognition.

FY2020 Winners

Shinji Muraoka
For over 40 years, Mr. Muraoka(From left) An Suzuki, Yuki Chokki,

Soma Suzuki, Taiki Chokki

Hiroaki Yamamoto
For six months, Mr. Yamamoto operated a

has operated facilities as a

The group collected donations through crowd-

free shuttle bus for commuters to the citypioneer in after-school care forfunding to support Rohingya children living incenter as a way of alleviating concerns

children with autism spectrum

refugee camps in Myanmar.

about infection among commuters in his

disorders and intellectual

community during the pandemic.

disabilities.
Please visit the website below to view information about the activities of
Citizen of the Year award winners and their comments.
https://www.citizen.co.jp/global/coy/

CITIZEN REPORT 2021

09

Sustainable Management

The CITIZEN Group’s Sustainability Committee
The CITIZEN Group promotes Group-wide sustainable
management through initiatives centering on the
Sustainability Committee. The committee is chaired by the
President of Citizen Watch, and its members are the fulltime Directors of Citizen Watch and the presidents of theoperating companies.
The CSR Department and Corporate Planning Divisionof Citizen Watch serve as the Sustainability Committee’s
secretariat and work with CSR managers and corporate
planning sections at Group companies, as well as thesecretariats of the committees in charge of each aspect ofmateriality. Regular sustainability secretariat meetings areheld to review sustainability issues at each company andcheck on matters such as the state of progress of related

Main matters deliberated
by Sustainability Committee
in FY2020

initiatives. Following discussion at these meetings, proposal
and reports from each company are presented to
the Sustainability Committee for deliberation.
At Sustainability Committee meetings, which are held once aquarter, matters reported at sustainability secretariat meetings
are deliberated, materiality is periodically reviewed, and policies
for initiatives by existing business to achieve sustainability are
drawn up and monitored. The results of these discussions arereported to the Management Committee and the Board of
Directors, who in turn issue instructions and carry out auditing.
In FY2020, an SDGs study meeting was held for executives,
including department managers and Sustainability Committee
members, with outside experts invited, to deepen understandingof corporate social requirements and issues that should be tackled.

Status of initiatives related to Group materiality
Methodology for promoting human rights due diligence at suppliers through CSR procurement
Self-assessment of status of each Group company’s initiatives using UN Global Compact’s
CSR procurement self-assessment questionnaire (SAQ)
Review of materiality and key risks of the GroupThe CITIZEN Group’s System for Promoting Sustainable Management
The Group Quality Compliance Committee and three othercommittees have been established under the Sustainability
Committee. These four committees mainly manage andpromote initiatives targeting each aspect of materiality
identified by the CITIZEN Group.
We have also established the Group Information
Governance Committee, the Group Legal Compliance
Committee, and the Group Business Continuity Management
Committee to address matters related to the handling ofmanagement-related risks and making the Group’s
management foundation more resilient. These committees
operate under the Management Committee, which meets
monthly, as a structure that enables swift detection of anddeliberation on problems as well as immediate responses tothem. In addition, in June 2020, CITIZEN-SIRT was established
as a CSIRT (Computer Security Incident Response Team)capable of immediately responding to sudden events suchas cyberattacks.

System for Promoting Sustainable Management
Board of Directors
Management Committee
Sustainability Committee

10

CITIZEN-SIRT

Group Quality Compliance Committee

Group Information Governance Committee

Group Human Resources Committee

Group Legal Compliance Committee

Group Environment Committee

Group Business Continuity Management Committee

Group Sustainable Procurement Committee

CITIZEN REPORT 2021

The CITIZEN Group’s Materiality Roadmap (Excerpt)
With a view to achieving sustainable growth, the CITIZEN
Group has formulated the Group Materiality Roadmap for2030, which covers goals, KPIs and measures for addressing
the four aspects of materiality that have been identified by
the Group. Initiatives toward each goal, which also
represent priority areas for the Group’s CSR activities, arelinked to the PDCA cycle through self-assessment. The
table below shows an excerpt from the roadmap detailing

Materiality

Enhancingqualitycompliance

Respect forhuman rights
and labor
practices

Promotingsustainableprocurement

Promotingenvironmental
innovation

FY2020 goals and KPIs, their results and evaluation, andFY2021 goals for each aspect of materiality.

Please visit our website to access the roadmap.
https://www.citizen.co.jp/global/csr/materiality/
road_map/index.html

FY2020 Goals and KPIs

FY2020 Results

Evaluation

FY2021 Goals

Further raising awareness of the Quality
Code of Conduct and identifying risks inthe state of compliance

Dissemination of Quality Code of
Conduct at overseas branches continued
in China and started in Vietnam andThailand. Recognition among domestic
employees was ascertained throughe-learning.

○

Establishment ofan effective
monitoring system△

Implementationof measures that
could not beestablished dueto the pandemic○

Promotion offact-finding basedon SAQ△

Implementationof measures that
could not beestablished dueto the pandemic

Activities to raise awareness of the Quality
Code of Conduct conducted twice

Activities conducted twice online as ameasure to prevent the spread of COVID-19

Percentage of personnel undergoinge-learning: 90%

Provided to all domestic employees.
Attendance rate: 97.8%

Establishment of the human rights due
diligence scheme and activities based on
responding to/compliance with laborrelated laws and regulations and basic
health and safety policies

Conducted investigations into the statusof measures to avoid the use of conﬂict
minerals and due diligence concerning
human rights risk in the supply chain

Percentage of personnel undergoing
human rights e-learning: 100%

Provided to all domestic employees.
Attendance rate: 96.0%

Compliance with laws and regulations
on overtime

Cases of violations of laws or regulations: 0

Preparations for establishment of humanrights due diligence in 2021 (identifying
negative risks, and establishing andimplementing measures)

Not established because still in the earlystages of identifying human rights risk ofbusiness activities

Collecting information to help
identify risks

Administered SAQ and conductedinvestigations concerning conﬂict minerals
and green procurement

Sending SAQ to 20% of major suppliers

SAQ sent to 355 major suppliers

Enhancement and integration of global
environmental management systems at
major Group operating companies(preparations for realization in FY2021)

Renewed integrated certification (ISO
14001) in Japan. Expanded domestic
initiatives to overseas as part of Groupwide environmental management.

• CO2 emissions:
Scope 1 and 2: 5% reduction
Scope 3: 2.5% reduction

Attained reduction goal and introduced
electricity from renewable energy sources
on a trial basis at the Tokyo Works

Water use: 5% reduction

Attained

Recycling rate: 82.5%

Attained (99% or more in Japan)

Nature conservation and community
environmental activities implemented at
all business facilities

Partially suspended to prevent the spreadof COVID-19 and conducted at 59%
of offices〇: Attained, △: Partially not attained

CITIZEN REPORT 2021

11

Sustainable Management

Recognition and Management of ESG Risks
The CITIZEN Group recognizes ESG risks as management
risks that must be tackled by the entire Group. Led by the
CSR Department of Citizen Watch and working with thecooperation of Group companies, we have established asystem for identifying such risks through regular risk
assessments, and promptly reporting and responding torisks that have manifested. Along with the establishment of
this system, we have been fostering recognition of andapproaches to risks relating to ESG and the SDGs within theGroup, from senior management to frontline employees.
In actual risk management, progress in standardizing risk
awareness throughout the Group meant that the Group wasable to share information and respond effectively to the
COVID-19 pandemic.

Other key risks include the risk of cyberattacks and thoserelating to international business such as global import andexport. We have made progress in year-round gathering of
the latest information on these risks, and in establishingrelevant management systems. To counter cyberattacks andother cybersecurity-related risks, we have established
CITIZEN-SIRT as a response team.
As part of its sustainable management, by building anddeveloping systems to manage ESG risks the CITIZEN
Group will not only be able to identify risks at an earlystage, but also to find opportunities in risks.

Support for the TCFD Recommendations
In November 2020, the CITIZEN Group announced its
support for the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD). Starting in

2020, we are disclosing information inaccordance with the recommendations.
https://www.fsb-tcfd.org/supporters/

Work Style Reform and Human Resources Development
The CITIZEN Group believes that securing and developing
capable human resources leads to sustainable management.
Each Group company takes the initiative in moving forwardwith the creation of a workplace environment where diverse
human resources can fulfill their potential. The entire Groupis promoting the creation of a better workplace environmentby sharing example initiatives taken at each company atGroup Human Resources Committee meetings. In FY2020,
the introduction of telecommuting progressed in the Group.
For human resources development, the results of the360-degree evaluation that Citizen Watch has been

conducting since FY2019 are used to enhance humanresources management and training content. In striving fortalent management that best leverages capable humanresources, we are building mechanisms for helping
individuals to plan their careers. These include opportunities
for employees to notify the Company of their certifications or
submit transfer requests, and a selection of training programs
tailored to individual learning aspirations or career objectives.
As with building a better workplace environment, knowledge
and practices for developing human resources are sharedwithin the Group.

Environmental Goals
The CITIZEN Group has drawn up a roadmap on initiatives
for environmental protection, which is one aspect ofmateriality identified by the Group, based on the CITIZEN
Group Environmental Vision 2050 and the CITIZEN Group
Environmental Goals 2030. Initiatives for environmental
protection and related goals defined in the roadmap arewide-ranging, and cover reduction of CO2 emissions and

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CITIZEN REPORT 2021

the use of hazardous chemicals, efficient use of water andother resources, prevention of environmental incidents andpreservation of biodiversity. In FY2020, business activities
were restricted because of the coronavirus. Under thesecircumstances, initiatives for environmental protection were
promoted, and almost all items exceeded their set goals.

Stakeholder Engagement
The CITIZEN Group has been emphasizing engagement with
suppliers with a view to realizing sustainable procurement as
part of the promotion of sustainable management—one of
the key strategies of Medium-Term Management Plan 2021,
which began in FY2019. Specifically, although we were
impacted by the COVID-19 pandemic, we surveyed suppliers

using an SAQ, held online briefings via streaming video,and conducted remote fact-finding (equivalent to auditing).
In addition, we have built engagement with employees,
including through stress checks with regard to changing work
styles caused by the pandemic, and through a questionnaire
sent to foreign employees living in Japan.

Examples of Stakeholder Engagement
Note: In FY2020, certain engagement activities were suspended or conducted online due to the pandemic. We will implement respective responses and plans, taking
the COVID-19 pandemic situation into consideration.

Stakeholder

Response/Plan

Result/Evaluation

Customers

Improvement of products and services, ensuring safety,
promoting universal design principles

Conducting social campaign New TiMe, New Me

Suppliers

Briefings for suppliers (streaming video), evaluation based on
SAQ, evaluation based on fact-finding

Implementation of human rights due diligence

Employees

Reinforcement of work-life balance, promoting health of
employees, introduction of telecommuting, operation of ﬂexible
work hour system, operation of talent management system

Improving employee satisfaction, enhancing work-life balance
programs, developing workplaces where employees can workwith peace of mind, developing workplaces where employees
can demonstrate their abilities to the maximum extent

NGOs andNPOs

In cooperation with NGOs, promotion of social contribution
activities that allow participation by employees, holding briefings
to report on the results of Social Contribution Mission Program

Holding sessions for reporting results of social contribution
activities

Local
Communities

Total number of employees participating in beautification
activities: 2,294; number of plant tours accepted: 8; number ofwatch assembly classes held: 3; donations to social contribution
activities: 16.9 million yen; holding table-tennis lessons

Inviting local residents to events held on business sites,
contributing to stable communities through mutual
understanding, enhancing activities to contribute to local
areas through our businesses, improving table-tennis skills in
the community

Major External Recognition
The CITIZEN Group has continued to carry out businessactivities in line with its Corporate Philosophy, “Loved bycitizens, working for citizens.” Based on our determination
never to violate social norms, cause distrust among ourcustomers or business partners, or behave dishonestly, we

FTSE Blossom Japan Index
Since December 2019, we have been
included in the FTSE Blossom Japan
Index.

MSCI Japan ESG Select Leaders
Index and MSCI Japan Empowering
Women Select Index (WIN)We have been included in the MSCIJapan ESG Select Leaders Index since
December 2019 and the MSCI Japan
Empowering Women Index (WIN)since June 2017.

implement a wide range of CSR activities aimed at offeringsolutions to social issues and contributing to the sustainable
development of society. Our approach and initiatives havebeen highly evaluated by third-party institutions, and we havebeen selected for ESG indices and received other recognition.

CDP Supplier Engagement Rating

SOMPO Sustainability Index

In 2021, we were listed on CDP’s
Supplier Engagement Leaderboard,which recognizes only the highestrated companies.

Since 2017, we have been included in
the SOMPO Sustainability Index(previously the SNAM Sustainability
Index).

CITIZEN REPORT 2021

13

FY2020 Full-Year Results and Capital Strategy

We will achieve an early recovery
in performance and deliver stableshareholder returns.

Toshiyuki Furukawa

FY2020 Full-Year Results andOutlook for FY2021 Performance
Full-year results for FY2020 reﬂected the impact of the
global COVID-19 pandemic, which inevitably resulted insignificantly poorer business results. Net sales were 206.6
billion yen (down 71.8 billion yen year on year), and while
efforts were made to reduce costs, including a 19.5 billion
yen reduction in selling, general and administrative
expenses, these were not enough to offset the drop inrevenue, resulting in an operating loss of 9.5 billion yen.
In North America, a primary market for the Watch
business, sales fell significantly due to the impact of store
closings, and the added effect of sluggish consumption due
to lockdowns and other measures in response to the

Director

COVID-19 pandemic. Performance was also poor in theJapanese market, with a decline in consumer confidence as
people stayed home, while the loss of demand from inboundtourism also had an impact. The Machine Tools business,meanwhile, was also affected by the pandemic as the market
continued its downward trend, with demand related tocapital investment staying low in the first half. However, in thesecond half China led an increase in overseas orders, and thebusiness shifted toward a recovery track.
Loss attributable to owners of parent was 25.1 billion
yen. Major factors included a reversal of a part of deferred
tax assets in the second quarter of FY2020, leading toincome taxes - deferred of 10.7 billion yen, andextraordinary losses consisting mainly of restructuring costsof 4.3 billion yen, and loss on COVID of 3.0 billion yen.

Capital Investment / Depreciation

Business Results (Operating Profit / ROE)
(Billion yen)

30

24.9

(%)

(Billion yen)

30

30

22.4

23.7
21.1

15

10.0

7.8

5.2

6.1

15

20

16.8
13.7

4.0

13.9

–9.5
0

0

10

–15

0

17.0

15.4
10.9 11.5

12.0

2020

2021 (FY)(Forecast)

–7.0
–11.8
–15

2017

2018

Operating profit (left)

14

CITIZEN REPORT 2021

2019

2020

Return on equity (ROE) (right)

2021 (FY)(Forecast)

2017

2018

Capital investment

2019

Depreciation

JapanOthers

33.9%

1.1%

FY2020 Results
Net Sales

Dividends per Share / Payout Ratio

Europe16.3%

Operating Profit

Net Sales

ProfitAttributable(%)
to Owners of Parent

206.6 billion yen

Americas–9.5 billion
16.9%yenAsia–25.1 billion
yen
31.8%

(down 25.8% year on year)(—% year on year)(—% year on year)

(Yen)

25

20

12

36.3

Japan

33.9%

5

Domestic

6,898

Number of
Employees

Net Sales(%)

Overseas(40.5%)

16.9%

Asia

40

(59.5%)

31.8%

Our outlook for FY2021 is a return to profitability, withincreased sales and profit driven primarily by the mainstay
Watch and Machine Tools businesses. We forecast net sales ofDomestic
260.0 billion yen (up 53.4 billion
6,898yen) and operating profit of(40.5%)
10.0 billion yen(reversal
from
9.5 billion yen operating loss).
Number of
Employees
In the Watch business, although recovery ofOverseas
consumption
in the Japanese market continues to lack
10,146(59.5%)
steam, consumption is steadily improving overseas,
primarily in China and North America, where we expect tosee a recovery in brick-and-mortar sales in addition toincreased e-commerce sales, which we have worked tostrengthen. Additionally, as a result of our efforts tooptimize production scale and reduce inventory throughstructural reforms implemented in FY2020, we haveestablished the foundation for enhanced profitability
linked with a recovery in consumption.
In the Machine Tools business, we expect to see afull-scale recovery as orders quickly pick up not only in
China, but in Europe, North America and other developed
economies, primarily in the automotive and medical sectors.
We will also continue new initiatives aimed at capturing
orders, including exhibitions that utilize online tools. With
lead times to shipping growing due to strong orders,
ramping up production will be an issue for us to address.
Following relocation and expansion, our new factory in
China is scheduled to begin operation in the summer of2021, and we are targeting further results growth.

Capital Investment
By focusing only on high-priority projects in FY2020, wereduced capital investment to 10.9 billion yen, well below
the usual level. In FY2021, however, we expect capital

20

5

0

2017

2018

10,146

Americas

14

60

10

Europe

16.3%

48.6

47.6

Data by Region
1.1%

80

22

20

15

Others(%)

Dividends per share (left)

2019

2020

2021 (FY)(Forecast)0

Payout ratio (right)

investment of 17.0 billion (up 6.0 billion yen), including
accelerated investments to boost capacity in the Machine
Tools business. In the Watch business, along with a phased
expansion of investments in automation and rationalization,
we will invest in strengthening e-commerce sales, which arebecoming increasingly important. Furthermore, the launchof a website that offers new experiences unique to thedigital space, among other initiatives, will increase
consumer touchpoints as we work toward integrating online
and ofﬂine engagement.

Capital Policy
Under Medium-Term Management Plan 2021, ourshareholder return policy calls for an average total return of
60% or greater for the three years of the plan. While werecorded a loss attributable to owners of parent in FY2020,
we paid an annual dividend of 5 yen per share upon
comprehensive consideration of the need to balance
short-term liquidity with stable dividends. In FY2021, weplan to continue our policy of issuing dividends that take
into consideration the overall balance between
performance and the payment of stable dividends.
Our basic policy on cross-shareholdings, as outlined in our
Corporate Governance Report, is that their rationality andnecessity will be examined based on the relationshipbetween the business partner and the Group, as well as thepossibility for mutually enhancing corporate value. We will
work to reduce the scale of shareholdings if the significanceof continuing to hold the shares is diluted. To date, we havesteadily reduced the number of strategic cross-shareholdings.
We will continue to review holdings going forward.

CITIZEN REPORT 2021

15

Our Businesses

1918

Company founded“We want to produce a watch made in Japan.”In 1918, at a time when imports dominated, Shokosha Watch ResearchInstitute, the forerunner of Citizen Watch, was founded with the goal of
producing a watch made in Japan. The finished pocket watch, basedon an original design, was given the name “CITIZEN” by the Mayor ofTokyo, Count Shinpei Goto, in the hope that it would be widely loved
by citizens over the ages. This became the inspiration for the company
name we have today.

WatchesMovements

Business Characteristics

Watches

1924
The company’s first pocket watch,
CITIZEN, after which the company
was later named.

46.3%

Machine Tools

A Portfolio of Watchmaking Assets
ParashockFirst Japanese-made watch featuring
a shock-proof mechanism (Parashock)

1956

22.6%

Parawater
First fully waterproof Japanese-made watch

1959

We began the production of machine tools in
1936, leveraging technology and expertise gainedin the manufacture of watch parts, which must becompact and extremely precise. Machine tools forcreating components essential for a wide range ofindustries—including the automotive, medical
and IT fields—support today’s technology
advances and social development.

Hi-sonic
First Japanese-made tuning fork electronic watch

1971

Devices andComponents

Citizen Quartz
CITIZEN’s first quartz watch

1973

1976

Chrystron Solar Cell
World’s first analog light-powered watch

22.2%

Radio-Controlled Watch
World’s first multi-band analog radio-controlled watch(Japan, Germany, U.K.)

1993

2003

ATTESA Eco-Drive Radio-Controlled Watch
World’s first thin-type radio-controlled watchwith a full-metal case (Eco-Drive)
Eco-Drive Satellite Wave
World’s first satellite system analog watch

2011

2016

Eco-Drive One
World’s thinnest* analog light-powered watch(case thickness of 2.98 millimeters)
2018Electronic andOther Products

8.9%

Announcement of Caliber 0100
World’s most precise* light-powered movement withtimekeeping accuracy of ±1 second per year (Eco-Drive)
2021

Announcement of Caliber 0200
A mechanical watch movement that achieves
both high precision and aesthetic beauty* As a light-powered watch. As of June 2021, CITIZEN survey.

16

Inspiring people through beautiful designs
perfected with the latest technology—the fusionof technology and beauty guides CITIZEN inproviding citizens around the world with better
watches. We are one of the world’s few
manufactures d’horlogerie, capable of integrated
in-house manufacture of everything fromindividual parts to completed products.

CITIZEN REPORT 2021

We leverage our core technologies developed
through the Watch business, including
miniaturization, precision processing and low
power consumption technologies, to manufacturedevices for use in everyday electronic products.
Our devices enable lower power consumption
and longer product lifespan, thus reducing
environmental impact and creating more
comfortable and convenient lifestyles.

We apply precision processing and assembly
technologies developed through the Watch
business to manufacture point-of-sales systems,
barcode printers and high-resolution digital
photo printers, which play important roles inretail stores, factories and society in general.
Electronic thermometers and electronic bloodpressure monitors assist people in managing
their health, and contribute to healthy living.

CNC automatic lathes

LEDs for lighting

Main Products

Automotive components

Digital photo printers

Main Customers

Net Sales and Operating Profit(Millions of yen)
163,718

Top share of the
U.S. mid-priced
marketA global leader inmovement sales

16,183• Watches• General consumers• Movements• Retail stores• System clocks• Dealers

163,525

141,620

12,440124,000

95,625

4,000

3,938

–8,192and others

2017

2018

Net sales

2019

2020

(FY)
2021
(Forecast)

Operating profit(Millions of yen)

A leader in global
share for small- andmid-sized computer
numerical control(CNC) automatic
lathes• Automotive parts
manufacturers• Sliding headstock type CNC

automatic lathe• Fixed headstock type CNC

automatic lathe• Medical device
manufacturers• Semiconductor
production equipment
manufacturers

72,16464,04913,08267,00058,54546,707
10,443

9,000

7,261

2,935
2017

2018

Net sales

and others

2019

2020

(FY)
2021
(Forecast)

Operating profit(Millions of yen)

A global leader incompact chip LEDs

• Automotive components• Automotive
manufacturers• Compact switches• Lighting manufacturers• Chip LEDs

• Home appliancemanufacturers• LEDs for lighting• Crystal devices• Motors

65,596• Consumer electronics
manufacturers

2,782

60,80755,94651,00045,919

2,543
1,500

926

–493
2017

2018

Net sales

and others

2019

2020

(FY)
2021
(Forecast)

Operating profit(Millions of yen)
20,580Application of small
precision technology• Digital photo printers• Retailers• POS and barcode printers• Wholesalers• Electronic thermometers• Household applianceretailers• Electronic blood pressure
monitors

513

and others

19,33016,875438

18,389394

18,000
500

–257

2017

2018

Net sales

2019

2020

(FY)
2021
(Forecast)

Operating profit(In FY2020, the segment name was changed with the integration of the Electronic Products business and the Other Products
business. Net sales and operating profit for FY2017 through FY2019 are for the Electronic Products business only.)

CITIZEN REPORT 2021

17

Our Business Portfolio

Watches
Main Operating Companies
Citizen Watch Co., Ltd.;
Citizen Watch Manufacturing Co., Ltd.;
Citizen Retail Planning Co., Ltd.;
Citizen T.I.C. Co., Ltd.

Net Sales

95.6 billion yen

FY2020Results

Operating Profit–8.1 billion yen

Net Sales
FY2021
Forecast

124.0 billion yen
Operating Profit

4.0 billion yen

We have also been working on several other unprecedented

Review of FY2020

challenges. These include our Fine Tuning Service (FTS), whichallows users to customize their watches in as many as 40,000 possiblecombinations; our AI Watch Recommend service, which uses AI to

The CITIZEN Watch Group boasts a strong market presence insuggest watches to consumers based on their preferences; andphysical stores, not only in Japan, but also in the U.S. and China. At

Riiiver, an IoT platform service that connects watches, services andthe same time, we have earned steady support among retailers forpeople through a variety of devices. In June 2020, our direct-sales

travelers, where our ability to capture demand from inbound tourists

e-commerce website in Japan had its full-scale launch. FY2020 as ain addition to domestic consumers is another strength. Nevertheless,whole was a year in which we worked to strengthen our shift tothese two areas of strength have been directly impacted by thedigital sales.

global COVID-19 pandemic, resulting in a significant drop in

1. A ranking of the “best online shops” in 8 main industries divided into 39 categories,
based on evaluations by a panel of more than 8,000 American online shoppers, as
conducted by Newsweek, Inc. of the U.S. and global data research firm Statista GmbH.

performance in FY2020.
Even before the pandemic, we had been working to grow sales
through the e-commerce channel, as well as at physical stores. In
China in particular, our e-commerce sales ratio already exceeded
50% before the pandemic, and we have managed to maintain aStrengths of Our Watch Businesscertain level of sales despite the pandemic. In recent months,
e-commerce and in-store sales have improved and are showing
signs of a strong recovery.

capabilities in analog quartz watches, and to date has developed

channels, we have built a brand direct-sales e-commerce website

Eco-Drive movements, including the Caliber 0100 movement thatand are focusing on enhancing its quality. Our efforts to build a

has an annual accuracy of ±1 second and is used in The CITIZEN,

website that makes it easy for visitors to understand the appeal of

making it the world’s most precise light-powered watch, as well as

and purchase our products have earned us a favorable reputation

the Eco-Drive One, a watch made with the world’s thinnest light-

from the market, including selection as one of Newsweek magazine’s

powered movement at just 1.00 mm thick.

Best Online Shops 2021.1 E-commerce direct sales have more than18

Citizen Watch has world-leading technology development

In the U.S., in addition to e-commerce sales through existing

Our proprietary technology Eco-Drive has been at the core of

doubled over the previous year, which shows the growth of

CITIZEN technology development. Since the 1976 launch of the

e-commerce as a primary sales channel.

Crystron Solar Cell, the world’s first analog light-powered watch, we

In Japan, we saw firm sales of SATELLITE WAVE GPS F950, ourhave continued to create a variety of “world’s first” light-powered

ﬂagship model launched to mark the 50th anniversary of our world’s

watches. The evolution of Eco-Drive involves not only movements

first titanium watch, as well as of 50th anniversary limited models

but also development of the watch dial, an essential part of thetaking their design inspiration from outer space. This enabled us toaesthetic of a watch. With metal-like reﬂectivity and depth of design,achieve a measure of success even in these difficult circumstances.

Eco-Drive dials have striking expressiveness and beauty. In an age

CITIZEN REPORT 2021

Message from the Director in Charge

We will leverage CITIZEN technologies
to convey the wonder of watches
to the world.

Yoshitaka Oji
Directorthat demands sustainability, we believe Eco-Drive is a technologythat enhances the value of the watch.

In August 2021 we plan to launch The CITIZEN mechanicalmodels, featuring our proprietary Caliber 0200 high-precision

We also possess advanced titanium processing technology andmechanical movement, and the Series 8, featuring a modern, sporty

surface hardening technology, meaning we can create products withdesign and a mechanical movement offering enhanced magnetic

our proprietary watch material Super Titanium™ that are lightweight,

resistance. Both have generated a solid pre-sales response, and in

scratch-resistant and gentle on the skin (hypoallergenic). Thesedemonstrating our advanced technical capabilities we expect thesetechnologies have gained a strong reputation even in non-watch-models to serve as a new strength. Moreover, in June 2021, as part

related fields. Components made with Super Titanium™, whichof our initiatives to capture consumers in segments that may

combines our titanium processing technology with surface

otherwise have few touchpoints with watches, we launched CITIZEN

hardening technology Duratect, are scheduled for use in the lunar

Timeless City (available in Japanese only), a virtual space in which

lander for HAKUTO-R,2 a commercial lunar exploration program.

customers can enjoy the many attractive features of our watches.

2. A program led by ispace, inc. which plans to conduct two lunar exploration missions by 2023.

We will continue to constantly move forward, driven by our belief
that “BETTER STARTS NOW.”FY2021 Market Conditions andOutlook Based on Business Expansion
While risks from the COVID-19 pandemic will persist through FY2021,
the countermeasures we implemented in FY2020 form a system for
responding flexibly to changes in the market environment.
The situation regarding the COVID-19 pandemic varies
depending on country and region, requiring an agile response
tailored to each situation. The growth of e-commerce has broughtsignificant changes to existing distribution infrastructure, so in
addition to our ongoing initiatives to enhance direct-sales
e-commerce—our direct connection to customers—we are working
to restructure and strengthen both the physical store channel anddirectly-managed stores. In Japan, we are also expanding our
e-commerce website and CITIZEN Premium Doors, our chain of
specialist retail spaces for high-end watches.

Please visit the website below to access
CITIZEN Timeless City.
https://city.citizen.jp/ (Japanese language only)

CITIZEN REPORT 2021

19

Our Business Portfolio Watches

Technologies for Citizens
Eco-Drive
What is the ideal source of power for a watch? In 1976, CITIZEN
launched the world’s first analog light-powered watch. We named
the technology Eco-Drive in acknowledgment of its eco-friendly
origins. It converts any kind of light into energy to power a watch
and stores the surplus in a power cell. On a full charge, an Eco-Drive
watch runs for months even in darkness with no need for regularbattery replacement. As a light-power pioneer, we continue
exploring new possibilities.
In a first for a watchmaker, Eco-Drive products obtained Eco Markcertification in 1996, a label managed by the Japan Environment
Association (JEA), in recognition of their contribution to environmental
sustainability. Eco-Drive went on to be awarded a Gold Prize at the
JEA’s Eco Mark Awards 2014, a first in the watch industry.

Developing High-Value-Added Watches

Eco-Drive One, the world’s thinnest
analog quartz light-powered watch

The CITIZEN Caliber 0100, the world’s
most accurate light-powered watch

Caliber 0200,
a new mechanical movement

Our high-value-added models include the
Eco-Drive One, a light-powered watch witha movement just 1.00 mm thick; The
CITIZEN Caliber 0100, a light-powered
watch accurate to ±1 second per year; andthe Caliber 0200 mechanical movement,
grounded in the watchmaking traditions ofboth Japan and Switzerland. These models,
which offer added value beyond that ofconventional watches, comprise a uniquelineup made possible only through
CITIZEN’s in-house capabilities, fromdesign, to manufacture of components,
assembly, and final adjustments.

Skilled Watchmaking “Meisters” Aspiring toGreater Accuracy and Precision
Watches, which are made up of many components and require advanced precision,
are assembled entirely by hand. Those responsible for that work are our watchmaking“Meisters,” people with the most advanced skills. Only those experienced craftspeople
who have passed internal and external certification exams, been given awards, or
have otherwise been publicly recognized fortheir contributions to Japanese manufacturing,are eligible to receive this title. The current
Super Meister has been selected for theContemporary Master Craftsman Award by
Japan’s Ministry of Health, Labour and Welfare,and has also been a winner of the Prime
Minister’s Prize of the Monodzukuri Nippon
Grand Award.

20

CITIZEN REPORT 2021

Titanium Processing Technology
Compared to other metals, titanium is soft and difficult to process. CITIZEN
addresses this challenge using proprietary processing technologies. These
technologies include pressing-related technologies for thermal control anddemolding; technologies for cutting that allow for detailed finishing oftitanium parts formed in the pressing process; and polishing technologies
that involve the craftsperson hand-finishing the precisely cut titanium to asmooth, mirror shine. Initiatives in recent years to reduce costs and achieve
low-volume, high-mix production led us to establish a new case processing
method without the use of metal molds, which were previously essential, andto develop automated polishing equipment that delivers a level of polishingcomparable to that of an experienced technician. The culmination of theseprocesses is the beauty of a finished CITIZEN watch.
Super Titanium™ is a unique material that overcomes the weaknesses ofProprietary technology used in the HAKUTO-R commercial lunar
exploration program

conventional titanium and is achieved through CITIZEN’s proprietary titanium
processing and surface hardening technologies. It is scratch-resistant,lightweight, gentle on the skin and rust-resistant.

Titanium

CITIZEN’s proprietarytitanium processing technology
and surface hardening technology(Duratect)• Lightweight• Gentle on the skin
• Rust-resistant• Scratch-resistant• Beautiful

Super Titanium™

• Scratch-resistant• Lightweight• Gentle on the skin

• Rust-resistant• Beautiful

Surface Hardening
Meticulous cleaning involving multiple cleaning solutions is followed byDuratect, CITIZEN’s proprietary surface hardening technology that uses

Stainlesssteel

Duratect MRK

Color variations

proprietary equipment. There are three types of Duratect technology:
technology for coating the material, technology for hardening the surfaceof the material, and technology for doing both. Applying Duratectaccording to the intended usage of the watch enables ﬂexible control overhardness and color tone. These characteristics also make it suitable for
products other than watches.

Duratect results in high scratch
resistance, as seen in comparison
against stainless steel on the left.

Multi-Brand Portfolio

BULOVA was founded by Joseph Bulova in New
York in 1875. Based on its advanced technologicalcapabilities, the firm has been a driving force inthe watch market. Over the years, BULOVA has
been responsible for many “world’s firsts,”
including the first tuning fork watch.

Frederique Constant takes inspiration from theconcept of “accessible luxury,” and all aspects ofproduction are conducted in-house, from designand development to final assembly. The brand’s
mission is to use outstanding manufacturing tooffer high-quality watches at sensible prices.

Arnold & Son bears the name of John Arnold, an
English watchmaker who made a name for himself
in the 18th century. Inspired by his work, the firm
continues to create watches using traditional
watchmaking techniques.

CITIZEN REPORT 2021

21

Our Business Portfolio

Machine Tools
Main Operating Companies
Citizen Machinery Co., Ltd.

Net Sales

FY2020Results

46.7 billion yen

Operating Profit

2.9 billion yen

Review of FY2020

Net Sales
FY2021
Forecast

67.0 billion yen

Operating Profit

9.0 billion yen

Strengths of Our Machine Tools Business

Orders fell significantly in the first quarter of FY2020 due to the

We consider the Machine Tools business to have competitive

COVID-19 pandemic, and we expected it would take time foradvantages over other companies in terms of proprietary

markets to recover. Subsequently, however, orders quickly turned

technologies such as low frequency vibration cutting (LFV) andupward in the Chinese market and elsewhere, and have been on afriction joining technologies, as well as expertise in operability andrecovery course since the second quarter.

processing technologies.

Current strong orders are not simply a temporary rebound from

Our sales are well-balanced among the four key regions of

the pandemic-related drop; they also include an economic cycle-

Japan, Asia including China, Europe and the U.S. In addition,

driven recovery in orders. Furthermore, the global trend toward

our business focus is becoming broader, dealing with a wide range

labor-saving and automation is accelerating.

of industries without overreliance on any one field, including

In addition to alkapplysolution, our network technology-based
service, our Online NC School for NC automatic lathe programmingand machine operation has been very well-received by customers
given restrictions on movement due to the pandemic.
While current circumstances make it difficult to achieve theautomotive-, medical-, IT- and telecommunications-related products,
as well as precision equipment.
Consequently, we are able to maintain relatively stable resultscompared to other companies in the machine tools industry, which
is vulnerable to the impact of economic fluctuations.

targets of the Medium-Term Management Plan, progress continues
generally as planned with our three key strategies: establish a firmbusiness base through innovative manufacturing; further
strengthen the competitiveness of existing businesses, centered on

FY2021 Market Conditions andOutlook Based on Business Expansion

emerging markets; and expand business tailored to the age of IOT(solutions business).
Construction of our new, relocated factory in China is scheduled

in 2021 total annual machine tool orders across JMTBA members areto be completed in the summer of 2021, and we also plan to open

expected to rise about 30% year on year to 1,200 billion yen. We

new sales and service sites in Italy and Germany. In Japan, in

believe this recovery trend will continue for some time, supported byaddition to expanding the lineup of display machines at our solution

growing demand, including for automotive-related products andcenters, we are also enhancing our online services, including remotesemiconductor production equipment.

support connecting customers with solution centers andprogramming training through alkartschool.
In February 2021, we held Citizen Machinery Online Private Show

22

According to the Japan Machine Tool Builders’ Association (JMTBA),

Order levels in the Chinese market continue to stay strong, but
we believe full-scale growth is yet to come. We are expanding
production capacity through construction of a new factory, while also

2021, introducing new machines and proprietary technologies via

strengthening efforts to expand sales. We are also focusing on the

livestream and video to a warm reception from many customers.

Indian market, where significant growth is expected in the medium

CITIZEN REPORT 2021

Message from the Director in Charge

We will establish a position as a“new manufacturing (monozukuri ) company,”creating the world’s most advanced
solutions for innovative manufacturing.

Keiichi Nakajima
Director
President, Citizen Machinery Co., Ltd.

to long term. We expect growing demand for technologies that offer

Because machine tools can be used for mass production ofhigh productivity and advanced processing, advantages offered by

precision, minute components, they are sometimes used in the

our automatic lathes.

manufacture of military weapons, but we believe that CITIZEN’s
machine tools must never be used for such purposes.
The CITIZEN Group also promotes sustainable management,

Addressing the Shift to Electric Vehicles

with the goal of ensuring the peace of mind, growth and sustainable
development of our customers. The Machine Tools business isdeveloping proprietary technologies and expanding its lineup of

Many reports from think tanks and financial institutions predict that,

eco-friendly products. Our proprietary low frequency vibration

until about 2035, gasoline, electric and hybrid vehicles will continue

cutting (LFV) and friction joining technologies improve productivity,

to coexist, with the shift to electric vehicles having a limited impact

but they also reduce environmental impact, and as such, havein the short term.

gained strong recognition both in and outside Japan, including

There are some concerns that the adoption of electric vehicles

commendations from trade journals. In looking to expand ourwill result in a decrease in the number of engine parts. However,

eco-friendly lineup, we evaluate products from the development

even if the shift gains major traction, demand for components suchstage using criteria such as energy and resource savings,

as brakes, drive and steering systems, doors, air conditioners andrecyclability, long-term usability and environmental conservation,seats will not disappear. We also expect that the shift to electric

before moving to commercialization.

vehicles and the evolution of autonomous driving and automaticbraking technologies will drive demand for components that will see
increased use, including compact motors and sensors. If anything,
we believe that business opportunities could potentially expand.
Furthermore, we are broadening our focus into a wide rangeof fields outside of automotive-related products as well as otherregions. The medical field, which has ample potential for growthwith the advancement of medical technology, is one field for which
CITIZEN has particularly high expectations.

ESG Initiatives

Citizen Machinery Online Private Show 2021

In accordance with the CITIZEN Group’s Corporate Philosophy,“Loved by citizens, working for citizens,” the Machine Tools businessdoes not sell products to military weapons-related manufacturers.

CITIZEN REPORT 2021

23

Our Business Portfolio Machine Tools

Achieving Innovative Production
Product
Fields

Machine tools play a role in the manufacture of components for a variety of products encountered everyday. This goes beyond watch components to include automotive components, components for medical
equipment and precision equipment, all of which are manufactured using machine tools.

Sliding Headstock Type NC Automatic Lathes

Fixed Headstock Type NC Automatic Lathes

Small-diameter, long-length precision components
Medium-diameter, short-length components

New Automatic Lathes

Engines and motors; drive and steering
Automotive

Endoscopes; implants; bone screws

system components; brakes; safety
equipment; doors and windows

MedicalCell phones, smartphones andWatch components; semiconductor
Precision
Equipment

manufacturing equipment; pneumatic
equipment

IT and Telecommunications

other telecommunications equipment;
5G and other telecommunications
infrastructure; televisions; computers;
digital cameras; printers

24

CITIZEN REPORT 2021

LFV Technology
Low frequency vibration cutting (LFV) technology is a nextgeneration processing technology that leads to productivity
improvements. LFV technology applies proprietary CITIZEN control
technology that vibrates the servo axis in the cutting direction,
allowing for “air cutting” time in which the tool is not in contact withthe workpiece and thereby breaking up chips during the cutting
process. This solves a number of long-standing chip-related issues,
such as how to improve the efficiency of small-diameter, deep-bore
machining, or break up chips produced when working with difficultto-cut materials, which tend to generate long strips. In addition, thistechnology dramatically reduces chip volume and helps prevent
defects on the workpiece surface, thereby achieving high-precision
machining over extended periods of time.

Conventional chips

Chips from LFV technology

Cumulative global number of units shipped: 2,500 (As of October 2020)
Japan

1,150

EuropeAmericas

800

250
Asia

300

Friction Joining Technology
We have developed proprietary friction joining technology and aclamping device that achieve advanced weld quality. This reduces
the amount of remnant bars to about one-fifth that of conventional
methods, contributing significantly to reduced environmental load
through effective use of materials and to lower processing costs
when using high-value-added materials.

Cincom L32 Sliding Headstock Type CNC Automatic Lathe with Remnant Bar
Reduction Function

CITIZEN REPORT 2021

25

Our Business Portfolio

Devices andComponents

Establishing a Top Position in Specific Fields
by Offering Differentiated Products

Creating the Next Generationof Growth Business

Main Operating Companies
Citizen Electronics Co., Ltd.; Citizen Finedevice Co., Ltd.;
Citizen Micro Co., Ltd.; Citizen Electronics Timel Co., Ltd.;Key Strategies

Citizen Chiba Precision Co., Ltd.; Fujimi Corporation

1

Develop a diverse lineup of automotive-related
products centered on the small precise metal partmachining business• Establish competitive advantages centered on theautomotive components business• Advance the shift to high-value-added products, mass
production and rationalization, expanding into areas
beyond automotive-related products

2

Expand the range of high-quality, high-valueadded products in response to market changes• Expand market share using proprietary and differentiatedtechnologies, including LEDs and tactile switches

3

Electronic andOther Products
Main Operating Companies
Citizen Systems Japan Co., Ltd.; Tokyo Bijutsu Co., Ltd.

Enhance management stability by
improving profitability

Providing Value to People
Around the WorldOur Electronic and Other Products business, based on small
precision technology accumulated through watchmaking,encompasses the printer business, including photo printers andcompact printers, and the healthcare device business, including
blood pressure monitors and digital thermometers. Building on ourcore businesses of healthcare devices made from the customer’s
perspective and high-quality, high-functionality photo printers, wewill work to expand into global niche markets with the goal ofdriving stable profits.
Electronic devices are increasingly important in a businessenvironment that demands constant evolution, and in day-to-day
life, where we seek to promote healthy, active lifestyles. We willcontinue to pursue new value and convenience while monitoring
people’s health and lifestyle needs.

26

CITIZEN REPORT 2021

Leveraging our miniaturization, precision processing, and low power

Our LEDs for lighting are next-generation light sources designed

consumption technologies developed in the manufacture ofin pursuit of high performance, point light source and light quality.

watches, we make a wide range of components and products that

Our tactile switches, crystal device components and motors are vital

support the lives of people and society.

in smartphones, home appliances, consumer electronics, andOur goal is to establish competitive advantages centered on

medical devices. We will use these and other proprietary,

automotive components, for which we have established a reputationdifferentiated technologies to expand our offering of high-quality,

for our precise metal part machining technology. In automotive

high-value-added products in response to market changes.

components, we offer products in the areas of safety, comfort, theGoing forward we will continue to focus on advancing ourenvironment, and controls. We supply automotive manufacturers

technologies to achieve greater levels of miniaturization, precision

around the world, primarily with functional components. We are also

processing, and low power consumption. We will work to create theworking to create added value through the rationalization andnext generation of growth businesses by establishing a top position

integration of processing systems made possible with manufacturing

in specific fields and transitioning to a leaner earnings structure as

facilities we have designed ourselves, as we aim to expand into areas

we move to enhance management stability.

beyond automotive-related products.

Automotive components

Digital thermometers

LEDs for lighting

Crystal units, crystal oscillators

MotorsDigital blood pressure monitors

Publishing

Digital body composition monitors

POS printers

CITIZEN REPORT 2021

27

Corporate Governance

Basic Approach to Corporate Governance
Loved by citizens, working for citizens—This is the sentiment fromwhich Citizen Watch Co., Ltd. (“the Company”) derives its nameand which it has made its Corporate Philosophy. The Company
works to contribute to society and increase its corporate value
through sustainable corporate activities, in harmony with the local
community and the global environment. To continue to promote
its aims, the Company believes it is important to ensuretransparency in management and multi-faceted management
oversight. Accordingly, the Company is striving to expand andenhance its corporate governance.
Corporate Governance System
The Board of Directors of the Company consists of six Inside
Directors who oversee the Group and are responsible forbusiness execution in principal operations, and three Outside
Directors who review and monitor business management from an
independent position, making the most of their extensive
experience and knowledge of management. The Company is acompany with an Audit & Supervisory Board, and audits are
conducted by three Audit & Supervisory Board Members (two ofwhom are Outside Audit & Supervisory Board Members), whopossess a high degree of knowledge and expertise regarding
corporate finance and corporate law.

The Company has voluntarily established the Nomination
Committee and the Compensation Committee to increase thetransparency of management.
The main duties of the Nomination Committee include
discussing matters concerning the appointment of Representative
Directors, the President and CEO, and the Chairperson of theBoard of Directors, and making proposals on such matters to theBoard of Directors. The main duties of the Compensation
Committee include discussing matters concerning the policies andstandards of compensation for Directors, and providing advice onsuch matters to the Board of Directors.
Committee members are appointed by resolution of theBoard of Directors. Each committee consists of at least three
Directors, the majority of whom are Outside Directors and at
least one of whom is a Representative Director. The Chairpersonof each committee is an Outside Director, elected through themutual consensus of committee members.
The Company has determined that the corporate governancesystem described above is adequate for ensuring the proper andefficient execution of duties, management transparency andmulti-faceted management oversight.

Selection/Dismissal

Selection/Dismissal
Proposal/Reporting

Auditing

Cooperation

Selection/Dismissal

Advice/ReportingAccounting Audit

Appointment/
Removal/Supervision

ReportingInternal Audit

ReportingDirection/Supervision

Cooperation* Chairperson: Outside Director
Members: Three or more Directors (majority Outside Directors, at least one Representative Director)

Outside Officers
The Company has appointed three Outside Directors and two
Outside Audit & Supervisory Board Members. The three Outside
Directors have extensive experience and broad insights as
managers and as an attorney-at-law, which they use to review andmonitor the Company’s management. The two Outside Audit &Supervisory Board Members have extensive experience, broad
Name

Reasons for Appointment

Fumiaki Terasaka

To utilize Mr. Fumiaki Terasaka’s considerable experience in and extensive knowledge of management to check and supervise theCompany’s management from an independent, objective standpoint, and in light of his achievements as an Outside Director of theCompany, the Company has reappointed him as Outside Director.

Outside Director

Toshiko Kuboki

Ms. Toshiko Kuboki has extensive experience and knowledge as an attorney-at-law, and the Company expects that she will be able to utilize
her professional point of view as an attorney-at-law and her experience as an outside director of another company to check and supervise
the Company’s management. The Company also expects that she will take on a supervisory function in the decision-making process
regarding selection of the President and CEO, Director compensation and other matters from an independent, objective standpoint, andhas thus reappointed her as Outside Director. While Ms. Kuboki has not been involved in the management of a company aside from her
position as an outside director or as an Outside Audit & Supervisory Board Member of the Company, given her thorough knowledge ofcorporate legal affairs as an attorney-at-law, the Company believes her capable of properly performing her duties as Outside Director.

Outside Director

Yoshio Osawa

In the belief that Mr. Yoshio Osawa will utilize his considerable experience in and extensive knowledge of management to check andsupervise the Company’s management, and with the expectation that he will take on a supervisory function in the decision-making process
regarding selection of the President and CEO, Director compensation and other matters from an independent, objective standpoint, theCompany has reappointed him as Outside Director.

Outside Audit &Supervisory Board
MemberNoboru Akatsuka

Mr. Noboru Akatsuka has been managing banks and companies for many years and has extensive knowledge and experience thereof.
The Company believes he will utilize such knowledge and experience to audit the Company, and has reappointed him as Outside Audit &Supervisory Board Member.

Yaeko Ishida

Ms. Yaeko Ishida has extensive experience and knowledge as an attorney-at-law, and since she will be able to utilize her professional pointof view as an attorney-at-law to audit the Company, the Company believes that she is suitable for the position of Outside Audit &Supervisory Board Member. While Ms. Ishida has not been involved in the management of a company, the Company deems that she has
thorough knowledge of corporate legal affairs as an attorney-at-law and will be able to properly perform her duties as an Outside Audit &Supervisory Board Member, and has reappointed her as Outside Audit & Supervisory Board Member.

Outside Director

Outside Audit &Supervisory Board
Member28

insights, and expertise relating to finance and accounting as abanker and an attorney-at-law, which they use to audit theCompany. The Company has determined that the systemdescribed above is adequate for maintaining and promoting
corporate governance.

CITIZEN REPORT 2021

Officer Compensation
Regarding the amount of officer compensation, the Company
bases its decisions on the amount of earnings improvement it
desires, the level considered appropriate to secure outstanding
personnel, changes in the management environment, externaldata, levels prevalent at other companies, as well as details ofmanagement duties. Also, regarding decisions about executive
bonuses, in addition to these considerations, it considers financial
benchmarks (sales, operating profit, etc.) and non-financial
benchmarks (corporate structure improvement, systemic
improvement, ideas for the future, etc.).

Total Officer Compensation
Category

No. of officers

Total amount ofcompensation, etc.
(millions of yen)

Of which, fixedcompensation(millions of yen)

Of which, bonuses(millions of yen)

Of which, performance-linked
share-based compensation(millions of yen)

Directors [of whom, Outside Directors]

11 [3]

159 [28]

159 [28]

— [—]

— [—]

Audit & Supervisory Board Members[of whom, Outside Audit & Supervisory
Board Members]

3 [2]

43 [24]43 [24]

— [—]

— [—]

Total [of whom, Outside Officers]

14 [5]

203 [52]

203 [52]

— [—]

— [—]

(Notes) 1.	The above figures include Directors who retired at the conclusion of the 135th Ordinary General Meeting of Shareholders held on June 25, 2020.
2.	Due to the decline in business performance, the fixed compensation of Directors (excluding Outside Directors) was reduced by between 10% and 25%, depending on the Director’s position, for the period May 2020
through October 2020, and no bonuses were paid for FY2020.
3.	Bonuses are paid to increase motivation toward contributing to the improvement of single-year and medium-to-long-term performance as well as to the enhancement of corporate value. Performance indicators forbonuses are consolidated net sales and consolidated operating profit as outlined in the annual plan, and consolidated net sales, consolidated operating profit and ROE as outlined in the Medium-Term Management Plan.
In FY2020, the Company recorded consolidated net sales of 206,641 million yen, a consolidated operating loss of 9,551 million yen and ROE of −11.8%. Bonuses are calculated by multiplying the base monthly
compensation of each position by a coefficient determined by the level of achievement of performance indicators and non-financial items.
4.	Performance-linked share-based compensation is in the form of shares of the Company, and the conditions, etc. for allotment are as stated in “(1) Policies, etc. on determination of officer compensation, etc.” of the Noticeof the 136th Ordinary General Meeting of Shareholders. Furthermore, the status of granting shares during FY2020 is stated in “II 1. (5) Status of shares delivered to officers of the Company as compensation for the
performance of the duties during the fiscal year under review” of the Notice. Performance-linked share-based compensation is paid to clarify the link between Directors’ compensation and the Company’s share value, andto increase motivation toward contributing to the improvement of medium-to-long-term performance as well as to the enhancement of corporate value. Performance indicators for performance-linked share-based
compensation are consolidated net sales, consolidated operating profit and ROE as outlined in the Medium-Term Management Plan. In FY2020, the Company recorded consolidated net sales of 206,641 million yen, aconsolidated operating loss of 9,551 million yen and ROE of −11.8%. Performance-linked share-based compensation is calculated according to the level of achievement of performance indicators, etc.
5.	The maximum allowance for the total amount of compensation, etc. for Directors (excluding Outside Directors) was set at 370 million yen per year (inclusive of bonuses, etc.) at the 133rd Ordinary General Meeting of
Shareholders held on June 27, 2018, and the number of Directors (excluding Outside Directors) at the conclusion of the 136th Ordinary General Meeting of Shareholders is eight. Compensation for the performance of theduties of employees who also serve as Directors is included in the above compensation, etc.
6.	Separate from Note 5 above, at the 133rd Ordinary General Meeting of Shareholders held on June 27, 2018, the maximum allowance for the total amount of performance-linked share-based compensation for Directors(excluding Outside Directors; excluding Directors who are non-residents of Japan) was set at 300 million yen for a period of three fiscal years (and 100 million yen for the initial period starting from 2018), and the number of
Directors (excluding Outside Directors and Directors who are non-residents of Japan) at the conclusion of the 136th Ordinary General Meeting of Shareholders is eight.
7.	The maximum allowance for the total amount of compensation, etc. for Outside Directors was set at 40 million yen per year at the 134th Ordinary General Meeting of Shareholders held on June 26, 2019, and the number of
Outside Directors at the conclusion of the 136th Ordinary General Meeting of Shareholders is three. No bonuses are paid to Outside Directors.
8.	The maximum allowance for the total amount of compensation, etc. for Audit & Supervisory Board Members was set at 80 million yen per year at the 122nd Ordinary General Meeting of Shareholders held on June 26, 2007,
and the number of Audit & Supervisory Board Members at the conclusion of the 136th Ordinary General Meeting of Shareholders is four. No bonuses are paid to Audit & Supervisory Board Members.
9.	In order to increase the transparency of compensation for Directors, the Board of Directors has delegated the determination of the content of individual compensation, etc. for Directors for FY2020 to the Compensation
Committee chaired by Outside Director Fumiaki Terasaka and with Outside Directors Toshiko Kuboki and Yoshio Osawa, and President and CEO Toshihiko Sato as members. Given that the determination of such content
has been delegated to the Compensation Committee by resolution of the Board of Directors and that the content of the compensation, etc. is in line with the policy on the determination of the content of individualcompensation, etc. for Directors resolved by the Board of Directors, the Compensation Committee has deemed that individual compensation, etc. for Directors for FY2020 conforms with said policy.

Analysis and Evaluation of the Effectiveness of the Board of Directors and the Audit & Supervisory Board
1. Method of Evaluation

2. Overview of Results

The Company used an evaluation tool provided by an externalorganization to administer a questionnaire to all members of theBoard of Directors and the Audit & Supervisory Board for the
purpose of analyzing and evaluating the effectiveness of the Boardof Directors. The questionnaire was implemented using questions
prepared by the external organization and the results of the analysis
and evaluation were then discussed by the Board of Directors.

Based on the analysis and evaluation of the questionnaire regarding the effectiveness of theBoard of Directors, the Directors and the Audit & Supervisory Board Members generally gavehigh grades, and it was confirmed that the Board of Directors functioned effectively. The results ofthe evaluation for each question are as shown below.

• Respondents: All Directors and Audit & Supervisory Board
Members (13 people)• Method: Questionnaire survey• Period: March 2021
• Questions: 18 in total(1) Questions regarding the management/administration of theBoard of Directors (2 questions)(2) Questions regarding the agenda items at meetings of theBoard of Directors (9 questions)(3) Questions regarding the systems that support the Board of
Directors (7 questions)(1)	Management/Administration of the Board of Directors
Responses indicated that the materials used at Board of Directors meetings are of an
appropriate volume and an adequate amount of information is disclosed in advance.
There were also other opinions on how materials are arranged and on meeting preparations.
(2)	Agenda items at meetings of the Board of Directors
Responses indicated that Outside Directors actively provided opinions during deliberations by
the Board of Directors, and that matters with a high degree of managerial importance werecovered, resulting in more active Q&A and discussion.
(3)	Systems that support the Board of Directors
Responses indicated that the Company appropriately responds to requests from Directors
concerning proposals, findings and requests with a high level of managerial importance.
This includes providing briefings and information outside of Board of Directors meetings.
Responses also indicated that the Nomination Committee and the Compensation Committee
appropriately fulfill their roles, and that the decisions of the Compensation Committee show
sound judgment.

3. Initiatives in FY2020• In order to verify evaluation of the effectiveness of the Board of Directors with greater objectivity and clarify future issues, the questions used were prepared by an externalorganization. Furthermore, the questionnaire was conducted online to increase convenience. The expression of a variety of meaningful opinions will lead to future
improvements.
• For certain proposals, senior operating officers and operating officers were called to meetings of the Board of Directors to provide detailed explanations. This increased
Directors’ understanding of the underlying business conditions and resulted in more in-depth discussion.
• Providing more briefings and information outside of Board of Directors meetings, as well as more opportunities for communication between Inside Directors and Outside
Directors, enabled more in-depth discussion by the Board of Directors.

4. Future Initiatives
The Board of Directors will strive to increase its effectiveness and enhance corporate value by incorporating issues raised in the evaluation, while considering the Company’s
current condition and responses to changes in the environment, and by continuing to encourage active discussion.
Furthermore, through constructive discussion at Board of Directors meetings based on Japan’s Corporate Governance Code, the Board of Directors will ensure its
effectiveness and ability to appropriately fulfill its roles and responsibilities.

CITIZEN REPORT 2021

29

Corporate Governance

Strengthening Group Risk Management
The CITIZEN Group has established the Basic Policy on Group Risk
Management, the Basic Regulations on Group Risk Management
and the Basic Regulations on Group Crisis Management for the
purpose of centrally managing and swiftly responding to risks, andactively undertakes initiatives to strengthen corporate governancethat will contribute to Group-wide achievement of business goals
and sustainable development.
The Sustainability Committee was established in FY2020. Its
main responsibilities are identifying and handling the Group’s key
risks and responding to new risks, in addition to acting as thesteering committee for Group-wide sustainability initiatives.
The President and CEO is the chair of the Sustainability
Committee, which in turn has established subcommittees formain risk themes. Officers in charge and representatives from risk
management departments participate in these subcommittees,
and senior management identifies and addresses key risks
including ESG risks such as those related to human rights andlabor practices, environmental issues, procurement and the
supply chain. Furthermore, the Management Committee is in
direct control of the committee and the organization responsible

for managing financial risks and risks concerning themanagement foundation as it relates to compliance, business
continuity planning, intellectual property, information andcybersecurity. As a result, Group companies are able to shareimportant risk management-related information including
information on risks common across the Group and risks faced byindividual companies, while also standardizing risk management
across the Group.
In FY2018, the CITIZEN Group established the Group Quality
Compliance Committee responsible for considering andformulating measures to strengthen quality compliance for theentire Group. The committee is chaired by the Director in chargeof Group risk management and is composed of quality officers
for each Group company. Its primary responsibility is to handle
quality compliance risks. In addition, we regularly conduct
training, education and audits on the CITIZEN Group Quality
Assurance Code of Conduct to improve awareness of quality
compliance throughout the Group.
The CITIZEN Group will continue to make improvements tostrengthen risk management Group-wide.

Group Risk Management Committee

Group Quality
Compliance
Committee

Group Legal
Compliance
Committee

Group
Environmental
Management
Committee

Group Accounting
Committee

Group Intellectual
Property
Management
Committee

Group Information
GovernanceCommittee

Group Human
Resources
Committee

Group BusinessContinuity
Management
Committee

Ensuring Appropriate Conduct of Business by Subsidiaries
Based on rules and regulations for subsidiaries and affiliates, theCompany manages and guides the development of management
systems and internal control systems at its subsidiaries.
With regard to the individual business activities of the CITIZEN
Group, the Company thoroughly disseminates the management
policies and plans it has formulated, and clarifies the authority
and responsibility of Group companies. Group companies are
responsible for autonomous management based on the industry
characteristics and other aspects of each business.

In addition, the Group shares information about andcollaborates on key issues for Group businesses throughmeetings including Management Committee meetings andliaison conferences attended by Group companies.
Furthermore, subsidiaries are required to submit regular
reports at Business Control and Management Committee
meetings and Watch Group Control Committee meetings on thestatus of business conduct. The Internal Audit Department also
monitors subsidiaries through audits.

Other Corporate Governance Matters
Company Institutions and Internal Control System
The Company holds meetings of the Management Committee
comprising full-time Directors and full-time Audit & Supervisory
Board Members to ensure prompt management decision-making
and management transparency. The committee fully discusses
and conducts advance deliberations on matters relevant tomanagement decisions and other important management
matters of the Board of Directors.

30

CITIZEN REPORT 2021

The Board of Directors makes decisions relevant to businessexecution and supervises business execution. With regard tobusiness execution, Representative Directors, Directors in charge,
and operating officers manage businesses.
The Board of Directors met 17 times during FY2020, and all
Directors and all Audit & Supervisory Board Members attended
at least approximately 94% of meetings held during theirrespective terms of office.

Message from an Outside Director

CITIZEN should leverage technology
cultivated throughout its history tocreate new value for society.
Toshiko Kuboki
Outside Director

Q. What is your impression of the CITIZEN Group?
My impression is that the CITIZEN Group has continued totirelessly develop precision machine technology over many years.
CITIZEN shows great respect for manufacturing as a craft, and its
approach seems both diligent and focused.
The resulting trust it has established and the CITIZEN branditself are great strengths for the CITIZEN Group. That said, I sensethat despite having this great trust, history and brand, CITIZEN issometimes unaware of the inherent value of those strengths.
Many of the CITIZEN Group’s products and initiatives havecompelling stories behind them. I always thought Eco-Drive
technology was excellent, and lately CITIZEN has been pursuingsustainable manufacturing that is both eco- and people-friendly.
This includes watches that use ethical materials and specialty
lubricants with low environmental impact, friction joining
technology in the Machine Tools business, and LEDs andcompact motors for the medical field developed by the Devices
and Components business. CITIZEN has also launched its Eco
Tree ACTION initiative, whereby one mangrove seedling will be
donated through NICE, an international NGO, for every newwatch owner opting not to receive a box with their purchase.
Greening activities at CITIZEN’s headquarters and factories arealso designed for the enjoyment of the changing seasons andcoexistence with nature. While not necessarily aware of it at thetime, CITIZEN has in fact long been engaged in addressing the
Sustainable Development Goals (SDGs). The CITIZEN Group is agood citizen of society. The Group holds many other “seeds ofvalue” for society; CITIZEN just needs to be more aware of andmore proactive in communicating that value.

Q. What are your thoughts on the structure of theBoard of Directors?
Meetings of the Board of Directors always generate a lively
exchange of opinions. Coming from a diverse range ofexperiences and viewpoints, opinions are always intriguing andprovide insights into potential solutions. One important theme isbusiness succession, in other words, how to hand the enterpriseover to the next generation. Outside Directors are expected toenhance the functions of management transparency andgovernance, and I feel I play an important role in that regard.
The issue of diversity has often been brought up in recent
years. Gender, nationality and other attributes are part of aperson’s individuality. In that regard, companies today needhuman resources with diverse experiences and diverse

communication styles and other skills, which are dependent on
differences in individuality.
The CITIZEN Group is currently seeing an increase in female
employees—and not just executives—but there are far fewer rolemodels for women in management than there are for men. The
CITIZEN Group needs to increase the number of women withleadership experience, and enable them to gain more experience.

Q. What is your perspective on the CITIZEN Group’sbusiness environment?
Market conditions have changed significantly due to the
COVID-19 pandemic, and this is particularly true for the Watch
business. Business performance has also fallen in some areas.
Nevertheless, CITIZEN is advancing a variety of reforms andplans, including a greater focus on marketing. As the saying
goes, a crisis is also an opportunity. From a medium-to-long-term
perspective, I do not view the situation pessimistically.
Besides, overcoming adversity as in the current situation is anexperience that will certainly prove beneficial in the future, bothfor the Company and for individual employees. The CITIZEN
Group has not only technical capabilities and brand strength, butmany “seeds of value” for society; these attributes give CITIZEN
the ability to turn adversity into opportunity.

Q. What are your expectations for the CITIZEN Group?
I think the CITIZEN Group has succeeded in cultivating a flat
culture that facilitates free discussion while maintaining mutual
respect. It is really pleasing to hear people addressing one
another by name rather than title.
Given that culture, in the same way that winds from different
directions combine to create the lifting force of a whirlwind, myhope is that by engaging in dynamic discussions that transcend
the boundaries of workplace and area of responsibility, the
CITIZEN Group will see an even greater diversity of ideas, andride the resulting updraft as one unified team.
Rather than a collection of individuals simply doing their job
well in their respective fields, I hope that members of the
CITIZEN Group show an interest in areas beyond their specificareas of responsibility, engage in discussion, maintain a sense ofurgency, and take on the challenge of making those “seeds ofvalue” for society bloom.

CITIZEN REPORT 2021

31

Management Team

1

2

3

4

5

6

7

8

9

10

11

12

Directors
1

Toshihiko Sato
President and CEO

Toshihiko Sato, with his record of achievements and experience
including running the Devices and Components business and being
responsible for watch manufacturing, continues to contribute to theadvancement of the CITIZEN Group’s businesses.

2

Toshiyuki Furukawa
Director, in charge of Accounting Department, Public & Investor
Relations Department, IT Management Department andCorporate Planning Division

As General Manager of the Corporate Planning Division, Toshiyuki
Furukawa has a record of achievements in formulating Groupmanagement strategy, and as Director has experience leading the
Corporate Planning Division, Accounting Department, and the Public &Investor Relations Department. He assumed his current post in 2016.

3

Keiichi Nakajima
Director

Keiichi Nakajima has mainly been involved in the Machine Tools business,
driving the Machine Tools business as a whole and promoting businessstrategies as President of Citizen Machinery Co., Ltd. He assumed his
current post in 2013.

4

Shinji Shirai
Director, Senior General Manager of Manufacturing Technology
Division and in charge of Quality Assurance Department

After being involved in watch and clock manufacturing at the Company’s
subsidiaries, Shinji Shirai gained experience managing watch
manufacturing subsidiaries. He also has experience in operations
involving watch manufacturing, technologies and product development.
He assumed his current post in 2017.

5

Yoshitaka Oji
Director, Senior General Manager of Watch Business Division,
Senior General Manager of Product Development Division, andin charge of Movement Division

After being involved in watch and clock sales at one of the Company’s
overseas subsidiaries, Yoshitaka Oji gained experience as General
Manager of the Corporate Planning Division, promoting management
strategy in the Watch business and product development of watches andclocks. He assumed his current post in 2017.

6

Yoshiaki Miyamoto
Director, General Manager of General Affairs Division and in
charge of Group Risk Management, Personnel Division, CSR
Department and Environmental Management Department

After being involved in the startup of new plants at Group overseas
subsidiaries engaged in watch and clock manufacturing, Yoshiaki Miyamotomanaged overseas subsidiaries responsible for watch and clock sales. He also
has experience as Director with responsibility for Group risk management,
general affairs and personnel. He assumed his current post in 2018.

32

CITIZEN REPORT 2021

Auditors
7

Fumiaki Terasaka

Outside Director Independent(Career Summary)
2004 Operating Officer and Director of Kyushu Sales & Marketing
Division of Sapporo Breweries Ltd.
2004 Director and Senior Officer, Director of Marketing Division of
Sapporo Breweries Ltd.
2005 Director and Executive Managing Officer, Director of Marketing
Division of Sapporo Breweries Ltd.
2009 Executive Managing Officer of Sapporo Breweries Ltd.
2010 President and Representative Director of Sapporo Breweries Ltd.
2010 Managing Director and Group Operating Officer of Sapporo
Holdings Limited
2013 Advisor of Sapporo Breweries Ltd.
2014 Senior Advisor of Sapporo Breweries Ltd.
2015 Outside Audit & Supervisory Board Member of Daisyo
Corporation (present)2017 Outside Director of Fujitsu General Limited (present)2017 Outside Director of the Company (present)

8

Toshiko Kuboki

Outside Director Independent(Career Summary)1987 Registered as an attorney-at-law
2002 Conciliation Commissioner of Tokyo Family Court (present)
2009 Retirement Benefit Examination Committee Member of Board ofAudit of Japan (present)2012 Visiting Professor of Graduate School of Law, Chuo University(present)2013 Municipal Board of Education Member of Chuo-ku, Tokyo (present)2015 Outside Director of Qol Co., Ltd. (Currently Qol Holdings Co., Ltd.)(present)
2015 Outside Auditor of Kyodo News (present)2016 Outside Audit & Supervisory Board Member of the Company
2019 Outside Director of the Company (present)

9

Yoshio Osawa

Outside Director Independent(Career Summary)
2003 Corporate Officer and General Manager of Network Division of
Sumitomo Corporation2005 Executive Officer and General Manager of Network Division of
Sumitomo Corporation2007 Executive Officer and General Manager of Media Division of
Sumitomo Corporation
2008 Managing Executive Officer and General Manager of Media,
Network & Lifestyle Retail Business Unit of Sumitomo Corporation
2008 Representative Director and Managing Executive Officer of
Sumitomo Corporation2011 Representative Director and Senior Managing Executive Officer
of Sumitomo Corporation2013 Representative Director, President and Chief Operating Officer of
SCSK Corporation
2015 Representative Director and President of SCSK Corporation
2016 Director and Chairman of the Board of SCSK Corporation2017 Director of SCSK Corporation2018 Outside Director of Canon Marketing Japan Inc. (present)
2019 Outside Director of the Company (present)

10 Noboru Akatsuka

Audit & Supervisory Board Member (Full-time), Outside Audit &Supervisory Board Member Independent(Career Summary)
1981 Joined Dai-Ichi Kangyo Bank, Limited
2005 General Manager of Asia Corporate Banking of Mizuho
Corporate Bank, Ltd. (Currently Mizuho Bank, Ltd.)
2007 General Manager of Overseas Business Promotion Division ofMizuho Corporate Bank, Ltd.
2008 General Manager of Corporate Banking Division No. 18 ofMizuho Corporate Bank, Ltd.
2009 Executive Officer of Mizuho Corporate Bank, Ltd.
2011 Managing Executive Officer of Century Tokyo Leasing
Corporation
2016 Counselor of Century Tokyo Leasing Corporation
2016 Chairman of Fujitsu Leasing Co., Ltd.
2018 Audit & Supervisory Board Member (Full-time) of the Company(present)

11 Yoshio Takada

Audit & Supervisory Board Member (Full-time)

Yoshio Takada has mainly been involved in accounting operations,having held several managerial positions in accounting departments of
the Company, following which he also had experience managing a
subsidiary as Director and CEO. He assumed his current post in 2017.

12 Yaeko Ishida

Outside Audit & Supervisory Board Member Independent(Career Summary)
2000 Registered as an attorney-at-law
2007 Judicial Commissioner of Tokyo Summary Court
2016 Conciliation Commissioner of Tachikawa Branch of Tokyo Family
Court (present)
2019 Outside Audit & Supervisory Board Member of the Company(present)

Independent
Independent officer pursuant to Rule 436-2 of the Securities Listing
Regulations of Tokyo Stock Exchange, Inc.
Notes: For more information on the nomination of Outside Directors andOutside Audit & Supervisory Board Members, see page 28.
Yaeko Ishida uses the name Yaeko Kitadai in her profession as an
attorney-at-law.

Company Information
Company Overview (As of March 31, 2021)
Corporate name Citizen Watch Co., Ltd.
EstablishedMay 28, 1930

Headquarters

6-1-12, Tanashi-cho,Nishi-Tokyo-shi, Tokyo
188-8511, Japan

Representative

Toshihiko Sato,
President and CEO

Capital¥32,648 million

Stock Information (As of March 31, 2021)

Employees

17,044 (consolidated)

Business
Manufacturing and sale of watches anddescription their components, and as a holding
company, planning and implementationof Group management strategies,
Group business auditing, developmentof Group technologies, intellectual
property management, and otheradministrative operations.

Securities code

7762

Stock exchange
listing

Tokyo Stock Exchange(First Section)

Total number ofauthorized shares

959,752,000

Total number ofshares issued

314,353,809

Number ofshareholders

42,588Principal Places of Business and Group Companies
2 Tokorozawa Works[OVERSEAS GROUP]EUROPE
17 CITIZEN WATCH EUROPE G.M.B.H.

41 CINCOM MIYANO TAIWAN CO., LTD.

[DOMESTIC GROUP]

18 CITIZEN WATCH IBÉRICA S.A.U.

42 CITIZEN (CHINA) PRECISION MACHINERY CO., LTD.

1 Headquarters, Tokyo Works

39 SUNCITI MANUFACTURERS LTD.
40 CITIZEN WATCHES AUSTRALIA PTY LTD.

3 CITIZEN MACHINERY CO., LTD.

19 CITIZEN WATCH ITALY S.P.A.

43 CITIZEN MACHINERY ASIA CO., LTD.

4 CITIZEN ELECTRONICS CO., LTD.

20 CITIZEN WATCH UNITED KINGDOM, LTD.

44 CITIZEN MACHINERY PHILIPPINES INC.

5 CITIZEN FINEDEVICE CO., LTD.

21 FREDERIQUE CONSTANT HOLDING S.A.

45 CITIZEN MACHINERY VIETNAM CO., LTD.

6 CITIZEN SYSTEMS JAPAN CO., LTD.

22 MANUFACTURE LA JOUX-PERRET S.A.

46 C-E (HONG KONG) LTD.

7 CITIZEN WATCH MANUFACTURING CO., LTD.

23 CITIZEN MACCHINE ITALIA S.R.L.

47 CITIZEN ELECTRONICS (CHINA) CO., LTD.

8 CITIZEN RETAIL PLANNING., LTD.

24 CITIZEN MACHINERY EUROPE G.M.B.H.

48 FIRSTCOME ELECTRONICS LTD.

9 CITIZEN T.I.C. CO., LTD.

25 CITIZEN MACHINERY UK LTD.

49 JIANG XING ELECTRONICS LTD.

10 TOKYO BIJUTSU CO., LTD.

26 EGASCA, S.A.

50 CITIZEN FINEDEVICE PHILIPPINES CORP.

11 CITIZEN CUSTOMER SERVICE CO., LTD.

27 HESTIKA FRANCE S.A.S.

51 CITIZEN SEIMITSU (THAILAND) CO., LTD.

12 CITIZEN LOGISTICS SERVICE CO., LTD.

28 C-E (DEUTSCHLAND) G.M.B.H.

52 MASTER CROWN ELECTRONICS (WUZHOU) LTD.

13 CITIZEN ELECTRONICS TIMEL CO., LTD.

29 CITIZEN SYSTEMS EUROPE G.M.B.H.

53 MOST CROWN INDUSTRIES LTD.
54 CITIZEN SYSTEMS (DONGGUAN) CO., LTD.

14 CITIZEN MICRO CO., LTD.
15 CITIZEN CHIBA PRECISION CO., LTD.

ASIA, OCEANIA

55 CITIZEN SYSTEMS (H.K.) LTD.

16 FUJIMI CORPORATION

30 CITIZEN (SHANGHAI) TRADING CO., LTD.

56 CITIZEN SYSTEMS (JIANGMEN) CO., LTD.

31 CITIZEN WATCH (CHINA) CO., LTD.
32 CITIZEN WATCH MANUFACTURING
Watches
Machine Tools
Devices and Components
Electronic and Other Products(THAILAND) CO., LTD.
33 CITIZEN WATCHES (H.K.) LTD.

NORTH AMERICA, SOUTH AMERICA
57 CITIZEN DE MEXICO, S. DE R. L. DE C. V.
58 CITIZEN LATINAMERICA CORPORATION

34 CITIZEN WATCHES (INDIA) PVT. LTD.

59 CITIZEN WATCH CANADA, LTD.

35 CITIZEN WATCHES (MALAYSIA) SDN. BHD.

60 CITIZEN WATCH COMPANY OF AMERICA, INC.

36 CIVIS MANUFACTURING LTD.

61 CECOL, INC.

37 GUANGZHOU MOST CROWN ELECTRONICS LTD.

62 MIYOTA DEVELOPMENT CENTER OF AMERICA INC.

38 ROYAL TIME CITI CO., LTD.

63 CITIZEN SYSTEMS AMERICA CORP.

CITIZEN REPORT 2021

33

FINANCIAL DATA 2021
Analysis of Operating Results
Fiscal Year-End Operating Results(Millions of yen)

Year ended
March 31, 2020

Year ended
March 31, 2021%
changeNet sales

278,531206,641(71,890)(25.8%)

Operating profit (loss)

6,136(9,551)(15,687)—

Ordinary profit (loss)

7,531(4,143)(11,674)—

Profit (loss) attributable toowners of parent(16,667)(25,173)(8,505)—

During the fiscal year ended March 31, 2021, the Japanese economy
faced severe conditions, reflecting a fall in demand from inboundtourism and a sustained period of weak consumer activity due to the
COVID-19 pandemic. In the United States, the economy recovered
moderately, although a resurgence in new COVID-19 cases put
strain on the economic recovery. European economies also suffered
low levels of economic activity, partly due to severe limitations on
movement re-imposed in many countries. In Asia, while a recovery
was evident in China, other Asian economies lacked momentum.
In this environment, the CITIZEN Group instituted a range ofinitiatives in accordance with the Medium-Term Management Plan
2021, which was established in February 2019. These initiatives
included facilitating the growth of the Watch business and Machine
Tools business, promoting sustainable management andstrengthening quality compliance, with a view to raising the level of
traditional manufacturing and addressing the challenge of new value
creation. The consolidated financial results for the fiscal year underreview showed a decline in both sales and profit. Net sales stood at
206.6 billion yen (down 25.8% year on year), and operating loss was
9.5 billion yen (compared with operating profit of 6.1 billion yen in
the previous fiscal year). Ordinary loss was 4.1 billion yen (comparedwith ordinary profit of 7.5 billion yen in the previous fiscal year), andloss attributable to owners of parent came to 25.1 billion yen(compared with loss attributable to owners of parent of 16.6 billion
yen in the previous fiscal year) due to the posting of an extraordinary
loss.

Analysis of Financial Position• Assets Outstanding at Fiscal Year End
As of the end of the consolidated fiscal year under review, total
assets decreased by 3.7 billion yen from the end of the previous
consolidated fiscal year, to 365.8 billion yen. Current assets
increased by 8.7 billion yen, mainly due to a 21.6 billion yen increasein cash and deposits, despite a 10.9 billion yen decrease ininventories. Non-current assets decreased by 12.5 billion yen, mainlyreflecting a 9.3 billion yen decrease in deferred tax assets and a 1.8
billion yen decrease in tools, furniture and fixtures, net.
Liabilities increased by 14.1 billion yen from the end of theprevious consolidated fiscal year, to 152.9 billion yen, chiefly
reflecting a 27.2 billion yen increase in long-term borrowings and a
1.6 billion yen increase in deferred tax liabilities, which was partially
offset by a 7.5 billion yen decrease in short-term borrowings.
Net assets decreased by 17.9 billion yen from the end of theprevious consolidated fiscal year, to 212.8 billion yen, primarilyreflecting a 5.9 billion yen increase in foreign currency translation
adjustment and a 2.9 billion yen increase in valuation difference on
available-for-sale securities, which was more than offset by a 26.4
billion yen decrease in retained earnings.

34

Year-on-yearchangeCITIZEN REPORT 2021

• Cash FlowsNet cash provided by operating activities decreased by 9.8 billion yen
year on year, to 7.4 billion yen. Major factors contributing to this result
included 13.7 billion yen in decrease in inventories, 11.5 billion yen in
depreciation and 3.2 billion yen in subsidies received, despite 13.7
billion yen in loss before income taxes, 3.5 billion yen in decrease intrade payables and 1.8 billion yen in decrease in provision for loss onreorganization.
Net cash used in investing activities decreased by 7.8 billion yen
year on year, to 7.6 billion yen. Major factors contributing to this result
included 3.1 billion yen in proceeds from sale of investment securities
and 1.5 billion yen in proceeds from sale of property, plant andequipment, offsetting 9.2 billion yen in purchase of property, plantand equipment and 2.8 billion yen in purchase of intangible assets.
Net cash provided by financing activities was 18.3 billion yen,
compared with net cash used in financing activities of 7.0 billion yen in
the same period of the previous fiscal year. Major factors contributing
to this result included 35.1 billion yen in proceeds from long-termborrowings, offsetting 13.7 billion yen in repayments of long-termborrowings
For the consolidated fiscal year under review, cash and cash
equivalents increased by 21.5 billion yen year on year, to 99.5 billion
yen as of the end of the year.
•F undamental Policy Regarding the Distribution of Profits andDividends for the Fiscal Year Under Review and the Fiscal YearEnding March 2022
The Company considers the proportion of the total amount ofdividends and share buybacks to profit attributable to owners ofparent as the ratio of return to shareholders. Based on this concept, itestablished a basic policy of ensuring that the ratio of return toshareholders is at least 60% on average for three years.
The Company determines dividends by considering the balance
between consolidated results-based dividend payments and stabledividend payments.
The year-end dividend for the fiscal year under review will be 2.50
yen per share. Consequently, the full-year dividend for the fiscal year
under review will be 5.00 yen per share.
The Company expects that the full-year dividend for the next
fiscal year will be 18.00 yen per share, comprehensively taking into
consideration stable dividend payments and results trends, among
other factors.

RisksMatters which may affect the Groupʼs results, financial position andshare price, etc. include the following:
1. Risks in each of the Groupʼs businesses
The CITIZEN Groupʼs main business is to manufacture and sell watches,machine tools, electronic devices, and electronic products. The Group
operates its business all over the world, and our customers include bothindividuals and various manufacturers. Therefore, our operating results
are influenced by various factors, some of which are listed below.
WatchesCompetition in the watch market is intensifying, not only fromJapanese brands, but also from high-end Swiss brands, low-end
Chinese manufacturers, and smartwatch manufacturers, along withalternative products such as smartphones with watch functions. With
respect to movements, demand for analog quartz movements istrending downward, primarily in the low-end range, reflecting an
increase in demand for smartwatches. In addition, unit prices are
falling due to an intensifying competitive environment resulting mainly
from the rise of Chinese manufacturers. Consequently, there is a riskof a decline in sales quantity and market share.
Moreover, if the adverse outcomes of the COVID-19 pandemic,
such as restrictions on outings, suspension or reduced hours of store
and restaurant operation, and stagnation of supply chains, areaggravated or prolonged, our operating results may be affected evenmore severely due to a global decline in consumer confidence.
Machine Tools
The Machine Tools business is susceptible to the effects of economic
cycles and fluctuations in corporate capital investment. The Groupʼs
operating results may be affected by factors such as a fall in appetite
for capital investment and disruption to supply chains due to the
COVID-19 pandemic.
Devices and Components
The Devices and Components business is characterized by rapid
technological innovation and fierce competition between companies,
meaning that declining sales prices or delays in development, forexample, can have a significant impact on business results. Precision
machining components are susceptible to customer trends, including
automotive and smartphone manufacturers. As for opto-devices,
patent licensing agreements are concluded for manufacturing certain
products. Our business results could be affected should a cooperative
relationship underpinning a patent agreement break down and accessto the patent be lost.
Moreover, the Groupʼs operating results may be affected byfactors such as a decrease in plant operating rates, reduced operating
rates of automakers and other clients of the Group, and disruption to
supply chains as a result of the spread of COVID-19.
Electronic and Other Products
The Electronic and Other Products business is susceptible to declining
capital expenditure and personal spending as a result of changing
economic conditions. The Groupʼs operating results may be affected by
the stagnation of the global economy and disruption to semiconductor
and other supply chains due to the COVID-19 pandemic, and otherfactors. With intense competition from electronics manufacturers in
China and other countries in addition to domestic manufacturers, andrapid technological innovation, business results may also be impacted
by factors such as declining sales prices and development delays.
2. Overseas sales
Overseas sales account for a high percentage of the Groupʼs overall
product sales. As our products are sold worldwide, our operating
results may be affected by economic and consumer trends in eacharea, as well as by political and socioeconomic factors.
3. Foreign currency fluctuation risk
As overseas sales account for a high percentage of the Groupʼs productsales, as mentioned in 2 above, we enter into foreign currency contracts,
currency options and other such transactions to hedge against risks.
Although we are expanding and strengthening our overseas production,
currency fluctuations may still affect the Groupʼs operating results.
4. Manufacturing in China
China is one of Groupʼs main production bases for the Groupʼs
products. It is therefore possible for our operating results to beaffected by factors in China, such as the suspension of production due
to problems, the enactment of new regulations that could affectproduction, or the sharp appreciation of the Chinese yuan.

5. Impairment loss
An impairment loss would be applicable if the market value of theGroupʼs assets were to decline significantly or the profitability of ourbusiness were to deteriorate. This may affect the Groupʼs operating
results and financial position.
6. Patents and intangible property
As part of the Groupʼs R&D and production activities, we make use ofa variety of technologies covered by intellectual property rights. These
include intellectual property rights that are owned by the CITIZEN
Group, and others for which we believe we have legitimately received
licenses to use. Nevertheless, should a third party claim, based on
grounds of which we are unaware, that its intellectual property rights
have been violated, a dispute could arise that could affect the Groupʼsbusiness results. For some products in particular, manufacturing isbased on patent licensing agreements. If a cooperative relationshipunderpinning such an agreement were to break down, or access to
the relevant patent were to be lost, it may affect our business results.
7. Risk related to natural disaster such as earthquakes
We have established a Group risk management system to avoid any
injury or damage to facilities in the event of a fire, an earthquake orother disaster through drills and other safety activities at ourheadquarters and works. In the event of a particularly serious
earthquake or other such disaster, however, our production activities
and product supplies may be affected. There may also be a significant
impact on our operating results and financial position due toreconstruction costs, for example.
8. Risks related to M&As and business alliances
We are committed to strengthening the Groupʼs business foundations
through M&As and business alliances. When undertaking suchactivities, we carry out comprehensive research into and examinationsof the companies involved. Nevertheless, there may be risks that we
discover later, such as unrealized liabilities or obstacles in
implementing projects, which may materially affect the Groupʼs
operating results and financial position.
9. Risk related to borrowings
The Groupʼs borrowings include syndicated loans and commitmentline agreements with financial institutions. Any violation of financial
restrictions under such agreements could result in demands for theaccelerated repayment of the relevant borrowings, which may affect
the Groupʼs financial position.
10. Risks related to information security
Given that the number of illegitimate access attempts and externalcyberattacks continues to grow globally, the Group has been working
to strengthen information security. Nevertheless, in the event of any
damage to the functioning of the Groupʼs information systems due toan external cyberattack or other reasons, or the occurrence of anincident such as the suspension of services by a service provider, theGroupʼs business activities, operating results and financial position
may be seriously affected.
The Group holds and manages, in a variety of forms, personal
information obtained from customers and other sources, as well as
confidential information related to the technologies, research anddevelopment, manufacture and sales of the Group and customers. The
Group takes measures to protect such confidential information.
Nevertheless, such measures may not be sufficiently effective if
unforeseen circumstances arise. If such information is disclosed withoutauthorization, the Group may be asked to pay compensation for losses
and damages, or face legal action, which may affect the operating
results, financial position, reputation and credibility of the Group.
11. Other risks
The Groupʼs operating results may be affected by a variety of factors
in addition to the above, including changes in social infrastructure andmarket competition as a result of rapid advances in technology,changes in the Groupʼs financial or managerial situation, trading
restrictions in major markets in Japan or overseas, international
taxation risk including the transfer pricing taxation system, or
substantial changes in stock or bond markets.

CITIZEN REPORT 2021

35

Consolidated
Balance
Consolidated Balance
SheetsSheets
CitizenCitizen Watch
WatchCo.,
Co.,Ltd.
Ltd.andandConsolidated
ConsolidatedSubsidiaries
Subsidiaries
March
March 31,
31,2020
2020andand20212021(Millions of yen)

ASSETS

2021

2020

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade80,16843,254

101,816
44,102

Electronically recorded monetary claims - operating

1,395

1,371

Merchandise and finished goods

58,70852,018Work in process
Raw materials and supplies

20,56321,92019,372
18,857

Consumption taxes receivable
Other
Allowance for doubtful accounts

2,586
8,090
(1,033)

2,129
5,926
(1,150)Total current assets

235,655

244,444

Non-current assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net*3,*4

40,222*3,*4

39,877*3

17,014*3

15,811Tools, furniture and fixtures, net
Land

6,162
10,164

4,275
10,649Leased assets, net

1,264

1,249

Construction in progress

3,704

4,085

Total property, plant and equipment*178,532*1

75,948Intangible assets
SoftwareLeased assets

11

2

Other

710

1,059

4,552

4,652

Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Allowance for investment loss
Total investments and other assets
Total non-current assets
Total assets
See notes to consolidated financial statements.

36

3,590

3,830

CITIZEN REPORT 2021

*2

33,449408*233,341
251

14,604
2,657

5,293
2,185

(239)
(46)

(306)
－

50,83340,765

133,919

121,366

369,575

365,811(Millions of yen)

LIABILITIES AND NET ASSETS

2021

2020

Liabilities
Current liabilities
Notes and accounts payable - trade
Electronically recorded obligations - operating
Notes payable - facilities
Electronically recorded obligations - non-operating
Short-term borrowings
Income taxes payable
Accrued expenses
Provision for bonuses
Provision for bonuses for directors (and other officers)
Provision for product warranties
Provision for environmental measures
Provision for loss on reorganization
Other

*5

Total current liabilities
Non-current liabilities
Bonds payable
Long-term borrowings
Deferred tax liabilities
Provision for loss on reorganization
Retirement benefit liability
Asset retirement obligations
Other
Total non-current liabilities

16,485
9,223
508
784
17,227
1,551
8,160
4,855
170
1,133
87
1,840
9,242

*5

59,74571,271*5

10,00027,929585
829
24,03866
4,061
67,511

15,576
9,041
241
395
9,648
1,381
9,451
4,778
157
984
2
715
7,369

*5

10,00055,2122,281
103
22,59075
2,937
93,201

138,783

152,946

32,64833,730154,855(1,069)32,64833,740128,393(1,069)220,165

193,713

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans

3,578(1,095)
(921)

6,503
4,871
(1,100)Total accumulated other comprehensive income

1,560

10,273

9,066

8,878

230,791

212,864

369,575

365,811

Total liabilities
Net assets
Shareholders' equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders' equity

Non-controlling interests
Total net assets
Total liabilities and net assets

CITIZEN REPORT 2021

37

Consolidated Statements of Income
Consolidated Statements of Income

Citizen Watch Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2020 and 2021
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2020 and 2021

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Rental income
Share of profit of entities accounted for using equity method
Foreign exchange gains
Subsidy income
Other(Millions of yen)2020
278,531*10 177,431
101,100*1,*2
94,964
6,136

2021
206,641*10 140,742
65,898*1,*2
75,450(9,551)

479
1,378
171
801
－
230
396

256
1,129
166
440
854
3,357
297

*3

Total non-operating income
Non-operating expenses
Commission for syndicated loans
Interest expenses
Loss on sale of notes receivable - trade
Depreciation of assets for rent
Foreign exchange losses
Bad debt expenses
Other

3,459

6,501

105
406
88
39
919
213
396

215
415
16
51
－
－
394

2,063

1,093

Ordinary profit

7,531(4,143)Extraordinary income
Gain on sale of investment securities
Gain on sale of non-current assets
Other

1,860
75
5

1,452
819
491

Total non-operating expenses*4

Total extraordinary income
Extraordinary losses
Loss on sale of non-current assets
Loss on retirement of non-current assets
Impairment losses
Loss on valuation of investment securities
Reorganization cost
Extra retirement payments
Loss on COVID
Other

*4

2,762

1,941
*6
*5
*7
*8
*9

34
252
19,272
1
1,404
2,835
－
758

*6
*5
*7
*8
*9
*11

19
241
2,857
1,220
238
4,374
3,034
394

24,55912,381

Profit before income taxes(15,086)(13,761)

Income taxes - current
Income taxes - deferred

4,126(1,754)920
10,756

Total extraordinary losses

Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent
See notes to consolidated financial statements.

38*3

CITIZEN REPORT 2021

2,371

11,677(17,458)(25,439)

(790)

(265)

(16,667)(25,173)

Consolidated Statements of Comprehensive Income
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2020 and 2021
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2020 2021

Consolidated Statements of Comprehensive Income(Millions of yen)2020
(17,458)2021(25,439)

Valuation difference on available-for-sale securities(4,533)2,924

Foreign currency translation adjustment

ProfitOther comprehensive income(4,403)

6,000

Remeasurements of defined benefit plans, net of tax

(65)

(174)

Share of other comprehensive income of entities accounted for using
equity(63)

66

Total other comprehensive income
Comprehensive income*(9,065)*

8,817(26,523)(16,622)(25,666)(16,460)

(856)

(161)

Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

See notes to consolidated financial statements.

CITIZEN REPORT 2021

39

Consolidated Statements of Changes in Net Assets

Citizen Watch Co., Ltd. and Consolidated Subsidiaries
Consolidated
Statements of Changes in Equity
Years ended March 31, 2020 and 2021
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2020 and 2021

(Millions of yen)
Shareholders' equity

Share capital
Balance at beginning of period

32,648

Capital surplus

Retained earnings

Treasury shares

34,019181,995(1,773)Cumulative effects of changes inaccounting policies
Restated balance(199)
32,64834,019Total
shareholders'equity246,889(199)

181,796(1,773)

246,690

Changes during period
Purchase of shares of
consolidated subsidiaries

00

Increase by merger
Change in scope of
consolidation(289)

Dividends of surplus
Profit (loss) attributable toowners of parent

363

363

5

(283)

(6,936)(6,936)(16,667)(16,667)(3,703)Cancellation of treasury shares
Purchase of treasury shares(2)

Disposal of treasury shares
Transfer of loss on disposal oftreasury
shares

3,703－(3,001)(3,001)

2

0

2

(2)

－

3,703

(3,703)－(288)(26,940)

704(26,525)

33,730154,855(1,069)220,165

Transfer from retained earnings
to capital surplus
Net changes in items other thanshareholders' equity
Total changes during period
Balance at end of period

32,648Valuationdifference on
available-forsale
securities
Balance at beginning of period

8,111

Accumulated other comprehensive income
Total
Foreignaccumulated
Remeasurem
currency
otherents of definedtranslation
comprehensive
benefit plansadjustment
income

3,303

(855)

10,559Noncontrollinginterests

Total net
assets

10,098267,547

Cumulative effects of changes inaccounting policies
Restated balance

(199)
8,111

3,303

(855)

10,55910,098267,348

Changes during period
Purchase of shares of
consolidated subsidiaries

0363

Increase by merger
Change in scope of
consolidation(283)

Dividends of surplus(6,936)

Profit (loss) attributable toownersof parent(16,667)

Cancellation of treasury shares(3,001)

Disposal of treasury shares

0

Transfer of loss on disposal oftreasury shares
Transfer from retained earnings
to capital surplus
Net changes in items other thanshareholders' equity(4,533)

Total changes during period(4,533)
3,578

Balance at end of period

40－

Purchase of treasury shares

CITIZEN REPORT 2021－－
(4,399)(66)(8,999)(1,032)(10,031)(4,399)(66)(8,999)(1,032)(36,556)(1,095)

(921)

1,560

9,066

230,791

Financial year ended March 31, 2021
(Millions of yen)
Shareholders' equity
Share capital

Balance at beginning of period

Capital surplus

32,648Retained earnings

33,730154,855

Total shareholders'

Treasury shares

equity(1,069)220,165

Cumulative effects of changes inaccounting policies
Restated balance

32,64833,730154,855(1,069)220,165

Changes during period
Purchase of shares of consolidated
subsidiaries

99

Increase by merger
Change in scope ofconsolidation

(506)

(506)

Dividends of surplus

(782)

(782)

(25,173)(25,173)

Profit (loss) attributable toowners of parent-

Cancellation of treasury shares
Purchase of treasury shares

(0)

(0)

Disposal of treasury shares

1

1

Transfer of loss on disposal oftreasury shares－

Transfer from retained earnings
to capital surplus
Net changes in items other thanshareholders' equity

－

-

9

(26,462)

0(26,451)

32,64833,740128,393(1,069)193,713

Total changes during period
Balance at end of period

Accumulated other comprehensive income

Valuation differenceon
available-for-salesecurities

Balance at beginning of period

3,578

Total accumulated Non-controlling
Foreign currency translation Remeasurem ents ofinterests
other comprehensive
adjustment
definedbenefit plansincome(1,095)

(921)

1,560

9,066

Cumulative effects of changes inaccounting policies
Restated balance

Total netassets

230,791－

3,578(1,095)

(921)

1,560

9,066

230,791

Changes during period
Purchase of shares of consolidated subsidiaries

9

Increase by merger-

Change in scope of
consolidation(506)

Dividends of surplus(782)(25,173)

Profit (loss) attributable toowners of parent
Cancellation of treasury shares－

Purchase of treasury shares(0)

Disposal of treasury shares

1

Transfer of loss on disposal oftreasury shares－

Transfer from retained earnings
to capital surplus－

Net changes in items other than shareholders'equity

2,924

5,966

(179)

8,712

(187)

8,524

Total changes during period

2,924

5,966

(179)

8,712

(187)

(17,927)

Balance at end of period

6,503

4,871

(1,100)10,273

8,878

212,864

CITIZEN REPORT 2021

41

Consolidated Statements of Cash Flows

Consolidated
Statements of Cash Flows
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
Citizen
WatchMarchCo., Ltd.
Years ended
31, and
2020Consolidated
and 2021 Subsidiaries
Years ended March 31, 2020 and 2021

(Millions of yen)
Cash flows from operating activities
Profit before income taxes
Depreciation
Increase (decrease) in provision for loss on reorganization
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in other provisions
Increase (decrease) in retirement benefit liability
Interest and dividend income
Subsidy income
Interest expenses
Loss (gain) on valuation of investment securities
Loss (gain) on sale of investment securities
Loss (gain) on sale of non-current assets
Loss on retirement of non-current assets
Impairment losses
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Subsidies received
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of investment securities
Proceeds from sale of investment securities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Loan advances
Proceeds from collection of loans receivable
Other, net
Net cash provided by (used in) investing activities

Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Dividends paid
Dividends paid to non-controlling interests
Purchase of treasury shares
Proceeds from sale of treasury shares
Purchase of shares of subsidiaries not resulting in change in scope of consolidation

Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting from change in scope of consolidation

Cash and cash equivalents at end of period

42

CITIZEN REPORT 2021

2020

2021

(15,086)
15,4381,375(91)(1,211)639(1,858)(230)406
1(1,858)(40)
252
19,272
20,214(4,096)(8,999)(1,351)
22,774
1,858(408)(7,107)230
17,347(13,761)
11,557(1,849)132(441)(1,683)(1,386)(3,357)415
1,220(1,452)
(799)
241
2,857
1,402
13,737(3,559)
(201)
3,072
1,380
(421)
212
3,245
7,489

(1,971)
4,061(16,851)773(2,254)(2)
173
572(15,498)(0)
3,163(9,240)1,534(2,892)
(153)
103
(141)
(7,627)(518)
15,270(10,717)(6,936)(170)(3,001)
－
(557)
(416)
(7,049)(1,880)(7,080)84,533544* 77,996(1,785)35,180(13,738)
(782)
(34)
(0)
1
(0)
(503)
18,336
2,843
21,042
77,996522* 99,561

Notes to Consolidated Financial Statements
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2020 and 2021

(Significant matters providing the basis for the preparationof consolidated financial statements)
1. Scope of consolidation(1) Number of consolidated subsidiaries 80
The names of main consolidated subsidiaries are Citizen
Machinery Co., Ltd., Citizen Electronics Co., Ltd., Citizen
Finedevice Co., Ltd. and Citizen Systems Japan Co., Ltd.
Effective from the beginning of the fiscal year underreview, Egasca S.A. was included in the scope of
consolidation because of increased materiality.
In addition, effective from the beginning of the fiscal year
under review, Miyano Service Engineering, Inc. was
excluded from the scope of consolidation because thecompany was merged with Citizen Machinery Co., Ltd., aconsolidated subsidiary of the Company. Further, Citizen
Jewelry Co., Ltd., Astar Precision Co., Ltd., Bulova Italys.r.l and Bulova Trading (Shanghai) Co., Ltd. were
excluded from the scope of consolidation because they
were liquidated.
(2) Number of non-consolidated subsidiaries 13
The name of a main non-consolidated subsidiary is
Citizen Customer Service Co.,Ltd.
The reason for exclusion is because the total assets, net
sales, profit/loss (equivalent portion for equity holdings),
and retained earnings (equivalent portion forequityholdings) of the non-consolidated subsidiaryexcluded from the scope of consolidation were individually
immaterial in comparison to net assets, net sales,
profit/loss and retained earnings, as reported on the
consolidated financial statements, and also would notmaterially impact the consolidated financial statements
taken together.
2. Application of the equity method(1) Number of affiliates under the equity method 2
The names of affiliates under the equity method are
Marubeni Citizen-Cincom Inc. and First Cainta Resources
Corporation.
(2) Status of non-consolidated subsidiaries and affiliates towhich the equity method is not applied
The major non-consolidated subsidiary to which the equity
method is not applied is Citizen Customer Service Co.,
Ltd., and the main affiliate to which the equity method is
not applied is VELDT Inc.
The reason for non-application is based on theimmateriality of the individual impacts of their profit/loss(equivalent portions for equity holdings), retained earnings(equivalent portions for equity holdings), and otherfinancial measures on the consolidated financial
statements, and based on the overall lack of importanceof each of these companies to the consolidated group.
3. Fiscal year of consolidated subsidiaries(1) Consolidated subsidiaries whose closing date isdifferent from the closing date for the consolidated
financial statements are as follows:
December 31 (Number of consolidated subsidiaries 57)(2) When preparing consolidated financial statements, thenecessary settlements are made to prepare the financial
statements which form the basis for the consolidated
financial statements prepared on the consolidated closing
date.
(3) Conventionally, when preparing the consolidated
financial statements, for certain consolidated subsidiaries
whose closing dates fall on December 31, the necessary
settlements are made to prepare the financial statements

which form the basis for the consolidated financial
statements; however, from the fiscal year under review, forthe convenience of consolidated subsidiary management,eight consolidated subsidiaries (Citizen Watch Companyof America, Inc. and seven others) have had their closing
dates changed to March 31.
There is no impact from this change on the consolidated
financial statements.
4. Accounting policies(1) Valuation standards and valuation method forsignificant assets
a. Marketable and investment securities
The Companies clarify all of their marketable andinvestment securities as available-for-sale. Available-forsale securities are carried at market value with thecorresponding recognition of net unrealized gains andlosses as a separate component of equity, net of related
taxes.
Realized gains and losses are determined on the moving
average method and included in the consolidated
statements of income.
b. Derivative financial instruments
The Companies have derivative financial instruments,
such as foreign currency forward contracts and interest
rate swaps to manage its exposure to foreign exchange
rate and interest rate risks. The Companies do not enter
into derivative financial instruments for trading purposes.
Foreign currency forward contracts are not designated forhedge accounting and stated at fair value; gains andlosses are recognized in the consolidated statements ofincome.
The interest rate swaps that qualify for hedge accounting
and meet specific matching criteria are not remeasured atmarket value.
c. Inventories
Inventories held for sale in the ordinary course of businessare measured at the lower of cost or net realizable value,
which is defined as selling price less estimated additional
manufacturing costs and estimated direct selling
expenses, determined by the weighted average method.
(2) Property, plant and equipmenta. Property, plant and equipment are stated at cost.
Depreciation is computed on the straight-line basis at therates based on the estimated useful lives of the respective
assets ranging from 2 to 60 years for buildings and from 2
to 10 years for machinery and equipment.
b. Property, plant and equipment are reviewed for
impairment whenever events or changes in circumstancesindicate that the carrying amount of the assets might beunrecoverable. Recoverability of assets to be held andused is measured by a comparison of the carrying amountto undiscounted future cash flows expected to begenerated by the assets. When the recoverable amount ofassets is estimated to be less than their carrying amount,the carrying amount of the assets is reduced to its
recoverable amount, and an impairment loss isrecognized.
Maintenance and repairs, including minor renewals andimprovements, are expensed in the consolidated
statements of income as incurred.
c. Leases
Finance leases that do not transfer ownership of theleased property to the lessees are depreciated on thestraight-line basis over the lease terms with no residual
value.
(3) Treatment of significant deferred assets
CITIZEN REPORT 2021

43

Bond issuance costs
One-time depreciation in fiscal year incurred.
(4) Standards for recording significant allowancesa. Allowance for doubtful accounts
In preparation for bad debt expenses on trade receivables
and loans, etc., the amount expected to be irrecoverable
is recorded considering the individual recoverability of
specific receivables such as doubtful accounts receivableusing the loan loss ratio for general receivables of theCompany and its domestic subsidiaries. Furthermore, therequired estimate is recorded considering therecoverability of individual receivables for overseas
consolidated subsidiaries.
b. Provision for bonuses
In order to allocate funds for the payment of bonuses for
employees, the Company and some consolidated
subsidiaries record an amount based on the expectedlevel of payment.
c. Provision for bonuses for directors (and other officers)
In order to allocate funds for the payment of bonuses for
directors (and other officers), the Company and someconsolidated subsidiaries record an amount based on the
expected level of payment.
d. Provision for product warranties
Some consolidated subsidiaries record a certain
percentage of net sales as a provision for the costs
required for after-sales service for products.
e. Provision for business restructuring and liquidation
lossesIn preparation for the expenses and losses incurred inassociation with business restructuring, the expectedamount is recorded.
f. Provision for environmental measures
In preparation for expenditure associated with futureenvironmental measures, an amount is recorded based ona reasonably estimated amount.
(5) Retirement benefitsa. Calculation of retirement benefit obligation
The retirement benefit obligation is calculated based on
benefit-formula basis.
b. Amortization of actuarial differences and prior service
costs
Actuarial differences are amortized on the decliningbalance basis from the next fiscal year over the period (5years) which is less than the average remaining years of
employment.
Prior service costs are amortized on the declining-balancebasis over the period (5-years) which is less than the
average remaining years of employment.
(6) Foreign currency translation
Assets and liabilities denominated in foreign currencies
are translated into Japanese yen at the spot exchange
rates at the reporting date.
The foreign currency exchange gains and losses resulting
from the settlement of these items are included in the
consolidated statements of income.
Balance sheet accounts of foreign subsidiaries aretranslated into Japanese yen at the reporting date rates
except for equity accounts, which are translated at thehistorical rates. Income statements of foreign subsidiaries
are translated at average rates during the year.
Exchange differences arising from the translation arerecognized in “Foreign currency translation adjustments”
and “non-controlling interests” in net assets.
(7) Significant hedging methods
a. Hedging methods
44

CITIZEN REPORT 2021

Deferral hedging is used. Furthermore, special treatment
is used for interest rate swaps when the requirements for
special treatment are satisfied.
b. Hedging instruments and hedged items
The hedged items and hedging instruments are as
follows.
Hedging instruments: Interest rate swaps
Hedged items: Interest on borrowingsc. Hedging policy
Hedging is used to avoid interest-rate risk on someborrowings.
d. Method of evaluation of hedging effectivenessEvaluation of hedging effectiveness has been omitted forinterest rate swaps because special treatment is used.
(8) Scope of funds in the Consolidated Statement of Cash
Flow
Cash on hand, demand deposits, and short-term
investments that are readily convertible into cash, areexposed to insignificant risk of changes in value and are
redeemable in three months or less from each acquisition
date.
(9) Other important matters for preparation of consolidated
financial statementsa. Accounting treatment of consumption taxes, etc.
Consumption taxes, etc. are accounted using the net-oftax method.
b. Application of tax effect accounting pertaining to thetransition from the consolidated taxation system to thegroup tax sharing system
For items for which transition to the group tax sharing
system created in the Act for Partial Amendment of the
Income Tax Act, etc. (Act No. 8 of 2020) was made and forwhich the non-consolidated taxation system was reviewed
in step with transition to the group tax sharing system, theCompany and some of its consolidated subsidiaries inJapan do not apply the provisions in Paragraph 44 of the
Implementation Guidance on Tax Effect Accounting(Accounting Standards Board of Japan (ASBJ) Guidance
No. 28, February 16, 2018) based on the treatment inParagraph 3 of the Practical Solution on the Treatment of
Tax Effect Accounting for the Transition from theConsolidated Taxation System to the Group Tax Sharing
System (ASBJ Practical Issues Task Force (PITF) No. 39,
March 31, 2020), and the amounts of deferred tax assets
and deferred tax liabilities are based on the provisions of
the Income Tax Act before amendment.
(Notes on accounting estimates)
1. Recoverability of deferred tax assets(1) Amount recorded in consolidated financial statements
for the fiscal year under review*The amount of deferred tax assets is the same as theamount shown in “Notes (Tax Effect Accounting)” 11 in theConsolidated Financial Statements.
(2) Information on the content of accounting estimates
In calculating deferred tax assets, the Group made carefuljudgements, and revised them to an amount that is highly
likely to be realized by recording valuation allowance.
Such assessment regarding the need for valuation
allowance involves careful consideration of future taxable
income and prevailing tax plans.
2. Impairment losses on non-current assets(1) Amount recorded on the consolidated financial
statements for the fiscal year under review
The amount of impairment losses on fixed assets is thesame as the amount stated in “Notes (Notes to theConsolidated Statement of Income) 7. Impairment Losses”
in the Consolidated Financial Statements.
(2) Information on the details of significant accounting
estimates pertaining to identified items
With regard to assets or asset groups found to show signsof impairment losses arising from the market value of noncurrent assets and gains or losses arising from operating
activities using those assets, if the total future
undiscounted cash flow from such assets or asset groups
is less than the book value, the Group writes down thebook value to the recoverable amount, and records the
reduction as impairment losses. The higher of the net salevalue or use value is used as the recoverable amount,
and use value is calculated as the present discounted
value of future cash flow. Future cash flow is calculated
based on business plans approved by the Board of
Directors, etc. and future market forecasts, etc.
The recoverability of deferred tax assets and impairment
losses on non-current assets are estimated based on theassumption that although global economic activity in thenext fiscal year will recover from the severe slump causedby the spread of COVID-19, the impact of the slowdown ineconomic activity will continue.
This assumption entails a high degree of uncertainty, andthe impact becoming more prolonged or more severe may
have an impact on next fiscal year’s consolidated financial
statements.
(New accounting pronouncements)
1.Accounting standard for revenue recognition, etc.
・“Accounting Standard for Revenue Recognition”(ASBJ Statement No. 29, March 31, 2020)
・“Implementation Guidance on Accounting Standard for
Revenue Recognition” (ASBJ Guidance No.30, March 26,
2021)
・“Guidance on Disclosures about Fair Value of Financial
Instruments” (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
The International Accounting Standards Board (IASB) andthe Financial Accounting Standards Board (FASB) in the
United States jointly developed comprehensive
accounting standards for revenue recognition andpublished the “Revenue from Contracts with Customers”(IFRS 15 in the IASB and Topic 606 in the FASB) in May
2014. Given that IFRS 15 will be applied from a fiscal year
starting on or after January 1, 2018 and that Topic 606 will
be applied from a fiscal year starting after December 15,
2017, ASBJ has developed comprehensive accounting
standards for revenue recognition and published them instep with the Implementation Guidance.
The basic policy of the ASBJ in developing accounting
standards for revenue recognition is thought to be setting
accounting standards, with the incorporation of the basic
principles of IFRS 15 as a starting point, from a standpointof comparability between financial statements, which isone of the benefits of ensuring consistency with IFRS 15,
and to be adding alternative accounting treatments
without losing comparability if there is an item that weshould take into account in practices, etc. that have been
conducted in Japan.
(2) Planned date of application
To be applied from the beginning of the fiscal year ending
March 31, 2022.

(3) Impact of the application of the accounting standards,
etc.
The amount of the impact on consolidated financial
statements is currently under review.
2. Accounting Standards for Fair Value Measurement
・“Accounting Standard for Fair Value Measurement”(ASBJ Statement No. 30, July 4, 2019)
・“Revised Accounting Standard for Measurement of
Inventories” (ASBJ Statement No. 9, July 4, 2019)
・“Revised Accounting Standard for Financial Instruments”(ASBJ Statement No. 10, July 4, 2019)
・“Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, July 4, 2019)
・“Guidance on Disclosures about Fair Value of Financial
Instruments” (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
IASB and FASB have established detailed guidance forfair value measurement (IFRS 13 “Fair Value
Measurement” by IFRS and Topic 820 “Fair Value
Measurement” by FASB).
In order to improve the comparability between theinternational accounting standard and Japanese
accounting standard, ASBJ has mainly consideredguidance and disclosure on fair value of financial
instruments and published the accounting standard andimplementation guidance for fair value measurement
accordingly.
As the basic policy of ASBJ for the development ofaccounting standard for fair value measurement, ASBJ
basically adopted all provisions of IFRS 13 by using aunified calculation method, from the point of view of
improving the comparability between the financial
statements based on IFRS or U.S. GAAP and Japanese
GAAP. Moreover, in consideration of the actual practiceconducted in Japan, other treatments for individual items
are established within the scope not to fail thecomparability.
(2) Planned date of application
To be applied from the beginning of the fiscal year ending
March 31, 2022.
(3) Impact of the application of the accounting standards,
etc.
The amount of the impact on consolidated financial
statements is currently under review.
(Changes in Methods of Presentation)(Application of Accounting Standard for Disclosure of
Accounting Estimates)
The “Accounting Standard for Disclosure of Accounting
Estimates” (ASBJ Statement No. 31, March 31, 2020)
applies to consolidated financial statements for the fiscal
year-end of the fiscal year ended March 31, 2021, andnotes on material accounting estimates are stated on the
consolidated financial statements.
However, the notes do not include information on thefiscal year ended March 31, 2020 in accordance with thetransitional treatment specified in the proviso of Section 11of the Standard.

CITIZEN REPORT 2021

45

(Consolidated Statements of Income)The “Commission for syndicated loans” that had been
included in “Other” under “Non-operating expenses” in thefiscal year ended March 31, 2020 is stated separatelyfrom the fiscal year ended March 31, 2021 because thesignificance of the amount has increased. In order toreflect the change in the method of presentation, thefinancial statements for the fiscal year ended March 31,
2020 have been reclassified.
As a result, the ¥396 million that had been represented in“Other” under “Non-operating expenses” in theConsolidated Statements of Income for the fiscal year
ended March 31, 2020 has been reclassified as ¥105
million in “Commission for syndicated loans” and ¥291
million in “Other”.
(Consolidated Statements of Cash Flows)
The “Subsidy income” and the “Proceeds from subsidy
income” that had been included in “Other” under “Cashflows from operating activities” in the fiscal year ended
March 31, 2020 is stated separately from the fiscal year
ended March 31, 2021 because the significance of theamount has increased. In order to reflect the change inthe method of presentation, the financial statements forthe fiscal year ended March 31, 2020 have been
reclassified.
As a result, the (¥1,350 million) that had been represented
in “Other” under “Cash flows from operating activities” in
the Consolidated Statements of Cash Flows for the fiscal
year ended March 31, 2020 has been reclassified as(¥230 million) in “Subsidy income”, ¥230 million in“Proceeds from subsidy income” and (¥1,351 million) in“Other”.
Additional information(Board Incentive Plan)(1) The Company has introduced a performance-based
stock remuneration plan (hereafter, "the plan") for
directors and titled corporate officers of the Company(excluding outside directors and corporate officers who
are non-residents of Japan), with the aim of defining therelationship between remuneration of Directors, etc. andthe Company’'s stock value, and providing an incentive for

46

CITIZEN REPORT 2021

increasing mid- and long-term business performance andcorporate value.
The Plan adopted a scheme called the Board Incentive
Plan (hereafter, referred to as “"BIP Trust”"). The BIP Trustrefers to an incentive plan for officers with reference to theperformance share planned restricted stock plan in the
U.S., under which the BIP Trust purchases Company’s
stocks and then grants and provides such stocks, as wellas cash corresponding to realization value of Company’'s
stocks to Directors, etc. according to the performanceachieved upon their retirement.
(2) Shares of the Company remaining in the trust
The shares of the Company remaining in the trust arerecorded as treasury stock under net assets. The bookvalue and the number of shares of the treasury stock forthe year ended March 31, 2020 were ¥243 million and
376,600 shares, and the book value and the number ofshares of the treasury stock for the year ended March 31,
2021 were ¥242 million and 374,652 shares.
(Accounting estimates due to the impact of COVID-19)
The Companies have made accounting estimates basedon the assumption that concerning the impact of COVID19 are as stated in “V. Status of Accounting 1.
Consolidated Financial Statements, etc. (1) Notes toConsolidated Financial Statements (Significant Accounting
Estimates)”.
(Financial restriction clause)
The loans executed on July 17, and August 7, 2020 are
subject to a financial restriction clause. The clause is asfollows.
(1) The amount obtained by deducting the foreign
currency translation adjustment from the amount of net
assets on the Consolidated Balance Sheets as of the final
day of each fiscal year and the second quarter of eachfiscal year must be maintained at 75% or higher.
(2) The operating profit/loss indicated in the Consolidated
Statements of Income at the end of each fiscal year mustnot be a loss for two consecutive fiscal years from thefiscal year ended March 31, 2021.
The fiscal year ended March 31, 2021 does not infringe
upon the above

(Notes to Consolidated Balance Sheet)*1. Accumulated depreciation of tangible fixed assets as follows

Accumulated depreciation

For the year ended
March 31, 2020
219,006(Millions of yen)
For the year ended
March 31, 2021
221,719*2. Those pertaining to non-consolidated subsidiaries and associates are as follows.

Investment securities

For the year ended
March 31, 2020
5,939

(Millions of yen)
For the year ended
March 31, 2021
4,818

*3. Accumulated reduction entry for tangible fixed assets based on government subsidies, etc. as follows

Buildings and structures
Machinery, equipment andvehicles

For the year ended
March 31, 2020
243
24

(Millions of yen)
For the year ended
March 31, 2021
249
20

For the year ended
March 31, 2020
1,122

(Millions of yen)
For the year ended
March 31, 2021
1,118

*4. Pledged assets and secured liabilities

Buildings and structures*5. The Group has entered into overdraft and commitment line agreements with five correspondent banks for the efficient
procurement of working capital. The balance of unused credit based on these agreements at the end of the consolidated
fiscal year is as follows:(Millions of yen)
For the year ended
For the year ended
March 31, 2020
March 31, 2021
Total amount of current account60,62859,376
overdrafts and loan commitments
Balance of borrowings

1,358

Balance－

59,27059,376(Notes to Consolidated Income Statement)*1.Details of selling, general and administrative expenses are as follows:

Depreciation
Provision of allowance for doubtful
accounts
Provision for bonuses
Provision for bonuses for directors(and other officers)
Retirement benefit expenses
Personnel expenses
Advertising and promotion
expenses
Provision for product warranties,etc.
Research and development
expenses

For the year ended
March 31, 2020
5,868(Millions of yen)
For the year ended
March 31, 2021
4,554

(38)

(126)

2,213

1,778

131

78

1,456
31,282

1,427
26,47618,143

12,168

96

2

6,164

5,576

CITIZEN REPORT 202147

*2. Research and development costs are as follows:

Research and development costs

For the year ended
March 31, 2020
6,164

(Millions of yen)
For the year ended
March 31, 2021
5,576

For the year ended
March 31, 2020
230

(Millions of yen)
For the year ended
March 31, 2021
3,357

*3. The details of subsidy income are as follows:

Subsidy income

Subsidy income in the previous fiscal year mainly comprised subsidies for projects promoting commerce and industry.
Subsidy income in the fiscal year under review mainly comprises employment adjustment subsidies associated with theimpact of the spread of COVID-19.
*4. Gain on sale of non-current assets are as follows:

Machinery, equipment and vehicles

For the year ended
March 31, 2020
40
29

Land
*5. Loss on retirement of non-current assets are as follows:

Buildings and structures

For the year ended
March 31, 2020
150

Machinery, equipment and vehicles

54
737(Millions of yen)
For the year ended
March 31, 2021
88

30
64

Tools, furniture and fixtures*6. Loss on retirement of non-current assets are as follows:

Buildings and structures(Millions of yen)
For the year ended
March 31, 2021

For the year ended
March 31, 2020
84256(Millions of yen)
For the year ended
March 31, 2021
0Machinery, equipment and vehicles

20

18

Tools, furniture and fixtures

40*7. Impairment losses
The main breakdown of impaired assets for the years ended March 31, 2021 and 2020 is as follows:
For the year 2020
Location
Use
Type
Japan
Japan
Japan and others
Others48

CITIZEN REPORT 2021

Movement manufacturing facilities
Assets for hybrid smartwatch
business
Electronic device manufacturing
facilities
Others

Machinery, equipment and vehicles,
buildings and structures, tools,
furniture and fixtures
Other intangible assets
Buildings and structures
Other intangible assets

For the year 2021
LocationUse

Type
Tools, furniture and fixtures, software,
Machinery, equipment and vehicles,
etc.

Japan

Implements, software, idle equipment,
etc.

Thailand

Watch making equipment

Machinery, equipment and vehicles,
buildings and structures, tools,
furniture and fixtures

China

Watch making equipment, Electronic
device manufacturing facilities

Machinery, equipment and vehicles,etc.

In principle, the Group uses business units based on business categories in management and accounting to group theminimum units generating cash flow. Company units are used to group some consolidated subsidiaries in light of theirsize. Furthermore, assets not clearly related to a specific business, such as the head office, are treated as common
assets.
In the previous fiscal year, impairment losses were recognized on assets not expected to be used in future and assets inbusinesses with deteriorated profitability, with the book value being written down to the recoverable amount, and the
reduction being recorded under extraordinary losses as impairment losses (19,272 million yen). The breakdown of these is
as follows: 9,081 million yen in machinery and equipment, 4,402 million yen in other intangible assets, 2,750 million yen inbuildings and structures, and 1,894 million yen in tools, furniture and fixtures.
In the fiscal year under review, the book value of assets not expected to be used in future, assets in businesses withdeteriorated profitability and assets in businesses where the business environment deteriorated significantly was written
down to the recoverable amount, and the reduction was recorded under extraordinary losses as impairment losses (2,857
million yen). The breakdown of these is as follows: 1,365 million yen in machinery, equipment and vehicles, 646 million
yen in software, 519 million yen in tools, furniture and fixtures, and 280 million yen in buildings and structures.
The recoverable amounts are calculated based on net sale value or use value. Net sale value is assessed using thedisposal value, and use value is calculated primarily by discounting future cash flow at 8%.
*8. Reorganization costs
The total amount of reorganization costs is as follows:(Millions of yen)
For the year ended
For the year ended
March 31, 2020
March 31, 2021
Reorganization
1,404
238
The loss on business restructuring in the previous consolidated fiscal year was mainly restructuring expenses associatedwith withdrawal from the jewelry business. (Of which, provision for loss on business restructuring was 129 million yen)
The loss on business restructuring in the current fiscal year mainly consists of restructuring expenses for the watchesbusiness and restructuring expenses for withdrawal from the leisure and service business. (Of which, provision for loss on
business restructuring is 80 million yen)
*9. Extra retirement payments
The total amount of extra retirement payments is as follows:

Extra retirement payments

For the year ended
March 31, 2020
2,835(Millions of yen)
For the year ended
March 31, 2021
4,374

Extra retirement payments in the consolidated statements of income for the year ended March 31, 2020 is related to
expenses for restructurings of devices business.
Provision for reorganization costs of ¥1,337 million was recorded in the consolidated balance sheets as of March 31,
2020.
Premium severance pay in the year ended March 31, 2021 is primarily the premium severance pay associated withrestructuring of the Watches business.

CITIZEN REPORT 202149

*10. Inventories at the end of the term are the amount after the lowering of book value associated with the decline inprofitability, and the next loss on valuation of inventories is included in cost of sales. The following amounts are after
offsetting with reversals.
(Millions of yen)
For the year ended
For the year ended
March 31, 2020
March 31, 2021
804
2,006
*11. Fixed expenses, etc. associated with the suspension of operation of plants and stores due to the impact of the spreadof COVID-19 are recorded under extraordinary losses as loss on COVID-19.
(Notes to Consolidated Statement of Comprehensive Income)* Reclassification adjustments and tax effects relating to other comprehensive income:

Valuation difference on availableforsale securities
Gains arising during the year

(Millions of yen)
For the year ended
March 31, 2021

(7,934)2,490

Reclassification adjustments

1,860

1,452

Amount before income tax effect(6,074)

3,942

Income tax effect

1,540(1,017)(4,533)

2,924(4,450)5,533

Valuation difference on availablefor-sale securities
Foreign currency translation
adjustment
Gains arising during the year
Reclassification adjustments
Amount before income tax effect
Income tax effectForeign currency translation
adjustment
Remeasurements of defined benefit
plans, net of tax
Gains arising during the year

47

467

(4,403)

6,000

－

－

(4,403)

6,000

(431)

(405)

Reclassification adjustments

216

209

Amount before income tax effect

(215)

(195)

Income tax effect

150

21

(65)

(174)

(63)

66

－

－

(63)

66

(9,065)

8,817

Remeasurements of defined
benefit plans, net of tax
Share of other comprehensive
income of entities accounted forusing equity method
Gains arising during the year
Reclassification adjustment
Share of other comprehensive
income of entities accounted forusing equity method
Total other comprehensive
income50

For the year ended
March 31, 2020

CITIZEN REPORT 2021

(Notes to Consolidated Statement of Changes in Net Assets)
For the prior fiscal year (From April 1, 2019, to March 31, 2020)
1. Matters concerning the type and total number of shares issued and the type and number of shares of treasury stock
As of April 1, 2019
(Shares)Issued shares
Common stock(Note 1)
Total

Increase(Shares)

Decrease(Shares)

As of March 31, 2020
(Shares)

320,353,809－

6,000,000

314,353,809

320,353,809－

6,000,000

314,353,809

2,070,969

5,921,049

6,277,611

1,714,407

Treasury stock
Common stock(Note 2,3,4)

Total
2,070,969
5,921,049
6,277,611
1,714,407(Notes) 1. The decrease in the number of shares issued and outstanding by 6,000,000 was a reduction due to thecancellation of treasury shares.
2. The increase in the number of treasury shares by 5,921,049 shares comprised an increase of 5,640,400 shares throughmarket purchases, an increase of 277,500 shares through the acquisition of the Company’s shares by the executive
remuneration BIP trust, and an increase of 3,149 shares through the acquisition of shares less than one unit.
3. The decrease in treasury shares by 6,277,611 shares comprised a decrease of 6,000,000 shares due to cancellation oftreasury shares, a decrease of 277,500 shares due to disposal of treasury shares by third-party allotment to the executive
remuneration BIP trust, and a decrease of 111 shares due to requests for the purchase of shares less than one unit.
4. The number of treasury shares at the end of the fiscal year under review includes the 376,600 shares owned by the
executive remuneration BIP trust.
2．Dividends(1) Dividends paid are as follows:
Resolution

Class ofsharesAmount ofdividends(Millions ofYen)

Dividend per
shar (Yen)Record date

Effective dateJune 26,
2019General
Meeting of
Shareholders

Ordinaryshares

3,183

10.00

March 31, 2019

June 27, 2019

November 8,
2019Board of
Directors' meeting

Ordinaryshares

3,752

12.00

September 30,
2019

December 3, 2019

(Notes) 1. The total amount of dividends resolved by the ordinary general meeting of shareholders held on June 26, 2019
includes the 0 million yen in dividends for the Company’s shares held by the executive remuneration BIP trust.
2. The total amount of dividends resolved by the Board of Directors on November 8, 2019 includes the 2 million yen in
dividends for the Company’s shares held by the executive remuneration BIP trust.

CITIZEN REPORT 202151

(2) Dividends for which the record date is during the fiscal year under review and the effective date of dividends is during
the following fiscal year: Not applicable
For the current fiscal year (As of March 31, 2021)
1. Matters concerning the type and total number of shares issued and the type and number of shares of treasury stock
As of April 1, 2020
(Shares)

Increase(Shares)

As of March 31,
2021(Shares)

Decrease(Shares)Issued shares
Common stock(Note 1)
Total

314,353,809－－

314,353,809

314,353,809－－

314,353,809

1,714,407

2,420

1,948

1,714,879

Treasury stock
Common stock(Note 2,3,4)
Total

1,714,407
2,420
1,948
1,714,879(Notes) 1. The increase of 2,420 shares in the number of treasury stock is due to the purchase of odd-lot shares.
2. The decrease of 1,948 shares in the number of treasury stock is due to the delivery and sale of the Company's sharesto persons who were directors by the Directors' Remuneration BIP Trust.
3. The number of treasury stock at the end of the current fiscal year includes 374,652 shares of the Company's stock heldby the Directors' Remuneration BIP Trust.
2．Dividends(1) Dividends paid are as follows:
Resolution

Class of shares

November 12, 2020
Board of Directors'
meeting

OrdinarysharesAmount ofdividends(Millions ofYen)

Dividend per
shar (Yen)Record date

Effective date

2.50

September 30,
2020

December 4, 2020

782

(Note） The total amount of dividends resolved by the Board of Directors on November 11, 2020 includes the 0 million
yen in dividends for the Company’s shares held by the executive remuneration BIP trust.
(2) Dividends whose record date is in the current fiscal year but whose effective date is in the following fiscal year are as
follows:
Resolution

Class ofshares

Sources ofdividend

Totalamount(Millions ofyen)

Dividend per
shar (Yen)

June 25, 2021
GeneralMeeting of
Shareholders

OrdinarysharesRetainedearnings

782

2.50

Record date

Effective date

March 31, 2021

June 28, 2021

(Note） The total amount of dividends resolved by the Board of Directors on June 25, 2021 includes the 0 million yen in
dividends for the Company’s shares held by the executive remuneration BIP trust.

52

CITIZEN REPORT 2021

(Notes to Consolidated Statement of Cash Flows)*1. Relationship between the fiscal year-end balance of cash and cash equivalents and the amount ofconsolidated balance sheet items

Cash and deposits(Millions of yen)
For the year ended
March 31, 2021
101,816

For the year ended
March 31, 2020
80,168Time deposits with a deposit term of
more than three months(2,170)(2,254)

BIP trust separate deposit

(1)

(0)

Cash and cash equivalents

77,996

99,561(Leases)(Borrower side)
1. Finance lease transactions
Finance lease transactions without transfer of ownership(1) Details of lease assets
Property, plant and equipment
Primarily production facilities (machinery, equipment and vehicles) and office equipment, etc. (tools, furniture and fixtures)(2) Method of depreciation of lease assets
As stated in Basis of presenting consolidated financial statements “4. Accounting policies (2) Method of depreciation ofsignificant depreciable assets.”
2. Operating lease transactions
Future lease payments pertaining to non-cancelable operating lease transactions

Within one year
Over one year
Total

For the year ended
March 31, 2020

9
24
33

(Millions of yen)
For the year ended
March 31, 2021
10
17
27

(Financial instruments)
1. Status of financial instruments(1) Policies
Under the Company’s policy, the Group is limited to utilize short-term deposits for fund management and obtains fundthrough financial institutions. Derivatives are made only for hedging purposes, and the Group does not use derivativetransactions for trading purposes.
(2) Risk management
The Group performs ongoing credit evaluations of significant customers to avoid credit risks of notes and accounts
receivables.
The Group monitors the market price or fair value of the investment securities and continuously reconsiders investment ineach company.
Debt and bonds are mainly for refunding of long-term debt and capital expenditure in accordance with investment strategy.
The Group has derivative financial instruments, such as foreign currency exchange forward, foreign currency option andinterest rate swap, and all derivative financial instruments are designated for hedging purposes.
The Companies clarify all of their marketable and investment securities as available-for-sale. Available-for-sale securities
are carried at market value with the corresponding recognition of net unrealized gains and losses as a separate
component of equity, net of related taxes.
Realized gains and losses are determined on the moving average method and included in the consolidated statements ofincome.
Investment securities are primarily shares of companies with business relationships, which are exposed to the risk offluctuation of market prices. The market values of these are periodically determined and reported to the Board of
Directors. Furthermore, holdings are continuously reviewed in light of relationships with business partners and the financial
condition of business partners.
Long-term loans are also provided to business partners.
Notes and accounts payable - trade, which are trade payables are mostly due within one year.

CITIZEN REPORT 2021

53

Borrowings and corporate bonds are primarily for the purpose of operating funds, refinancing of long-term debt andfunding for strategic investment. A portion of these is exposed to interest rate fluctuation risk due to having variableinterest rates, but a portion of the borrowings with variable interest rates is hedged using interest swap transactions to
avoid the risk of fluctuation of interest paid and fix interest payments.
Furthermore, although trade payables and borrowings are exposed to liquidity risk, the Group prepares and updates cash
flow plans in a timely manner based on reports from Group companies, and also manages liquidity risk by maintaining
liquidity on hand.
The Companies have derivative financial instruments, such as foreign currency forward contracts and interest rate swaps
to manage its exposure to foreign exchange rate and interest rate risks. The Companies do not enter into derivative
financial instruments for trading purposes.
Foreign currency forward contracts are not designated for hedge accounting and stated at fair value; gains and losses arerecognized in the consolidated statements of income.
The interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not remeasured atmarket value.
(3) Fair value estimation
The fair value of financial instruments is based on market price, if available.
The fair value of financial instruments might be reasonably estimated with adequate assumption and factors when market
price is not available. Estimated fair value depends on applied assumptions and factors.
2. Fair value of financial instruments
The table below shows the amounts of financial instruments recorded in the consolidated balance sheets, their fair values
and unrealized gains or losses as of March 31, 2021 and 2020.

54

CITIZEN REPORT 2021

(For the year ended March 31, 2020)
Carrying amount(1) Cash and time deposits(2) Notes and accounts
receivable(3) Electronically recordedmonetary claims(4) Investment securities
Available-for-salesecurities(5) Long-term loans(6) Long-term receivables(*1)
Allowance for long-term
receivables (*2)
Total(1) Notes and accounts
payable(2) Electronically recorded
obligations-operating(3) Short-term loans payable(4) Unsecured bonds(5) Long-term loans payable
(*3)
Total
Derivative transactions (*4)(Millions of Yen)
Differences

Fair value

80,16880,168－43,254

43,254

(0)

1,395

1,395

－

16,735

16,735

－

408

407

(0)

－
141,963－
141,962－(0)

16,485

16,485

－

9,223

9,223

－

3,527
10,000

3,527
9,968

－
(32)

41,62941,69969

80,86680,904

37

69
(69)

①Derivative transactions notdesignated for hedge
11
11－
accounting②Derivative transactions－－－
designated for hedge
accounting*1 Recorded under “Other” in investments and other assets on the Consolidated Balance Sheet.
*2 An allowance for doubtful accounts is deducted for distressed receivables.
*3 Includes in current portion of long-term borrowings.
*4 The net amount is shown for net claims and obligations arising from derivative transactions, and those recorded as liabilities areshown in parentheses.

CITIZEN REPORT 2021

55

(For the year ended March 31, 2021)(1) Cash and time deposits(2) Notes and accounts
receivable(3) Electronically recordedmonetary claims(4) Investment securities
Available-for-salesecurities(5) Long-term loans(6) Long-term receivables(*1)
Allowance for long-term
receivables (*2)
Total(1) Notes and accounts
payable(2) Electronically recorded
obligations-operating(3) Short-term loans payable

Carrying amount
101,816(Millions of Yen)
Differences

Fair value
101,816－

44,102

44,102

(0)

1,371

1,371

－

17,747

17,747

－

251

251

－

－
165,289－
165,288－(0)

15,576

15,576

－

9,041

9,041

－

68
(68)

1,632
1,632
－
(4) Unsecured bonds
10,0009,979(21)(5) Long-term loans payable
63,22963,066
(162)
(*3)
Total
99,47999,296(183)
Derivative transactions (*4)
①Derivative transactions not
(117)
(117)
designated for hedge－
accounting②Derivative transactions
designated for hedge－－－
accounting*1 Recorded under “Other” in investments and other assets on the Consolidated Balance Sheet.
*2 An allowance for doubtful accounts is deducted for distressed receivables.
*3 Includes in current portion of long-term borrowings.
*4 The net amount is shown for net claims and obligations arising from derivative transactions, and those recorded as liabilities areshown in parentheses.
Notes:
1. Method of fair value measurement of financial instruments
Assets:(1)Cash and time deposits
The carrying amount of these accounts approximates their fair value because these accounts are settled in a short period of time.
(2) Notes and accounts receivable
Certain notes and accounts receivable that take time to collect is measured at present value; it shows amounts discounted atreasonable rate under corresponding terms to maturity.
The carrying amounts of other notes and accounts receivables that are settled in a short period of time, approximate their fair value.
(3)Electronically recorded monetary claims
The carrying amounts of the accounts approximate its fair value because the account is settled in a short period of time.
(4) Investment securities
The fair values of equity securities are based on the prices at exchange market.
(5) Long-term loans
The fair value of long-term loans receivable is measured at present value obtained by discounting the future cash flows classified
by certain period at an adequate rate such as market rate with credit-spread taken into account.
However, as the interest rates of long-term loans receivable with floating rate are to be revised by certain prescribed period, theircarrying amounts approximate their fair value.
(6) Claims provable in bankruptcy, claims provable in rehabilitation
As allowance for doubtful accounts is recorded at the amount equivalent to the portion judged to be uncollectible individually basedon evaluation for collectability, their fair values approximate amounts obtained by subtracting allowance for doubtful accounts fromtheir book values, and these values are used as their fair values.

56

CITIZEN REPORT 2021

Liabilities:(1)(2)(3) Notes and accounts payable, short-term loans payable and electronically recorded obligations-operating
The carrying amount of these accounts approximates their fair value because these accounts are settled or repaid in a short periodof time.
(4)Unsecured bonds
Since the market price is not available, the fair value of bonds is measured at present value by discounting principles, interests andguarantee fees at a rate with term to maturity and credit risk taken into account.
(5)Long-term loans payable
The fair value of long-term debt is measured at present value by discounting total amount of principles and interests at an assumed
rate for new borrowings under similar conditions.
However, as the interest rates of long-term loans payable with floating rate are to be revised by certain prescribed period, theircarrying amount approximate their fair value
2. Unmarketable securities of ¥10,775 million and ¥10,774 million as of March 31, 2021 and 2020 are not included in “Investment
securities, Available-for-sale securities”, since their market prices are not available and it is not possible to estimate their future
cash flows, and therefore it is deemed extremely difficult to assume their fair value.
3. Expected maturities of cash and time deposits, notes and accounts receivable, electronically recorded monetary claims and longterm loans(For the year ended March 31, 2020)
Due after 1 year
through 5 years

Due in 1 year or less
Cash and deposits
Notes and accounts
receivable
Electronically recordedmonetary claims
Long-term receivables
Total

80,168−Due after 5 year
through 10 years(Millions of yen)
Due after 10 years−−

43,110

144

−

−

1,395

−

−

−

−
124,675

408
552

−
−

−
−

(For the year ended March 31, 2021)
Due after 1 year
through 5 years

Due in 1 year or less
Cash and deposits
Notes and accounts
receivable
Electronically recordedmonetary claims
Long-term receivables
Total

101,816−

Due after 5 year
through 10 years(Millions of yen)
Due after 10 years−−

43,880

222

−

−

1,371

−

−

−

−

251
473

−
−

−
−

147,067

4. Scheduled repayments of bonds, long-term loans payable, lease obligations, and other interest-bearing liabilities after the
consolidated settlement date
(For the year ended March 31, 2020)(Millions of yen)
Due after 2
Due after 3
Due after 4
Due in 1 year orDue after 2 year
Due after 5
year through 3
year through 4
year through 5
lessthrough 3 years
years
years
years
years
Short-term debt
3,527
－
－
－
－
Bonds
10,000－－－－Long-term debt
13,700
Lease liabilities
440
Total
17,668(For the year ended March 31, 2021)

8,037
241
8,278

Due in 1 year or
less

Due after 2 year
through 3 years

1,632

Short-term debt
Bonds
Long-term debt
Lease liabilities
Total

－
8,016
293
9,942

4,619
81
4,700

19
96
10,115

10,019113
10,132－

Due after 2
year through 3
years－

Due after 3
year through 4
years－

Due after 4
year through 5
years
－

－
3,837
226
4,064

10,0001,036
68
11,104－
1,036
61
10,098－15,03671
15,108

5,324
486
5,720

(Millions of yen)
Due after 5
years
－
－
25,266402
25,669

CITIZEN REPORT 2021

57

(Notes to Securities)
1. Other marketable securities(For the year ended March 31, 2020)
Category
Acquisition cost not
greater than bookvalue(1) Stocks(2) Bond①Government/municipalBook value(Millions of yen)
10,474

Unrealized gain
(Millions of yen)
6,000

－

－

－

②Corporate

－

－

－

③Other－－－－10,474
6,260

－
4,474
8,195

－
6,000
(1,935)(3) Other
Subtotal(1) Stocks(2) Bond①Government/municipal

Acquisition costgreater than bookvalue

Acquisition cost
(Millions of yen)
4,474

－

－

－

②Corporate

－

－

－

③Other－－－(3) Other－－－
Subtotal
6,260
8,195
(1,935)
Total
16,735
12,6694,065(Note) Unlisted shares, etc. (amount on Consolidated Balance Sheet: 10,774 million yen) are not included in “Other securities” inthe above table because they have no market price and it is very difficult to determine their market value.
(For the year ended March 31, 2021)
Category
Acquisition cost
not greater thanbook value(1) Stocks(2) Bond①Government/municipal

Acquisition cost
(Millions of yen)
9,121

Unrealized gain
(Millions of yen)
8,045

－

－

－

②Corporate

－

－

－

③Other－－－－17,167
580

－
9,121
618

－
8,045
(37)

(3) Other
Acquisition costgreater thanbook value

Book value(Millions of yen)
17,167

Subtotal(1) Stocks(2) Bond①Government/municipal

－

－

－

②Corporate

－

－

－

③Other－－－(3) Other

－
－
－
580
618
(37)
Total
17,747
9,739
8,008(Note) Unlisted shares, etc. (amount on Consolidated Balance Sheet: 10,775 million yen) are not included in “Other securities” inthe above table because they have no market price and it is very difficult to determine their market value.
Subtotal

2．Other marketable securities sold(For the year ended March 31, 2020)
Category(1) Stocks(2) Bond① Government/municipal② Corporate③ Other(3) Other
Total

58

CITIZEN REPORT 2021

Amount of proceeds(Millions of yen)
4,061

Total gains on sales(Millions of yen)
1,860

Total losses on sales(Millions of yen)

－

－

－

－

－

－

－

－

－

－
4,061

－
1,860

－
1

1

(For the year ended March 31, 2021)
Category(1) Stocks

Amount of proceeds(Millions of yen)
3,163

(2) Bonda. Government/municipal
b. Corporatec. Other(3) Other
Total

Total gains on sales(Millions of yen)
1,452

Total losses on sales(Millions of yen)
－

－

－

－

－

－

－

－

－

－

－

－

－

3,163

1,452

－

3．Impaired securities written down to their fair values
For the prior fiscal year (From April 1, 2019, to March 31, 2020)
Impairment loss of 1 million yen was recorded for investment securities.
For the current fiscal year (from April 1, 2020, to March 31, 2021)
The Company recorded impairment losses of 1,220 million yen on investment securities.
(Notes to Derivative Transactions)
1. Derivative transactions not subject to hedge accounting
Currency-related derivatives
For the prior fiscal year (As of March 31, 2020)
Category

Over-the countertransactions

Type

Contract amount(Millions of yen)Contract amountdue after 1 yearperiod(Millions of yen)

1,736

－

(0)

(0)

1,538

－

(2)

(2)

591

－

3

3

400

－

10

10

11

11

Forward foreignexchange
contracts(Sell)
U.S. dollar
Euro
(Buy)
Euro
British pound

Market value(Millions of yen)
(Note)

Total
4,267
－
(Note) Calculation of market valueMarket value is calculated based on value offered by the correspondent financial institutions.
For the current fiscal year (As of March 31, 2021)
Category

Contract amount(Millions of yen)Contract amountdue after 1 yearperiod(Millions of yen)

933

－

(18)

(18)

Euro
ChineseYuan(Buy)
U.S. dollar

2,496

－

(42)

(42)

1,011

－

(42)

(42)

265

－

(4)

(4)

Euro

809

13

13

British pound

－

315

－

Type
Forward foreignexchange
contracts(Sell)
U.S. dollar

Over-the countertransactions

Unrealized gain
(loss)(Millions of yen)

Market value(Millions of yen)
(Note)

Total
5,831
－
(Note) Calculation of market valueMarket value is calculated based on value offered by the correspondent financial institutions.

Unrealized gain
(loss)(Millions of yen)

(24)

(24)

(117)

(117)

CITIZEN REPORT 2021

59

2. Derivative transactions subject to hedging
Interest rates
Previous fiscal year (March 31, 2020)
Hedging methods

Type of transaction

Main hedged items

Contract amount,
etc.
(Millions of yen)Contract amount,etc. exceeding one
year(Millions of yen)

Market value(Millions of yen)Interest rate swap
transactions
Long-term
11,100(Note)－
Fixed payment,
borrowings
variable receipt(Note) Those subject to special treatment of interest rate swaps are treated together with long-term borrowings, and the market
value thereof is included in the market value of the relevant long-term borrowings.
Special treatment
of interest rate
swaps

For the current fiscal year (As of March 31, 2021)
Not applicable(Liability for retirement benefits)
1.Summary of retirement benefit plan
The Company and its domestic consolidated subsidiaries adopt retirement lump-sum plan and defined contribution pension plan.
Furthermore, some overseas consolidated subsidiaries use defined benefit plans or defined contribution plans.
Some consolidated subsidiaries use the simplified method of treating the amount of payment required for voluntary retirement as
retirement benefit liability when calculating retirement benefit liability.
2.Defined-benefit plans(1) Changes in retirement benefit obligations
For the year ended
March 31, 2020
24,739
1,349
121
720
(1,006)(18)(Millions of yen)
For the year ended
March 31, 2021
25,990
1,402
124
221
(3,233)298

For the year ended
March 31, 2020
1,411
34
546
14
(125)
(4)

(Millions of yen)
For the year ended
March 31, 2021
1,952
30
65
163
(97)
200

Balance at the beginning of the year
Service cost
Interest cost
Actuarial differences generated
Retirement benefits paid
Foreign currency translation adjustment
Amount of impact due to change from676－
simple method to principle method
Other
85
(15)
Balance at the end of year
25,99025,465(Note) Retirement benefit expenses of consolidated subsidiaries using the simplified method are included in service cost.
(2) Changes in plan assets

Balance at the beginning of the year
Expected return on plan assets
Actuarial differences generated
Contribution from employers
Retirement benefits paid
Foreign currency translation adjustment
Amount of impact due to change from
simple method to principle method
Other
Balance at the end of the year

60

CITIZEN REPORT 2021

－

573

76
1,952

(12)
2,875

(3) Reconciliation of the ending balance of retirement benefit obligations and plan assets to the liabilities for retirement benefits andassets related to retirement benefits recorded in the consolidated balance sheets(Millions of yen)
For the year ended
For the year ended
March 31, 2020
March 31, 2021
Retirement benefit obligations for
2,964
4,272
accumulation-type plans
Pension assets(1,952)(2,875)1,012
1,397
Retirement benefit obligations for unfunded
23,02521,193plans
Reconciliation from retirement benefit
obligations and plan assets to liability for
24,03822,590retirement benefits on the consolidatedbalance sheets
Liabilities for retirement benefits
Reconciliation from retirement benefit
obligations and plan assets to liability for
retirement benefits on the consolidatedbalance sheets

24,03822,59024,03822,590(4) Retirement benefit costs
For the year ended
March 31, 2020
1,349
121
(34)
247
(32)

(Millions of yen)
For the year ended
March 31, 2021
1,402
124
(30)
206
3

For the year ended
March 31, 2020
32
182
215

(Millions of yen)
For the year ended
March 31, 2021
15
180
195

For the year ended
March 31, 2020
205
922
1,127

(Millions of yen)
For the year ended
March 31, 2021
220
1,103
1,323

For the year ended
March 31, 2020
88.1
1.4
6.2
－
4.3
100.0

For the year ended
March 31, 2021
47.5
10.7
0.5
37.4
3.9
100.0

Service costs
Interest costs
Expected return on plan assets
Amortization of actuarial differences
Amortization of prior service costs
Retirement benefit expenses for defined
1,652
1,706
benefit plans(Note) Retirement benefit expenses of consolidated subsidiaries using the simplified method are included in service cost.
(5) Adjustments for retirement benefits

Past service cost
Actuarial differences
Total(6) Accumulated adjustments for retirement benefits

Unrecognized prior service costs
Unrecognized actuarial differences
Total(7) Plan assets① Breakdown for plan assets

Equity securities
Bonds
Cash and deposits
General life insurance account
OthersTotal%%

CITIZEN REPORT 2021

61

② Long-term expected rate of return
In order to determine the long-term expected rate of return, present and expected portfolio of plan assets and estimated long-term
rate of various assets have been considered.
(8) Assumptions of actuarial differences

For the year ended
March 31, 2020

Discount rate
Expected long-term rate of return on planasset

For the year ended
March 31, 2021

0.32〜3.10%

0.32〜3.15%

1.00〜4.00%

0.14〜4.00%

3．Defined contribution plan
Contributions to defined contribution plan for the years ended March 31, 2021 and 2020 are ¥1,105 million and ¥1,234 million,
respectively.
(Tax effect accounting)
1．Breakdown by main causes of the occurrence of deferred tax assets and deferred tax liabilities
For the year ended
March 31, 2020

Deferred tax assets:
Depreciation in excess
Inter-company profits and write down on
inventory
Liability for retirement benefits
Allowance for doubtful accounts
Provision for bonuses
Net operating loss carry-forward (Note)2
Investment securities
Provision for reorganization costs
OthersTotal deferred tax assets
Valuation allowance of tax loss carriedforward (Note)2
Valuation allowance for total future
deductible temporary differences, etc.
Subtotal valuation allowance (Note)1
Total deferred tax assets(Millions of yen)
For the year ended
March 31, 2021

6,502

5,421

5,587

5,289

6,703
190
1,468
2,791
2,017
973
5,952
32,186

6,051
336
1,363
10,906
2,052
225
4,712
36,358(2,680)(9,765)(11,893)(18,662)(14,573)
17,612(28,427)
7,930

Deferred tax liabilities:
Unrealized gain on subsidiaries(535)(1,568)
Undistributed earnings of foreign(2,668)(2,926)
subsidiaries
Others(390)(424)
Total deferred tax liabilities(3,594)(4,918)Net deferred tax assets
14,0183,012(Note) 1. The content of the increase in the valuation reserve is due to additional recognition of the valuation reserve due to therevision of the classification of the company under the Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ
Guidance No. 26) from the fiscal year under review.
(Note) 2. Tax losses carried forward and deferred tax assets thereof by deferral expiration date
(For the year ended March 31, 2020)
less
Due after 1
year through2 years

Due after 2
year through3 years

Due after 3
year through4 years

Due after 4
year through5 yearsDue
after 5years

Tax loss carryforward*

525

228

271

102

163

1,499

2,791

Valuation allowance

(502)

(228)

(271)

(102)

(163)

(1,411)(2,680)

Deferred tax assets

23

－

－

－

－

87

110

* Tax loss carryforward is the amount obtained by multiplying by the effective statutory tax rate.

62(Millions of yen)Due in1 yearor less

CITIZEN REPORT 2021

Total

(For the year ended March 31, 2021)(Millions of yen)Due in1 yearor lessless
Due after 1
year through2 years

Due after 2
year through3 years

Due after 3
year through4 years

Due after 4
year through5 yearsDue
after 5years

Tax loss carryforward*

457

255

132

247

307

9,507

10,906

Valuation allowance

(421)

(255)

(132)

(244)

(307)

(8,403)(9,765)

Deferred tax assets

35

－

－

2

－

1,103

1,141

Total

* Tax loss carryforward is the amount obtained by multiplying by the effective statutory tax rate.
2. Breakdown by principal items causing the difference between the normal effective statutory tax rate and the rate of income taxes
after tax effect accounting
Previous fiscal year (March 31, 2020)
Omitted due to posting a loss before income taxes.
Current fiscal year (March 31, 2021)
Omitted due to posting a loss before income taxes.
(Asset retirement obligations)
1. Asset retirement obligations recorded on the Consolidated Balance Sheeta. Overview of the asset retirement obligations
Asbestos removal expenses incurred when dismantling buildings owned by the Group and the cost of restoration of stores to their
original state under real estate lease agreements are recorded as asset retirement obligations.
b. Method of calculation of the amount of the asset retirement obligations
Asbestos removal expenses are estimated based on the useful life of the property, plant and equipment being 38 years. Due to the
expected useful life having already elapsed, the amount is calculated using the amount of expected expenditure at the end of the
fiscal year under review.
The cost of restoration to original state is estimated using an expected useful life of five years from acquisition and a discount rateof 0.0% to calculate the amount of asset retirement obligations.
c. Asset retirement obligations

Balance as of April 1, 2020
Increase due to acquisition of tangible fixed
assetsAdjusted to reflect the passage of time
Decrease due to fulfillment of asset retirement
obligations
Balance as of March 31, 2021

For the year ended
March 31, 2020
74－

(Millions of yen)
For the year ended
March 31, 2021
66
8

－

－

(7)

－

66

75

2. Asset retirement obligations not recorded on the Consolidated Balance Sheet
Other than the asset retirement obligations recorded on the Consolidated Balance Sheet, the Company has obligations pertaining
to restoration of land, etc. used based on lease agreements to the original state at the time it is vacated. However, the asset
retirement obligations cannot be reasonably estimated because the period of use of leased assets related to such obligations is
unclear and there are no plans for relocation, etc. at this time. For this reason, the asset retirement obligations corresponding tosuch obligations have not been recorded.

CITIZEN REPORT 2021

63

(Segment information)
1. General information about reportable segments:
The Citizen Group’s reportable segments are group components for which separate financial information can be obtained. Eachsegment is subject to periodic examinations to allow the Board of Directors to decide how to allocate management resources andassess performance.
The Citizen Group has adopted an operating holding company structure and comprehensive strategies are proposed andbusinesses are pursued by individual operating companies.
Consequently, the Citizen Group, starting from a foundation of operating companies manages its businesses through four
reportable segments – Watches, Machine tools, Devices and components, Electronic and other products – based on factors likesimilarity of types and characteristics of products.
The main contents of each business segment are as follows:Business Segment
Watches
Machine tools
Devices and components
Electronic and other products

Main Products
Movements
NC Automatic lathe
Automotive components, Compact switches, Chip LEDs, LEDs
for lighting, Crystal devices
Digital photo printers, healthcare device,etc.

2. Basis of measurement of reportable segment net sales, profit (loss), and other items:
The accounting methods applied to the business segments reported are generally the same as those described under “Basis ofpresenting the consolidated financial statements.”
Inter-segment earnings and transfers are based on market
3. Matters pertaining to changes in reportable segments
The Group has consolidated its existing “Electronic Products” and “Other Products” segments and changed the name to “Electronic
and Other Products” from the fiscal year under review due to a revision of the categories of management and administration.
Segment information for the previous fiscal year has been disclosed based on the classification of reportable segments applied
from the fiscal year under review.
4．Basis of measurement of reportable segment net sales, profit (loss), and other items:(For the year ended March 31, 2020)(Millions of yen)
Watches

Machinetools

Devices andcomponents

Electronic andother products

Total

Adjustments（Note1）

Consolidated（Note2）

Net sales
Sales to outside
customers
Inter-segment
sales and transfers
Total

141,620

58,54555,946

22,418278,531－

278,531

99

549

1,867

875

3,391

(3,391)－

141,719

59,09457,81423,294

281,923(3,391)

278,531

Segment profit(loss)

3,938

7,261

926

(215)

11,911(5,775)

6,136

Segment assets

173,621

61,20877,152

20,269332,252

37,323

369,575

8,470

1,694

4,014

323

14,503935

15,438

Other
Depreciation

Investment in
3,817
3,817
3,817
－
－
－
－
affiliates
Capital10,319
4,185
4,226
373
19,104
2,035
21,140expenditures(Note)1. Adjustments for the year ended March 31, 2020
(1) Segment profit (loss) totaling ¥ (5,775) million includes inter-segment elimination of ¥ 23 million and general corporate expensesof ¥ (5,799) million not allocated to any reportable segments.
(2). Segment assets totaling ¥37,323 million includes inter-segment elimination of ¥ (34,923) million and general corporate assetsof ¥72,247 million not allocated to any reportable segments.
(3) Depreciation is that related to general corporate assets.
(4) Increases in property, plant and equipment and intangible fixed assets are those related to general corporate assets.
2. Reported segment profit (loss) is reconciled to operating profit in the consolidated statements of income.

64

CITIZEN REPORT 2021

(For the year ended March 31, 2021)(Millions of yen)

Watches

Machinetools

Devices
andcomponents

Electronic
and otherproducts

Total

Adjustments（Note1）

Consolidated（Note2）

Net sales
Sales to outside customers

95,62546,70745,91918,389206,641－

206,641

64

161

922

630

1,779

(1,779)－Total

95,69046,86946,841

19,019208,421(1,779)206,641

Segment profit (loss)(8,192)

2,935

(493)

394

(5,355)(4,195)(9,551)

Segment assets

155,522

63,31871,486

18,908309,235

56,575

365,811

5,097

1,951

3,270

137

10,457

1,100

11,557

－

3,945

－

－

3,945

－

3,945

3,687

3,197

2,965

231

10,081825

10,907

Inter-segment sales andtransfers

Other
Depreciation
Investment in affiliates
Capital expenditures(Note) (1) “Adjustments” segment profit (loss) totaling ¥ (4,195) million includes inter-segment elimination of ¥ (139) million andgeneral corporate expenses of ¥ (4,335) million not allocated to any reportable segments.
(2) “Adjustments” segment assets totaling ¥56,575 million includes inter-segment elimination of ¥ (26,567) million and general
corporate assets of ¥83,143 million not allocated to any reportable segments.
(3) Depreciation is that related to general corporate assets.
(4) Increases in property, plant and equipment and intangible fixed assets are those related to general corporate assets.
2. Reported segment profit (loss) is reconciled to operating profit in the consolidated statements of income.
【Related Information】(For the year ended March 31, 2020)
1.The accounting methods applied to the business segments reported are generally the same as those described under “Basis ofpresenting the consolidated financial statements.”
Inter-segment earnings and transfers are based on market prices.
2.Information by region(1) Sales
Japan

Asia

America
EuropeChina
United States
98,83977,88457,47955,31242,47044,952(Note) Net sales are based on the location of customers and categorized by country or region.

Others
1,543(2) Property, plant and equipment
Japan

Asia
51,851

18,965Thailand

278,531(Millions of yen)
Total

Others9,180(Millions of yen)
Total

7,716

78,532(For the year ended March 31, 2021)
1.The accounting methods applied to the business segments reported are generally the same as those described under “Basis ofpresenting the consolidated financial statements.”
Inter-segment earnings and transfers are based on market prices.
2.Information by region(1) Sales
Japan

Asia

America
EuropeChina
United States
70,10865,65950,14934,91630,252
33,612(Note) Net sales are based on the location of customers and categorized by country or region.

Others2,345(Millions of yen)Total
206,641

CITIZEN REPORT 2021

65

(2) Property, plant and equipment
Japan

Asia
50,458Thailand

18,004(Millions of yen)
Total

Others
7,782

7,485

75,948【Information on impairment loss on fixed assets by reportable segment】(For the year ended March 31, 2020)
Watches
Impairment loss

15,436

Machine tools－

Devices andcomponents
3,153(Millions of yen)
Electronic andother products
578

Corporate/elimination

Total

103

(For the year ended March 31, 2021)
Watches
Impairment loss
(Per share information)

2,751

19,272(Millions of yen)
Machine tools－

Devices andcomponents
106Electronic andother products－

Corporate/elimination

Total
－

2,857

(yen)
For the year ended
For the year ended
March 31, 2020
March 31, 2021
Net assets per share709.21652.47Net loss per share(53.07)(80.52)(Note)1. Diluted earnings per share is not stated because there is no dilutive security.
(Note)2. The basis for calculation of Basic loss per share is as follows.
For the year ended
For the year ended
March 31, 2020
March 31, 2021
Net loss per share
Net loss attributable to owners of the parent(16,667)(25,173)(Millions of yen)Amount not attributable to common－－shareholders (Millions of yen)
Net loss attributable to owners of theparent attributable to common stock(16,667)(25,173)(Millions of yen)
Average number of shares during the period
314,081
312,639(Thousands of shares)
Outline of latent shares not included in thecalculation of diluted net income per share due―――――
to lack of dilutive effect(Note)3. The basis for calculation of the amount of net assets per share is as follows.
For the year ended
For the year ended
March 31, 2020
March 31, 2021
Total net assets (Millions of yen)
230,791
212,864
Amount deducted from total net assets
9,066
8,878
(Millions of yen)(Non-controlling interests (Millions of yen))(9,066)(8,878)
Net assets pertaining to common
221,725
203,986
shares at end of term (Millions of yen)
Number of common shares at end of term
used for calculation of net assets per share
312,639
312,638(thousands of shares)(Note) 4. The amount of net assets per share is based on the number of shares calculated by deducting the number of treasury
shares at the end of a term and the number of the Company’s shares owned under the executive remuneration BIP trust at the endof the term from the total number of outstanding shares at the end of that term, and the calculation of earnings (loss) per share isbased on the number of shares calculated by deducting the average number of treasury shares during a term and the average
number of shares owned under the executive remuneration BIP trust during the said term from the average total number ofoutstanding shares during the said term.
The average number of shares owned under the executive remuneration BIP trust for the previous fiscal year was 178,494 and thenumber of shares at the end of the fiscal year was 376, 600. The average number of shares owned under the executive
remuneration BIP trust for the consolidated fiscal year under review was 375,142 and the number of shares at the end of the fiscal
year was 374,652.

66

CITIZEN REPORT 2021

⑤ 【Consolidated Supplementary Schedules】【Schedule of Corporate Bonds】
Company
name

Issue

Citizen
Watch Co.,
Ltd.
Total

Date of issue

Balance at
beginning of term(Millions of yen)

Balance at endof term(Millions of yen)Interest
rate (%)

Collateral

Maturity

None

September25, 2023

3rd
September
Unsecured 25, 2018
10,00010,000－
Bonds
10,00010,000－－－(Note) The amounts to be redeemed over five years from the consolidated closing date are as follows.
Due in 1 year or lessDue after 1 year
through 2 years－[Schedule of loans]Class
Short-term borrowings
Current portion of longterm borrowings
Lease obligations
Long-term borrowings
Lease obligations
Other interest-bearing
liabilities
Total

Due after 2 year
through 3 years－－－(Millions of yen)
Due after 4 year
through 5 years

Due after 3 year
through 4 years

10,000－－

Balance as of April 1,
2020(Millions of yen)
3,527

Balance as of March
31, 2021(Millions of yen)
1,632

Average interest rate
(％)
2.4

－

13,700

8,016

1.1

－

440
27,9291,019

293
55,212
831

－
0.4
－

－
2022-2039
2022-2065

－

－

－

－

Repayment Date

46,616
65,986－－(Note)1.The average interest rate is calculated based on the average rate for the period.
2.The average interest rate for lease obligations is not stated because lease obligations are recorded in the consolidated balance
sheets before the deduction of the amount equivalent to interest included in the total lease payments.
3.Lease obligations are included in "Other (current liabilities)" and "Other (long-term liabilities)" in the consolidated balance sheets.
4. Finance leases that do not transfer ownership of the leased property to the lessees are depreciated on the straight-line basis
over the lease terms with no residual value.

Class

Due after 1 year
through 2 years

Due after 2 year
through 3 years(Millions of yen)
Due after 4 year
through 5 years

Due after 3 year
through 4 years

Long-term borrowings

3,837

1,036

10,03615,036

Lease obligations

226

68

61

71

CITIZEN REPORT 2021

67

English Translation
INDEPENDENT AUDITOR’S REPORT
June 25, 2021
To the Board of Directors of
Citizen Watch Co., Ltd.
Nihombashi Corporation
Chuo-Ku, Tokyo
Shigehiro Chiba
Designated and Engagement Partner
Certified Public Accountant
Hidekazu Takahashi
Designated and Engagement Partner
Certified Public Accountant
Tatsuya Oritoya
Designated and Engagement Partner
Certified Public Accountant
Yoichi Endo
Designated and Engagement Partner
Certified Public Accountant
OpinionPursuant to Article 193-2, paragraph 1 of the Financial Instruments and Exchange Law of Japan,
we have audited the consolidated financial statements of Citizen Watch Co., Ltd. and its
subsidiaries (the Group), which comprise the consolidated balance sheet as at March 31, 2021,
and the consolidated statements of income, comprehensive income, changes in net assets andcash flows for the year then ended, and notes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2021, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for

68

CITIZEN REPORT 2021

the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.

Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of mostsignificance in our audit of the consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the consolidated financial statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on thesematters.
Recoverability of Deferred Tax Assets
Description of Key Audit Matter

How the Key Audit Matter Was Addressed in the
Audit

Deferred tax assets, net of deferred tax

We performed the following audit procedures toliabilities, of JPY 5,293 million was

evaluate the recoverability of deferred tax

recorded on the consolidated balance

assets:sheet as of March 31, 2021. As disclosed•

Evaluated the design and tested thein Note to the consolidated financial

operating effectiveness of controls overstatements, total deferred tax assets

the Company’s deferred tax assets

was JPY 7,930 million which comprises ofvaluation process, including controls

the gross deferred tax assets related torelated to management’s judgement of

the future tax deductible expenses andthe recoverability of deferred tax assets,

net tax operating loss carryforward and•

Evaluated the reasonableness ofrelated valuation allowances as of March

recoverable category described in ASBJ

31, 2021 were JPY 36,358 million and JPY

Guidance No.26 “Recoverability of

28,427, respectively.

Deferred Tax Assets”,•

Evaluated the reasonableness ofAssessing the recoverability of deferred

estimated future taxable income

tax assets is considered based on futurecompared to the management’s

taxable income of the consolidated

forecasts,

Group in Japan in accordance with the
Accounting Standards Board of Japan•

Discussed with managements regarding
assumptions, including impact of COVID-

CITIZEN REPORT 2021

69

(ASBJ) Guidance No.26 “Recoverability of

19, and read and analyzed the related

Deferred Tax Assets”.

information and certain publicly
available information to evaluate thereasonableness of the assumptions, andThe estimates of future taxable income
are based on the forecasts of the•

Performed the retrospective analysis of

consolidated Group in Japan, and the

management’s prior year estimatedprojections are assessed based on

future taxable income and evaluated if

assumptions arising from managements’

the estimated future taxable income isjudgement.

reasonable and realizable.

Based on the aforementioned factors
above, we identified the recoverabilityof deferred tax assets as a key audit
matter.

Impairment of Long-Lived Assets
Description of Key Audit Matter

How the Key Audit Matter Was Addressed in the
Audit

As disclosed in Note to the consolidated

We performed the following audit procedures

financial statements, impairment loss ofover the impairment loss of the long-lived assets

JPY 2,857 million was recorded on thegroup recorded:

consolidated income statement for the•Assessed the reasonableness of theperiod utilized in the future cash flows

year ended March 31, 2021.

compared to remaining economic livesof the related assets,

The impaired assets group was
evaluated based on a quoted market•

Analyzed the future cash flows by

price or discounted future cash flows.

comparing the managements’ business

The impairment loss was recognizedplans to quoted market condition andsince the carrying amount of the assets

prior year managements’ businessgroup was not recoverable and exceeds

forecasts to actual historical financial

its fair value. The discounted future cash

results,flows were based on the forecasts•

Discussed with managements regarding

approved by managements withassumptions, including impact of COVID-

significant managements’ assumptions,19, and evaluated them by comparing tocertain publicly available information.

70

CITIZEN REPORT 2021

including the discount rate and•Verified applied discount rate comparedto publicly available information.

uncertainty arising from COVID-19.
Based on the aforementioned factors
above, we identified the impairment oflong-lived assets as a key audit matter.

Valuation of Inventories Held by the Watch Division
Description of Key Audit Matter

How the Key Audit Matter Was Addressed in the
Audit

As disclosed in Note to the consolidated

We performed the following audit procedures tofinancial statements, inventories of JPY

evaluate valuation of inventories held by the

52,018 was recorded on the

Watch Division:consolidated balance sheet as of March•

Evaluated the design and tested the31, 2021 are lower valued at the cost or

operating effectiveness of internal

net realizable value.

controls over the Company’s inventory

There are certain risks for slow-moving

valuation process,and obsolescence of the inventories held•

Inquired to the Division representativeby the Watch Division since the change

regarding the policy, including anyof market environment of Watch

indicator of potential slow-moving

Division and the negative impact of

inventories and calculation of net

COVID-19.

realizable value, and evaluated thereasonableness be comparing to theBased on the aforementioned factors

market trends and the products

above, we identified the valuation of

lifecycle, andinventories held by the Watch Division
as a key audit matter.

•

Tested the completeness of the slowmoving inventories report andrecalculated the net realizable value.

Responsibilities of Management and Audit & Supervisory Board and its member for theConsolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan, and

CITIZEN REPORT 2021

71

for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern and disclosing, as required by accounting principles
generally accepted in Japan, matters related to going concern.
The Audit & Supervisory Board Member and the Audit & Supervisory Board are responsible foroverseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.

As part of our audit in accordance with auditing standards generally accepted in Japan, we
exercise professional judgment and maintain professional skepticism throughout the audit.
We also:• Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
• Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of theconsolidated financial statements is not expressing an opinion on the effectiveness of the Group’s
internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future events or conditions may cause the Groupto cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the72

CITIZEN REPORT 2021

underlying transactions and events in a manner that achieves fair presentation in accordance withaccounting principles generally accepted in Japan.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with Audit & Supervisory Board Member and the Audit & Supervisory Board
regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide Audit & Supervisory Board Member and the Audit & Supervisory Board with the
ethical requirements regarding independence that are relevant to our audit of the financial
statements in Japan, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with corporate auditors and the board of corporate auditors,
we determine those matters that were of most significance in the audit of the consolidated
financial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to theprovisions of the Certified Public Accountants Act of Japan.

Notes to the Readers of Independent Auditor’s Report
This is merely an English translation of the Independent Auditor’s Report as required by the
Financial Instruments and Exchange Act of Japan for the conveniences of the reader. The original
Auditor's Report shows an audit opinion for the full set of consolidated financial statements
based on the Financial Instrumentals and Exchange Act of Japan.Therefore this English audit
report does not show our opinion for this English annual report which is only the abbreviation of
the above full set of consolidated financial statements.

CITIZEN REPORT 2021

73

Citizen Watch Co., Ltd.
6-1-12, Tanashi-cho, Nishi-Tokyo-shi, Tokyo 188-8511, Japan
TEL. 81-42-466-1231 FAX. 81-42-466-1280
https://www.citizen.co.jp/global
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