INTEGRATED REPORTCITIZEN REPORT

2023

Corporate Philosophy

Loved by citizens, working for citizens.
CITIZEN’s corporate philosophy, “Loved by citizens, working for citizens” isto deeply contribute to the lives of people around the world

through the manufacturing of products that are loved and trusted by citizens.

CITIZEN CALIBRE 16

1

The first pocket watch completedusing a proprietary design in 1924,
It was named“CITIZEN”by themayor of Tokyo at the time in thehope that it would be widely loved
by citizens for a long time.

Table of Contents
03 Value Creation Story
05 History of the CITIZEN Group
07 Message fromthe President & CEO
11 Watches

15 Machine Tools
19 Devices and Components
20 Electronic and Other Products
21 Financial Strategies
23 Financial andNon-financial Highlights

25 Identifying Material Issues
27 Sustainable Management
28 Environment
29 Employees
30 Customers
31 Business Partners
32 CITIZEN OF THE YEAR
33 Corporate Governance
36 Message froman Outside Director

CITIZEN Forest was created under the concept of being able to work bothindoors and outdoors. At Tokyo Works, we planted 215 trees and created aspace that is richly endowed with nature, attracting local birds and insects.
This space won a 2021 Good Design Award.

2

CITIZEN Group's Value Creation Story
Materiality

InputsSustainable management

Risks and
Opportunities(Awareness of
the External
Environment)

Financial Capital

Total assets

���.� billion yen

Cha

Net assets

���.� billion yen

Changes invaluesIntellectual Capital

more than �,���

Number of trademarks that the Group holds

more than �,���Manufactured Capital

Amount of capital investment

��.� billion yen

Digitalization

Research anddevelopment

Production system centered onJapan, China, and Thailand

Contributing tohigh-quality life

Social Capital

Sales andafter-sales
services

Automation
Technology

Global supply chain network

Providing solutionsin industry

Human Capital

Number of employees

Increasing job
satisfaction andcultivating
human resources

Natural Capital

Total energy consumption
Water intake

�,���,���GJ

Recycling rate

Fulﬁlling social
responsibility

3��,���

�,���,���㎥��％(as of March ���� )n t h e e x t e r n a l e nv i r o n m

tion
duc
pro
g
in
ov
pr
m
I

Number of patents that the Group holds

Responding to climatechange and contributing
to a recycling-oriented
societynge s i

Sales

Changes inmobility

e nt

Aging
populationeﬃciency through dig
ital
tra
ns
for
m
at
io
Productnplanning

Miniaturization

CITIZEN’s
Technical
Capabilities
Low Power
Consumption

DesignPrecision
Processing

Procurement

Production

Logistics

Corporate
governanceRisk management

B u s i ne s s foun dat io n

Sustainability
promotion system

Provide sustainable products

Outcomes

VisionWatches

Machine tools

Corporate Philosophy

Loved by citizens,working for citizens.

Give customers
excitement and highsatisfaction
Solve customers’
problems andcontributeto business successCustomers

Engage in businessactivities that reduce
environmental impact

Environment

Reliability
Emotion

Devices and components

Electronic and other products

Business
Partners

CITIZEN Group
long-term vision

Crafting a
new tomorrow

Security

Employees
Provide growth
opportunities
Realize job satisfactionand employee
friendliness

Improve each otherthrough businessactivities
Achieve sustainablegrowthCommunity

Shareholders
and Investors
Improve shareholder
value

Solve social issues
Create jobs andincrease development
in communities

4History of the CITIZEN Group

1910

1920

Watches

1930

1918

Top class share in the U.S.
middle-range market

Shokosha Watch Research Institute,the predecessor of Citizen Watch
Co., Ltd.,was establishedA global leader inmovement sales

1940

1924

First pocket watch

1950

1931

1956

[CITIZEN F],
CITIZEN’s ﬁrst wristwatch

1952

1960

The ﬁrst shock-resistant watch
movement made in Japan[Parashock]First domestically produced
watch with calendar[Calendar]

1959

The ﬁrst fully waterproof
watch made in Japan[Parawater]

Machine Tools

A leading world sharefor small and midsized CNC
automatic lathes

1936

1961

External sales ofm a c h in e to o l scommenced

Internalized manufacturing of
precision machinery for watch
production [AL-�]Units(Billions of yen)

Electronic andOther Products
20.4

Devices andComponents
15％
44.7

28％

7％

FY2022
Sales

301.3

Watches
50% 150.0

Devices and Components

Application of precision processing technologies developedin the assembly of watch parts

Machine Tools
86.1

Europe
62.2

U.S.
80.4

5

Units
(Billions of yen)

Other
3.2
21%

27%

FY2022
Overseas
sales ratio

75%

25%

26%

Japan
76.5

Asia
78.8

Electronic
and Other Products

Application of small precision
technology

1980

1990

2000

1970

2010

1993

The world’s ﬁrst
titanium wristwatch[X-� Cosmotron Chronometer]

2011

The world’s ﬁrst multi-band
radio-controlled watch[Cal. ����]

1976

2008

2012

1986

2011

2013

The world’s ﬁrst solarpowered analog watch[Crystron Solar Cell]

Acquisition of
Bulova Corporation shares

Citizen Machinery Co., Ltd., andMiyano Machinery Inc. merged

Sliding headstock type NC
automatic lathe long-sellingmodel [L��]

The world’s ﬁrst watch capableof receiving satellite signals[Eco-Drive Satellite Wave]

Multi-station machining cell[MC��]

1983

1964

1983

Production of crystal units andcrystal oscillators commenced

Expansion into the oﬃce
equipment ﬁeld

Mechanical models featuring a completely new mechanical movement[The CITIZEN]

The world’s thinnest
light-powered watch with amovement just � mm thick[Eco-Drive One]

Highly eﬃcient LED
for lighting[COB Series]

Acquisition ofFrederique Constant shares

2018

LFV Technology

2011

Manufacturing of automotive
parts commenced

2021

2016

Acquisition ofProthor Holding SA shares

1990

1976

2020

Friction bonding technology

2013

Compact linear motor
galvanoscanner[GVM Series]

Mass production of the world’s
ﬁrst sur face -mounted chip
LEDs commenced

IC sensor electronic thermometer[CT-��] featuring the world’s ﬁrst IC sensor

1997

Household-use
ultrasonic bath[SW����]2007

Digital thermal ink‐transfer
photo printer for businesses[CX Series]

2017

Thermal printer [CT-S���]
Achieves the industry’s smallest height and width

CITIZEN, Eco-Drive, LFV, and CITIZEN OF THE YEAR are registered trademarks of Citizen Watch Co., Ltd.

6

Message Message from the President & CEO

Crafting a new tomorrow

We aim to continue creating new value andnever stop taking on new challenge as we workto embody our corporate philosophy:“loved bycitizens, working for citizens.”
Citizen Watch Co., Ltd.
President & CEO

Toshihiko Sato7

Review of FY2022

FY2022 was the first year of our Medium-termManagement Plan 2024. It was a year in which
we implemented several measures based on
our long-term Group vision of“Crafting a new
tomorrow.”As a result of these measures, ourcore Watches and Machine Tools businesses — in particular — remained resilient, performing beyond our plans and enabling us tostrengthen the profit structure of each business. While risk factors such as soaring raw
material prices and other cost increases remain, the key over the next two years will be
how quickly and reliably we can implement
various measures.
In 2023, although some uncertainty remains,
as exemplified by growing tensions over theongoing conflict in Ukraine and the failure of
U.S. banks, the once raging COVID-19 pandemic is finally nearing its end, and the
movement toward reopening has begun toaccelerate globally. Over the past year, wehave been in a strongly defensive position,
but looking ahead we will turn to the offensive as we aim for sustainable growth.
Sustainable Management to Realize
Our Long-Term Vision

Since FY2019, the CITIZEN Group has beenworking to resolve social issues through its
business activities under the banner of“sus-tainable management.”For the Citizen
Group, sustainable management means not
only providing good products and service
but also expanding our business operations
while earning the trust of stakeholders andworking to sustainably increase corporate
value — through management paying due
care and consideration to social issues suchas human rights and the global environment
throughout our entire value chain.
In light of changes in the medium-to longterm business environment, the CITIZEN
Group is leveraging its strengths and capitalto address material issues (key issues for sustainable improvement of corporate value) interms of both business activities and business foundation, and engaging in initiatives
for growth.
Responding to Climate Change throughOur Material Issues

In formulating our long-term Group vision,
we have identified a set of material issues:
key issues that the CITIZEN Group should
address as priorities in the medium to longterm. In particular, we have prioritized responding to climate change as the most important material issue for the CITIZEN Group.
Strengthening efforts to combat climatechange—such as the occurrence of abnormal
weather conditions around the globe — hasalso become a pressing issue for companies.

The CITIZEN Group is working steadily toward achieving carbon neutrality by 2050, including facilitating the use of electricity derived from renewable energy sources andenergy-saving activities, and aiming fornet-zero effective greenhouse gas emissions
from our factories and offices by 2050.
For example, the Group is gradually introducing solar power generation equipment at
its manufacturing sites, both in Japan andoverseas, and has switched to effectively
CO2-free electric power derived from renewable energy for its domestic Citizen Watch
sales offices. We will continue working actively to respond to climate change, such as
by switching to renewable energy for locations throughout the Group, including overseas bases.
By FY2030, we will achieve our CO2 emission
reduction targets for Scope 1 and 2 by 50.4%
compared with FY2018, and Scope 3 (supply
chain emissions) for Category 1 (CO 2 emissions emitted in the course of activities up to
and including the manufacture of purchased
products and services) and Category 11 (useof products by consumers) by 30% comparedwith FY2018. The CITIZEN Group Environmental Targets 2030 (greenhouse gas emission reduction targets to be achieved by)have been recognized as having a scientificbasis to achieve the targets of the Paris
Agreement and have obtained SBT Initiative*1 certification.

8

To achieve environmentally friendly manufacturing, we will formulate Green Procurement Guidelines, implement chemical substance management, and actively provide
information. We will also comply with thelaws and regulations of each country and expand our range of environmentally friendly
products that pay care and consideration toenergy saving, long-term usability, and environmental conservation. As a result of committing to these environmental conservation
initiatives, we were certified as an“Eco-First
Company”under the Eco-First Program* 2, a
Ministry of the Environment initiative to promote corporate environmental activities. Asof March 2023, 54 companies had been certified under the scheme, with 12 companies
newly certified in April 2023, bringing the total number of companies certified to 66. We
will continue to engage in environmentallyfriendly initiatives through our business activities and contribute to the realization of asustainable society.
CITIZEN’s Environmentally Friendly
Technological Capabilities

The CITIZEN Group has advanced technological capabilities developed through its
Watches business. These technological capabilities, which we have continued to refine toachieve high-precision manufacturing, havedeveloped into the Group’s four strengths ofminiaturization, precision processing, automation technology and low power consumption, and have led to our expansion into awide range of fields such as Machine Tools,
Devices and Components, and Electronic
and Other Products.
In particular, the strength of low power consumption is an environmentally friendly
technology that also leads to customer value. For example, since Citizen Watch
launched the world’s first solar-powered analog watch in 1976, our Eco-Drive solar power generation technology has been installedin many Citizen products and has beenmarking the passage of time with customers
for many years. With the growing awarenessof sustainability in today’s society, its reputation is spreading to countries around theworld. Times are changing significantly, andmore dramatically, but we believe thatwatches are rare, and have universal value.
Mechanical watches, in particular, have a history spanning around 1,000 years and arestill developing today. No matter how muchdigitization progresses, these watches willremain for as long as human beings themselves continue to exist as analog beings. We
will continue to strengthen our investments
and focus on creating products that will be
loved for a long time.
Our Machine Tool business has also achieved
steady growth by responding to customer
demand for more parts to be produced precisely, consistently, more efficiently, andwith greater energy saving. To meet this ever-expanding demand, we have augmented
our production capacity and laid the foundation for further growth.

Enhancing Human Resource Development
and Diversity

As shown by our selection of“increasing job
satisfaction and cultivating human resources”as one of our material issues, we believethat investment in people is also of high importance in contributing to the creation of asustainable society. The CITIZEN Group is
engaged primarily in the manufacturing business. Of course, capital investment in development and manufacturing to turn materials
into products is important, but before that,
we will invest in people. We will make internal and external investments in the trainingof human resources from various perspectives: professionals, career development, development and planning capabilities, andhuman resources who can revitalize the organization. The growth of people leads to thecreation of new value, which in turn leads to
the growth of business and the creation ofvalue for various stakeholders.
One of the issues we are currently working toaddress is that of increasing diversity. If you
only discuss things with the same kind ofpeople, who share the same values, it is difficult to create new change. We recognize theneed to accept more diverse human resources to promote the collision of different values and create completely new value.
We intend to achieve steady growth by becoming a presence that delivers reliability, asense of security, and emotion to the world,“Crafting a new tomorrow”as set out in our
long-term Group vision, and by investing
management resources in accordance with
Medium-term Management Plan 2024, which
specifically incorporates this long-term vision. I look forward to your continued support with regard to this.

Solar panels installed at the Karuizawa Headquarters factory of the Machine Tool business (Citizen Machinery)

*1
*2
9

SBT Initiative: A joint initiative between WWF, CDP, the World Resources Institute (WRI), and the United Nations Global Compact. It encourages companies to set reduction targets
consistent with scientific knowledge toward the goal of limiting the increase in global average temperature due to climate change to 1.5°C above pre-industrial levels.

Eco-First Program: A program run by Japan’s Ministry of the Environment with the aim of encouraging companies’ efforts as environmentally advanced companies in their respective
industries. Companies make promises to the Minister of the Environment to implement their own environmental conservation initiatives (such as measures to combat global warming,
waste handling measures, and recycling measures) and are certified as companies that engage in “advanced, original, and industry-leading business activities.”

CITIZEN OF THE YEARThe CITIZEN OF THE YEAR award is an initiative that embodies the CITIZEN Group’s corporate philosophy of being“loved by citizens, working for citizens.”CITIZEN OF THE
YEAR was launched in 1990 and is now in its
33rd year. Each year, Japanese people andnon-Japanese people living in Japan are selected and honored as citizens (individuals
or organizations) who have emotionally
moved or contributed to the development ofcivil society, or the creation of happiness andattractiveness. An attitude of focusing on citizens — as encouraged by our corporate philosophy — and honoring activities whereby
citizens contribute to civil society and learning from such citizens together has been fostered as part of CITIZEN’s corporate culture.
At first glance, business activities and social
activities might seem to point in different directions, but they really share the common
value of“contributing to citizens.”Thisaward is one activity that enables Group employees to embody our long-term vision of“Crafting a new tomorrow”by experiencing
actions that inspire people around the world
through the social activities of the award
winners.
As a Group, we have a strong desire to become a presence that delivers reliability, asense of security, and emotion to the world,“Crafting a new tomorrow.”Even in our daily
business activities, we are mindful of our philosophy of being“loved by citizens, working
for citizens.”Every Group employee uses thiscorporate philosophy as a guideline for theiractions and judgment criteria. We believethat this strong belief will give rise to thepower to change society.

See page 32

CITIZEN OF THE YEAR

CITIZEN OF THE YEAR(Japanese)
https://www.citizen.co.jp/coy/index.html
10Watches

Providing earth and people-friendly products and services
that can be used and loved for a long timeContinuing to make watches that will be passed
on to future generations
Managing Director

Yoshitaka Oji

Review of Medium-term Management
Plan 2024

Results and Progress for the First Year

The impact of the COVID-19 pandemic has continued for longer than expected, and the speedof recovery in China and other Asian regions
has been particularly slow. At the same time,
the North American and European markets
showed an encouragingly strong recovery andachieved solid results despite uncertainties,
such as concern over international situations.
Over the past year, we have engaged in four
major initiatives.
The first is increasing unit sales prices. To increase the value of our products and reflect

11

appropriate prices, we switched from appealing to customers with functional value to appealing to them with emotional value, and as aresult were able to successfully increase unit
sales without lowering sales.
The second is cost-reduction activities. In addition to production line operations, we engagedin activities including design and implemented
initiatives to further improve quality in addition to reducing costs.
The third is inventory reduction activities.
Watches tend to accumulate in stock due to thelength of the manufacturing lead time and seasonality of sales. We have strengthened PSI(production, sales, inventory) management tostandardize production and optimize inventory.

The fourth is strengthening the global model.
In the past, measures were implemented ateach sales location based on the characteristics of each region. We have now shifted to asystem in which issues and objectives areshared by all sites as a common understanding. All these initiatives have produced results,
and I believe that we have made a good start
toward achieving the measures set forth in Medium-term Management Plan 2024.

Results and Progress of Global Brand Strategy

Medium-term Management Plan 2024 Watch Business Numerical Targets
Net sales

160.0 billion yen

Operating profit

Operating profit margin14.5 billion yen

9.0%

Medium-term Management Plan 2024 CITIZEN Brand Global Strategy
Progress so far

・Marketing is carried out in keeping with thecharacteristics of each region to expand
sales, building around the core of area-specific models designed to suit each region.
・The focus on area-specific models has led
to issues related to building brand presencein the global market and improving investment efficiency.

Medium- to Long-Term Initiatives

Low

Area-specificmodelsLow

GlobalbrandsBrand presence in the
global market

High

Shift in investments

High
Average unit price・Shift investments to global brands to improve investment efficiency
・Increase brand presence in the global market and build a brand image that truly represents CITIZEN

High
Average unit priceWe have positioned PROMASTER and CITIZEN
L as global brands under Medium-term Management Plan 2024 to promote growth, asbrands with a consistent brand concept andpotential for growth in the global market.
We are marketing PROMASTER as a professional sports watch brand with the brand concept
of“MARINE,”“LAND,”and“SKY,”and it has already achieved widespread acceptance in the
global market. CITIZEN L is being marketed asa sustainable watch brand with consideration
for the global environment and people. We willseek to strengthen its appeal in the global market. In particular, the CITIZEN L model with the“May bells”design theme — launched in April
2023 — has been selling well globally and isgradually producing results.
In global operations, the most important key
issue is how to incorporate the different tastes
of each country into a single, unified product.
Even for a single size of watch, there are someregions where large, heavy-duty designs are
preferred, while others prefer smaller, moredelicate, elegant designs. We aim to createstrong brands that are chosen beyond such
tastes.

Area-specificmodelsGlobalbrandsBrand presence in the
global market

High

12

Results and Progress of Strategy for Premium Brands and Mechanical Watches
CITIZEN has positioned three of its brands,“The CITIZEN,”“Eco-Drive One,”and“CAMPANOLA,”as premium brands and has beenworking to create stores with a clear brandconcept and actively introducing new productsin the high-price range category.
From“The CITIZEN,”we will release a mechanical model with date display, equipped with
the new CITIZEN-produced Cal.0210 movement, in the winter of 2023. From CAMPANOLA,
we have launched the“Global Art Collection,”featuring a complex movement made by La
Joux-Perret, a subsidiary of CITIZEN.
Premium brands—in particular—are highly regarded in the market, so we will continue toaccelerate the expansion of CITIZEN Premium
Doors, a group of exclusive retail spaces offering premium brand watches.

Multi-Brand Expansion

BULOVA was founded by Joseph Bulova in New York in
1875. With its advanced technological capabilities, thebrand has long been a leader in the watch market. Overthe years, BULOVA has created many world-firsts, including the world’s first tuning fork watch.

13

Frederique Constant is a Swiss watchmaking manufacture
based in Geneva. In 2023, as it celebrates its 35th anniversary, the Firm continues to showcase its constantly
advancing watchmaking expertise as it pursues its aim:
providing Swiss Made luxury watches at fair 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 brand continues to create
watches using traditional watchmaking techniques.

SUSTAINABLE
THE
FEATURE

Making watches that will be passed down to the next generation, to“craft a new tomorrow”
Sustainability and the circular economy areimportant activities that embody the CITIZEN
Group's long-term vision of“crafting a new tomorrow.”We will work to create a sustainable
society through manufacturing and the provision of services, with consideration for the environment and human rights, and contribute to
the earth and the lives of the people who liveon it in a way that is befitting of CITIZEN.
We will also continue to engage in circular
economy activities aimed at providing products and services that are both environmentally and people-friendly, which can be used andloved for a long time. Watches were once ex-pensive items, passed down by parents to theirchildren, from generation to generation. Although they are now easy to obtain, and lessoften passed down through generations, thespirit of passing them on as treasured possessions is still engraved in CITIZEN’ s watches.
With demand for consideration for the environment, we will continue to make watches thatwill be passed down to future generations, withan uncompromising approach to materials andmanufacturing methods for our products.

14

Machine Tools

Building a stronger business foundation
We aim to strengthen the production,

sales, and service systems and achieve growth.
Director

Keiichi Nakajima

Review of the Implementation of Medium-termManagement Plan 2024

Results and Progress in the First YearIn FY2022, the first year of Medium-term Management Plan 2024, we actively implemented
capital expenditures to achieve growth under
the policies of the medium-term management
plan and focused on increasing production capacity.
Due to global shortages of components, particularly semiconductors, production was lower
than planned. In this market environment,
however, we achieved the Medium-term Management Plan 2024 sales target for FY2024 of
86.0 billion yen in FY2022, the first year of the15

medium-term management plan. Operating
profit fell slightly short of the target for FY2024,
12.5 billion yen, chiefly due to the increase ofcosts, including the cost of components anddistribution costs.
In FY2022, we made a good start on achieving
the policy objectives of Medium-term Management Plan 2024: improving production systems
and building a stronger business foundation.
We will continue to strengthen our production,
sales, and service systems to achieve further
growth and the targets for FY2024.

Establishment of Business Foundations with an Eye Toward Achieving Net Sales of 100 Billion Yen
We have relocated and expanded our factory in
China, expanded our factory in Thailand, andbuilt a new building at Citizen Machinery’s
Karuizawa Headquarters factory, aiming to enhance production capacity and build a stablesupply system. Production capacity is expected
to increase 40% from FY2021 by FY2023. We areabout to establish a system that enables us torecord net sales of 100.0 billion yen if the shortages of components and other issues are resolved.
In the machine tools industry, which is susceptible to changing business conditions, we had
to handle the ups and downs in demand andthe disruptions of supply chains in FY2022. I
believe that overcoming this situation has enabled the foundation of our business to become stronger.
A large percentage of sales are in advanced
countries, including Japan, European countries, and the United States. Going forward,
markets in Asia, particularly in China and India,
are expected to grow. Due to labor shortages,
an increasing number of companies are entering Asian markets. At the same time, demand
for medicine-related and auto-related productswith greater added value that enable complex
machining is increasing. We will establish adequate production capacity and take steps tostrengthen the sales and service systems particularly in Asia, an area which is expected to
grow.

The precision machining plant at Citizen Machinery’ s Karuizawa Headquarters factory

Thai Factory

China Factory

Differentiation by Leveraging Processing Technologies
The low frequency vibration (LFV) cutting technology is CITIZEN’s proprietary control technology. During the cutting process, LFV technology creates moments when the tool is not in
contact with the workpiece, thereby breaking
up chips. This helps solve a range of problems
at production sites derived from chips andmakes a significant contribution to bolstering
productivity.
We first sold products incorporating LFV technology in Japan and began selling them in Europe and the United States in the autumn of2016. And we began sales in the Americas andAsia the following year. Customers who purchased the units reaped the benefits of LFVtechnology, which led to repeat purchases.
Thus, the number of customers desiring to purchase machines using LFV technology is increasing all over the world.
Previously, it was necessary to stop the opera-tion of machine tools often to remove chips.
Customers have said that machines using LFVtechnology have made 24-hour automated operation possible.
We began to incorporate LFV technology in our
products in 2013. In 2016, we made it available
on the Cincom L20, a long-selling model of thesliding headstock type automatic CNC lathe.
The number of models using LFV technology
has increased to 13. Cumulative shipments
have exceeded 5,000 units (as of January2023).

Chips broken into
pieces with the LFVtechnology

Conventional chips
Special LFV website
https://cmj.citizen.co.jp/english/product/lfv/index.html

Quantifiable Targets for the Machine Tools Businessin Medium-term Management Plan 2024
Net sales

86.0 billion yen

Operating profit
12.5 billion yen

Operating profit margin
14.5%

16

Expansion of Areas Where Automation/Labor-Saving Measures Are Applied
Although machine tools were being made capable of complicated and high-precision processing, post-cutting processes that had to behandled by humans were still necessary. As thelabor shortage is an ongoing persistent problem, demand from customers for automationand labor-reducing solutions has been growing.
FA Friendly is a new solution that caters tosuch automation and labor-saving needs ofcustomers. We have prepared a series of items
that are highly compatible with factory automation, including robot systems, material
feeding systems, loaders and unloaders, workpiece stockers, and conveyors between machines. We are increasing the variety of these
items. By enabling robots to do these post-processes, operators can devote themselves tohigh-value-added tasks.
We will build systems that are necessary for thedevelopment and sale of factory automation–
friendly products. At the same time, we collectand analyze information about customer
needs to expand new solutions for further automating processes and reducing labor.
An on-machine-type robot system.
A robot is mounted on the automatic lathe machine to save space in front of the machine.

Microfabrication that leaves φ 0.2 mm using low frequency vibration (LFV) cutting technology

17

SUSTAINABLE
THE
FEATURE

Suited for processing
precision componentsthat are thin and long

Suited for processing
precision componentsthat are thick and shortComponents for which CITIZEN machine tools are used

Automobiles

Powertrains, brakes, doors, etc.

Medicine

Implants, endoscopes, bonescrews, etc.

Precision IT equipment

An easy-to-understand descriptionof CNC automatic lathes
https://cmj.citizen.co.jp/english/special/

Semiconductors, watches, personal
computers, pneumatic equipment,
etc.

Automatic CNC lathes are machine tools. A machine tool, also called a mother machine, is a machine for producing other machines. Machine tools are primarily machines that shave and process
metal materials to make components. Machine tools are necessary in the manufacturing of mostof the products that we use.

Peaceful use of machine tools
Machine tools are generally used to manufacture large amounts of small, processed precisionparts, and they are occasionally used to manufacture weapons and military technology. The Machine Tools business does not sell its products to manufacturers of weapons or military technology to prevent CITIZEN’s machine tools from being used to manufacture such items. The CITIZEN
Group contributes to international peace guided by its corporate philosophy: Loved by citizens,working for citizens.

18

Devices and Components

Create the next generation of growth businesses

Automotive components

Crystal units, crystal oscillators

Leveraging our miniaturization, precision processing, and low power consumption technologies developed in the manufacture of watches,
we make a wide range of components and products that support the lives of people and society.
Our goal is to establish competitive advantages
centered on automotive components, for which
we have established a reputation for our precise
metal part machining technology. In automotive
components, we offer products in the areas ofsafety, comfort, the environment, and controls.
We supply automotive manufacturers around theworld primarily with functional components. We
are also working to create added value throughthe rationalization and integration of processing
systems made possible with manufacturing facilities we have designed ourselves, as we aim to
expand into areas beyond automotive-related
products.
Our LEDs for lighting are next-generation lightsources designed in pursuit of high performance,
point light source, and light quality. Our tactile

19

switches, crystal device components, and motors
are vital in smartphones, home appliances, consumer electronics, and medical devices. We will
use these and other proprietary, differentiatedtechnologies to expand our offering of high-quality, high-value-added products in response tomarket changes.
We will continue to focus on advancing our technologies to achieve greater levels of miniaturization, precision processing, and low power consumption. We will work to create the next
generation of growth businesses by establishinga top position in specific fields, and we will moveto enhance management stability by transitioning to a leaner earnings structure.

MotorsLEDs for lightingElectronic and Other Products

Provide electronic products close to people’s lifestyles

Our Electronic and Other Products business isbased on the miniaturization, precision machining, and low power consumption technologies accumulated through watchmaking. The
business encompasses the printer business,
including photo printers and compact printers,
and the healthcare device business, including
blood pressure monitors and digital thermometers. Building on our core businesses ofhigh-quality, high-functionality photo printersand healthcare devices made from the customer's perspective, we will work to expand into
global niche markets with the goal of driving
stable profits.
Electronic devices are increasingly important ina business environment that demands constant evolution, and in day-to-day life, where
we seek to promote healthy, active lifestyles.
We will continue to pursue new value and convenience while monitoring people's health andlifestyle needs.

Compact printerPhoto printer

Healthcare products

Publishing20

Financial Strategies

Working to improve capital efficiency

Aiming for sustainable growth with an ROE of at least 8.0%
Managing Director

Toshiyuki Furukawa

Review of the First Year of the Medium-termManagement Plan 2024 and Future Outlook

Under the Medium-term Management Plan
2024, we aim to achieve net sales of 320.0 billion yen, an operating profit margin of 8.0%,
and ROE of at least 8.0% or more in FY2024. In
FY2022, the first year of the Medium-term Management Plan 2024, we achieved ROE of 9.6%,
exceeding the target of 8.0% due to strong performance in both our mainstay Watches andMachine Tools businesses.
In the Watches business, in particular, we wereable to achieve a significant increase in operating profit due to continued growth of sales inNorth America and Europe, as well as the ef-

21fects of the weak yen on foreign exchange
rates. In the Machine Tools business, sales
reached a record high despite difficulties inprocuring parts, against the backdrop of strong
orders. At the same time, sales in the Devices
and Components business decreased due tothe impact of a decline in demand for automotive parts and LEDs for lighting.
In FY2023, we expect sales in the Watches business to increase, with expectations for a recovery in inbound demand in the Japanese market and other Asian markets, which have beenslower to recover than Europe and the UnitedStates. In the Machine Tools business, although orders are slowing, we aim to increase
sales by improving our production capacity.

Through the further growth of these core businesses, we will continue working to maintainan ROE of at least 8.0% or higher.

Business Results (Operating Profit/ROE)
Operating proﬁt (Billions of yen)
Return on equity (ROE) (%)

22.2

10.2
(FY)

2021

23.7

25.0

9.6
2022

2023
Forecast

Total Amounts in the Three Years from FY2022 to FY2024

Cash Allocation

Cash inflow

Priority implementation in accordance with Medium-term Management Plan 2024

With regard to cash allocation, we will prioritize investments of 60 billion yen–70 billion yen
for growth and rationalization, mainly in the
Watches and Machine Tools businesses, which
are our core businesses. After making shareholder returns in line with this cash allocation
policy, surplus funds will be allocated for repayment of loans, and so on; although implementing large-scale share buybacks has bolstered shareholder returns more than initiallyanticipated (in terms of the balance between
shareholder returns and financial strengthening during the Medium-term Management Plan
2024 period).
Our shareholder return policy stipulates that
we will make flexible decisions on buybacks oftreasury stock according to circumstances. In
FY2022, we decided to repurchase treasury
shares up to a maximum amount of 40.0 billion
yen. While the impact of the pandemic remains, we have been able to increase profitability to a level higher than before the pandemic. Despite this, there has still been
disparity between our performance and thestock market’s valuation of our business. However, as the Watches business is expected tomaintain stable performance in FY2023, andthe significance of holding cash as a risk buffer
has diminished, we have determined that it isnecessary to improve capital efficiency at an
early stage based on an appropriate capital
structure, liquidity on hand, and other factors.
We will continue to appropriately control ourbalance sheet with an awareness of the cost ofcapital.

Although inventory assets increased at the end of FY2022, theinitial estimate for the two-year
cumulative total is expected tobe reached by the end of FY2023

Investment for
growth andrationalization

Operatingcash flow

・Creation ofoperatingprofitSteadily implementing measurescentered on the reduction ofcross-shareholdings

60.0 billion–
70.0 billion yen

・Inventory
reduction

In FY2022, we resolved to buyback treasury shares using onhand fund.

The balance between shareholder returns and strengthening ourfinancial position has shifted
more heavily toward shareholder
returns than in our initial expectation.

Policies on capital expenditure
・More than 70% of capital expenditure is expenditure in the corebusinesses (Watches and Machine
Tools)

・Watches Business: Investments
for increasing the presence of thebrand and investment for rationalization to increase profitability

・Machine Tools Business: Active investment for increasing production
capacity
・Investment for advancing digitaltransformation

Shareholder
returns

Optimizationof assetsowned

Enhancementof financial
structure

Dividend policy for FY2022–FY2024

・Emphasis on continued payment of
stable dividends: a dividend payout ratioof around 50%
・Acquisition of treasury stock: to be
determined flexibly depending on thesituation

Enhancement of the financial structure
・Repayment of interest-bearing debt, etc.

Note:The size of the area in the image is for illustrative purposes and does not represent the planned amount.

Medium-term Management Plan 2024
Net sales (Billions of yen)

278.5

281.4

7.9

206.6

2.2

(FY)

Operating proﬁt margin (%)

2019

2020

(4.6)

2021

COVID-19 started to impact businesses
in 4Q of FY2019.

301.3

7.9

2022

320.0

8.0

2024

2030

Targets in the Medium-term Management Plan
Aim to raise sales to the pre-COVID level whileat the same time improving profitability.

Major Social Recognition

Financial Strategies

Currently, we are working to improve the efficiency of cash management for cash held byoverseas subsidiaries. By controlling the fundsof overseas subsidiaries at the head office, weare limiting the amount of surplus funds madeavailable to overseas subsidiaries and increasing capital efficiency within the CITIZEN Group,and have achieved results in this way.
We are also continuing to reduce our cross-shareholdings each year and will continue working
to reduce them.

Cash outflow

Dividend per Share and Payout Ratio
Dividend per share (Yen)

45.2
18

(FY)

34

Payout ratio (%)

51.7
40

25.2

2021

2022

2023
Forecast

22

Financial and Non-financial Highlights
2012

2013

2014

(Unit) Millions of yen

272,050

309,994

328,456

Millions of yen

11,54923,70627,889(FY)

Operating Results
Net sales

Gross profit

Millions of yen

Operating profit

Operating profit margin%

Ordinary profit

Status of Cash Flows

Cash flows from operating activities

Millions of yen(8,855)31,403

Millions of yen

18,78932,72429,053

Free cash flow

Millions of yen(5,064)

21,72419,807

95

Millions of yen

354,670

Millions of yen
Millions of yen(9,745)383,920

421,563

217,412

247,972

(4.7)

8.7

7.8

73,961%Equity ratio

181

192,409%

Return on assets (ROA)

(2.6)

%

53.3

78,34869,164

4.7

4.4

55.8

56.6

Capital expenditures

Millions of yen

19,78014,003

18,913R&D expenses

Millions of yen

7,595

7,440

8,169

Depreciation

Millions of yen

Total amount of dividends(Unit)

Percentage of female employees*

Percentage of female employees in management positions*
Number of male employees taking childcare leave*

Number of female employees taking childcare leave*

Percentage of overseas employees%

Recycling rate

Operating Profit (Millions of yen)
Operating Profit Margin (%)
22,273

206,641

7.9

7.9

2022

(FY)

2019

2020

2021

−

212,202

(FY)

−

−

−

−

−

64.5

198,04165.3

217,144

GJ

1,542,146

1,443,806

1,536,904

%

66.4

75.9

59.5

3,060

55.8
2022

−

62.1

60.0

(4.6)

−

−

2,300

2019

2020

58.1

2021

2,607

ROE (%) ROA (%)

238,673 232,775
230,791
212,864

6,136 2.2
(9,551)−Net Assets (Millions of yen)
Equity Ratio (%)

23,7085,183
23,651

People1,000m3

4,211

−

%

14,38622,233−%

Water intake

Total energy consumption

14,282

22,668Peoplet-CO2

301,366
281,4172,591

PeopleCO2 emissions (Scope 1 + 2)

Net Sales (Millions of yen)

15,406

Millions of yen

Number of employees

23

17,572(9,246)

Key Financial Indicators

2021

17,434(11,000)

Return on equity (ROE)

2020

8.5

25,307(23,853)

Interest-bearing liabilities

2019

7.6

13,805

Millions of yen

Total assets(FY)

129,876

Millions of yen

Net assets

278,531

119,376

Cash flows from investing activities

Cash flows from financing activities

Non-financial
Data

4.2

Millions of yen

Profit attributable to owners of parent

Financial
Data

95,451

5.8

(4.3)

57.5

2022

10.2

(7.0)
(FY)

2019

9.6
5.6

(6.8)
(11.8)

2020

2021

2022

Historical Financial-Data
https://www.citizen.co.jp/global/ir/chart1.html

2015

2016

2017

2018

2019

2020

348,267

312,559

320,047

321,652

278,531206,641

30,46721,501

24,92022,411

6,136(9,551)

7,531(4,143)27,34229,096

34,693

16,576

134,759

120,236

8.7

6.9

124,393

123,557

7.8

101,100

7.0

2021

65,8982.2(4.6)

30,61921,985

26,66426,602
13,369(16,667)(25,173)

29,98032,781

32,53919,897

17,347

7,490

13,201

16,573(24,637)(27,861)

5,343

4,920

(12,205)

19,303(7,862)(19,861)(15,498)(7,628)24,677

36

1,849

(138)

(20,626)(11,716)

406,462

395,887

409,909

413,91167,44453,031

49,02751,065

237,469

249,215

5.7

7.1

3.2

4.1

56.0

60.5

22,822

23,621

14,934

12,509

7,500

7,113

(5,888)

263,713

267,547

7.8

5.2

4.8

(7,049)62.2

16,85423,756

13,795

13,947

7,161

6,339

281,417

301,366

106,839

122,180

22,27323,7087.9

7.9

22,14021,836(9,550)(13,526)

25,142

3,049

18,337(19,956)

369,575

365,811

394,962

389,982

55,15774,862

66,155

65,116

230,791

212,864

(7.0)

3.2

61.9

2022

(11.8)

(4.3)

(6.8)

60.0

55.8

21,14010,907

15,438

11,558

6,164

5,576

(40,062)

238,673

232,775

10.2

9.6

5.8

5.6

58.1

57.5

10,77017,428

11,191

11,200

5,542

5,693

5,411

5,410

7,002

6,365

3,751

1,565

5,504

9,315

21,665

21,27920,882

20,23919,593

17,044

16,161

15,402

−

−

−

3.6

3.7

4.4

4.8

5.7

−

−

−

−

−

−

60.5

60.0

196,152

193,318

−

19.0

−

20.4

6

−

18

32

59.7

58.2

186,730

179,508

20.1

20

44

27

56.7

59.5

165,847

136,123

20.3

21.5

25

33

32

35

59.2

147,12257.7

123,103

1,422,152

1,477,626

1,474,879

1,464,616

1,368,041

1,166,060

1,258,866

1,208,976

64.6

66.6

74.3

78.6

77.3

78.3

73.1

88.8

2,731

2,293

2,174

2,225

1,954

1,751

* End of fiscal year data for all six main Group companies(Citizen Watch, Citizen Watch Manufacturing, CITIZEN MACHINERY, CITIZEN FINEDEVICE, CITIZEN ELECTRONICS, and CITIZEN SYSTEMS)

Percentage of Female Employees
in Managerial Positions (%)
5.7

4.4

CO2 Emissions (t-CO�)

Total Energy Consumption (TJ)

165,847

1,368

147,122
136,123
123,103

4.8

1,166

1,860

1,782

Water Intake (�,��� m�)
1,954

1,258 1,208

1,751

1,860

1,782

3.7
(FY)

2019

2020

2021

2022

(FY) 2019

2020

2021

2022

(FY)

2019

2020

2021

2022

(FY)

2019

2020

2021

2022

24

Sustainability Identifying Material Issues
In line with the formulation of our long-term vision, we evaluated the importance of social issues
from the perspective of our company and society, and identified material issues,

which are key issues that the CITIZEN Group should prioritize in the medium to long term.
Step 1 Identify Social Issues

Identify social issues based on the medium- to long-term social trends, the Company’ s direction, ESG external assessments, reviews, etc.

Note: Reference: SDGs; macro trends in environmental, social, and economic
fields; FTSE; MSCI; GRI Standards; ISO 26000; and other considerations.

Step 3

Assess the Appropriateness of the Proposed Materiality

After checking with external experts and a discussion by the
Sustainability Committee, reconsider the materiality plan inlight of the relevant measures for each business.

Step 2 Compete materiality Assessment of the Social Issues

Assess the impact on society and the importance of the materiality to the Company, and make assumptions about the proposed materiality.

Step 4

Identify the Materiality

Materiality is identified by the Management Committee and
Board of Directors after reaffirmation by the Sustainability
Committee.

Evaluate the degree of impact on society and the importance to the Company
and create a list of material issues(Planet)・Biodiversity conservation

・Responding to climate change

・Saving resources(carbon neutrality and EV conversion)・Management of chemical
substances contained in
products

・Reduction of toxic substanceemissions(People)Impact on stakeholders (society)・Respect for human rights
・Expanding the sterilization
market・Efficiency of food production(Profit)・Improved efficiency of logistics
management
・Corruption prevention

Occurrence probability: Low
Financial impact: Small

・Progress of digitalization

・Growing health awareness・Management of personal
information

・Pursuit of spiritual richness

・Aging and medical issues

・Securing and developing humanresources

・Widespread use of wearable
devices・Improved job satisfaction

・Promoting sustainableprocurement

・Diffusion of next-generation
telecommunications
infrastructure

・Streamlining manufacturing
management

・Enhancing quality compliance・Labor shortage/Skills transfer
・CASE progress

Occurrence probability: Middle
Financial impact: Middle

Occurrence probability: High
Financial impact: Large

Impact on the CITIZEN Group (business)

Identified material issues

Responding to climatechange and contributing to a
recycling-oriented society

25

Contributing to a highquality of life

Providing solutions in theindustrial sector

Enhancing job satisfaction
and developing humanresources

Fulfilling our social
responsibility

Main Risks, Opportunities, and Key Measures

Opportunity

Responding to climatechange and contributing to a
recycling-oriented society

・Expanding demand for products and services that
contribute to energy and resource conservationand productivity improvement
・Progress of CASE
Risk

・Wind and flood damage at business sites
・Increased energy costs
・Dependence on specific industries and customers
・Violation of laws and regulations concerning thechemical substances contained in products

Opportunity

・Shift from mechanical to passionate value
・Shift from treatment to preventive care

Contributing to a highquality of life

Risk

・Smartwatch proliferation
・Increased competition in the healthcare market
・Regulatory changes for medical devices
・Leakage of personal information

Opportunity

Providing solutions in theindustrial sector

・Factory automation / labor saving / automation /digitalization
・Expanding demand for products/services that
contribute to manufacturing management
efficiency
・Advancement of CASE
・Diffusion of next-generation telecommunications
infrastructure
Risk

・Loss of business opportunities
・Decline in competitiveness・Entry of competitors from other industries
using digital technology as a weapon

Opportunity

・Increase employee engagement
・Driving DX / innovation

Enhancing job satisfaction anddeveloping human resources

Risk

・Outflow of human resources
・Deterioration of business performance

Responding to climate change[Business activities]

・Supply parts for eco-cars (EVs and HVs), sale of LEDs for lighting, etc.
[Business foundation]

・Reduction of CO2 emissions, expansion of introduction of renewable energy,
etc.
Contribution to a recycling-oriented society[Business activities]

・Sales of photovoltaic and mechanical watches that can be used for a longtime
・Expansion of products using LFV and friction bonding technology, etc.
[Business foundation]

・Reduction of water consumption, promotion of recycling, management of
hazardous chemicals, reduction of packaging materials, etc.

Contribution to diverse lifestyles[Business activities]

・Customized watches and services
・Personalized experience, loT platforms, etc.
[Business activities]

・Providing LCD devices for digital cameras, head-mounted displays, etc.
Contribution to medical and healthcare[Business activities]

・Sales of UVC modules with a high bactericidal effect, specimen-holding plates
for bacterial analysis, etc.
・Providing thermometers and blood pressure monitors that are easy foranyone to use
・Providing digital health care services, "health appointments," etc.

Provide labor-saving and automation solutions[Business activities]

・Use and provision of "Machines, digital technology, and technology to use,"
etc.
[Column]・"Alkapplysolution" supports the digital transformation of the manufacturingindustry
Contribution to next-generation communication technology[Business activities]

・Providing time reference information to institutions requiring accurate time
information, etc.
・Development and sales of sensing devices (e.g., teleoperated robots)
Contribution to mobility[Business activities]

・Development and sales of lasers for EV vehicle signal lights, etc.
・Supply of components for advanced braking systems, communication
systems, sensors, etc.

Improvement of job satisfaction[Business foundation]

・Implementing measures to improve employee engagement, provide training
opportunities, etc.
Human resource development[Business foundation]

・Developing human resources to promote change within the Group,
strengthening group collaboration in the development of managementhuman resources, etc.
Diversity and inclusion[Business foundation]

・Systematic training and promotion of female management candidates,
encouraging male employees to take childcare leave, etc.

Opportunity

Fulfilling our social
responsibility

・Realization of the sustainable factory concept
・Compliance with major customers' terms andconditions
Risk

・Damage to corporate value
・Reputation
・Weakening of the management baseStrengthen risk management[Business foundation]

・Update and operation of the Groups material risks, etc.
Quality compliance[Business foundation]

・Activities to disseminate the Quality Code of Conduct, etc.
Respect for human rights and labor practices[Business foundation]

・Implementation of human rights due diligence, etc.
Promoting sustainable procurement[Business foundation]

・CSR procurement, green procurement, responsible mineral procurement,
etc.

26

Sustainability Sustainable Management

Sustainability
https://www.citizen.co.jp/global/sustainability/index.html

At the CITIZEN Group, we aim to remain needed and loved by people all over the world. For this purpose, our creation of products and services in response to changes in society, our consideration of procurement and production processes for the creation of those products and services, and thecorporate attitude that supports our foundation must be accepted by society. Instead of just providing good products and services, we strive to earn
the trust of stakeholders as we expand our businesses and improve our corporate value, by managing the Group in consideration of human rights,
the global environment, and other social issues. This is what we believe to be sustainable management at the CITIZEN Group.

Sustainable Factory

At the CITIZEN Group, we operate our business under the concept of the Sustainable Factory, which we consider the processes for manufacturing
products and providing services. Sustainable Factory refers to sustainable production facilities and business facilities (and business processes) thatreflect comprehensive consideration for matters such as compliance, human rights, labor practices, BCP*, and productivity improvement, as well as
environmental considerations. We have been confirming the progress of this concept by distributing to our Group bases in Japan the same SAQ(Self-Assessment Questionnaire) that we ask our business partners to answer, and in FY2022, we will be distributing the SAQ and seeking responses
from all of our bases, including overseas offices. We will work to spread understanding through these initiatives, with the goal of achieving the Sustainable Factory concept across the entire CITIZEN Group by 2030.

Structure for Promoting Sustainable Management

In April 2020, we established the Sustainability Committee, which is chaired by the president of Citizen Watch. Its members are full-time directors of
Citizen Watch and the presidents of the operating companies. With this committee playing a leading role, each company examines sustainability-related issues and regularly monitors the progress of sustainability activities, etc.

Sustainability Promotion Structure

CITIZEN-SIRT

Board of Directors

Management Committee
Sustainability Committee
Group Quality Compliance
Committee

Group Information GovernanceCommittee

Group Human Resources Committee

Group Legal Compliance Committee

Group Environment Committee

Group Business Continuity
Management Committee

Group Sustainable Procurement
Committee

Sustainability Committee Administrative Oﬃce

Corporate Planning Department, Environment Division,and CSR Division of Citizen Watch Co., Ltd.

Administrative Oﬃce Committee

Corporate Planning Department, Environment Division,and CSR Division of Group companies
Watches

MachineTools

Devices andComponents

Electronic
and Other
Products

Organizational structures for promoting
sustainability at each operating company*BCP (Business Continuity Plan): A business continuity plan is formulated during normal times to prepare for the possible impact of large disasters and similar events on business activities. These plans include systems, functions, response procedures, and other elements necessary for continuing to supply products and services or for enabling the fast resumption ofoperations.
27

Sustainability

Sustainable Management and Environment

CITIZEN Group Environmental Goals 2030

Response to Climate Change

Climate Change Risks and Opportunities

At the CITIZEN Group, we promote global environmental management for the realization of asustainable civil society by following the CITIZEN Group Environmental Policy, which is thecore of our environmental measures. In 2020,
we established the CITIZEN Group Environmental Vision 2050, expressing our commitment to decarbonization, the reduction of CO2
emissions to substantially zero and the sustainable use of resources. To achieve the CITIZEN Group Environmental Goals 2030, which
are five goals aimed at helping to achieve theSDGs, we are pushing forward with initiatives
to establish a decarbonized, resource-recycling, safe, secure, and spiritually wealthy society.

As a measure to mitigate climate change,
which is one of the most serious global environmental risks, the CITIZEN Group is working
to reduce the GHG emissions through the introduction of energy-saving activities and electricity derived from sustainable energy sourcesin factories and offices.
To express our commitment to mitigating climate change, we participate in the Japan Climate Initiative, and in FY2020, we announced
our support for the TCFD recommendations. In
FY2022, we revised the Group’ s CO2 emissions
targets (Scope 1, 2, and 3), obtaining SBT certification for the revised targets. In addition, adaptation measures in the event of large-scaledisasters caused by climate change are defined in the Disaster BCP (Business ContinuityPlan).

Based on our awareness of the major effects ofrisks and opportunities on our business strategy, the CITIZEN Group has identified climatechange — related risks and opportunities, andthe Sustainability Committee has analyzed theserisks and opportunities using the 1.5°C scenario
and the 4°C scenarios and evaluated their significance.

CITIZEN Group Environmental Goals 2030 (revised in February 2022)
Metrics

Targets

Greenhouse gas emissions(Scope 1 & 2)

30% reduction→50.4% reduction(from the FY2018 level)

Greenhouse gas emissions (Scope 3)

15% reduction (from the FY2018 level)

Percentage of renewable energy(Japan)30%→62%

Results of Scenario Analysis
Category
Policies and legal restrictions

Transition
Technologies and markets
risks
Reputation

Physicalrisks

Acute risks

Chronic risks

Energy and resource
efficiency

Opportunities

Products, services, and markets

Resilience

Material issues(risk/opportunity)

1.5℃

4℃

Machine Tools
Citizen Machinery’s Karuizawa Headquarters factory

Impact on CITIZEN

Large

Small

Cost increase resulting from the introduction or tightening of laws or regulations (carbon pricing
schemes)

MediumSmall

Decline in evaluation and reputation resulting from a delay in actions to address climate change,
and the resulting decline in our stock price and sales

MediumLarge

Increase in operating expenses due to the impact of, and measures against, abnormal weather

Small

Cost reduction resulting from energy conservation

MediumSmall

MediumSmall

Differentiation and greater competitiveness achieved by developing products using alternative
materials; Realizing decarbonization of the entire life cycle of products using alternative substances and weight reduction

Small

Small

Small
Large

Large

Large

Large

Medium Medium

Medium Medium
MediumLarge

Until 2024

Rising cost of raw materials, etc., and shortage or suspension of their supply●

Increasing seriousness and frequency of damage from natural disasters

Disruptions to production activities due to supply chain disruptions

Cost reduction resulting from resource conservation, 3R activities, zero waste emissions andconservation of water resources

Increase in earnings resulting from an increase in demand for environmentally friendly products
and services

Higher customer trust resulting from implementation of countermeasures against natural disasters
Minimization of physical risks and damages enabled by taking measures in a well-planned manner●

Time span

2025–2030

From 2031

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

28

Sustainability Sustainable Management and Employees
Our Mindset on Human Capital

Human Resource Development Road Map

The CITIZEN Group regards its employees ashuman capital, setting forth a vision for theGroup’ s human resources as having each employee feel a sense of pride working at CITIZEN
as they contribute to the realization of ourlong-term vision. Each Group company is taking the initiative in developing human resources capable of driving the growth of each company in line with the policies and businessenvironment of each operating company.
In addition to securing and developing humanresources, the Group is focused on creating awork environment in which diverse human resources can play an active role, aiming toachieve a rich future for every employee.

The CITIZEN Group aims to achieve both personal and social growth for employees bytraining human resources required for Groupwide and company-specific management andtransformation based on our management
strategy. In addition to training, we strengthened Group cooperation in training in FY 2022
and started to offer Management Fundamentals Training and Group Transformation Promotion Training.
Part of the Group Transformation Promotion
Training will be held jointly with Citizen Watch’s
Reskilling Training for managers.

Human Resource Development Road Map
Yearlybreakdown

Goals

KPI

Measures

FY2022 results

FY2023・Establish a Group-wide system to train human resources required for Group-wide and company-specific growth
and transformation
・100+ participants in Group Transformation Promotion Training(33% of Citizen Watch managers
participating in Reskilling Training)
・30+ participants in Management
Fundamentals Training

・200+ participants in Group Transformation Promotion Training(70% of Citizen Watch managers
participating in Reskilling Training)
・30+ participants in Management
Fundamentals Training

・Group Transformation Promotion Training
・Management Fundamentals Training

CITIZEN Forest was created under the concept of being able to work both indoors and outdoors.
At Tokyo Works, we planted 215 trees and created a space that is richly endowed with nature, attracting local birds and insects. This space won a 2021 Good Design Award.

29

FY2024・200+ participants in Group Transformation Promotion Training(100% of Citizen Watch managers
participating in Reskilling Training)
・30+ participants in Management
Fundamentals Training

FY2030 goal
Train the human resources required
for Group-wide and company-specific growth and transformation andrealize both personal and social
growth based on our management
strategy
1,000+ participants in Group Transformation Promotion Training andManagement Human Resource Development Training in total
・Group Transformation Promotion
Training
・Management Fundamentals Training

・Implementation of Group succession plans

Sustainability Sustainable Management and Customers
Customer Support

Handling numerous products for general customers, Citizen Watch aims to improve customer satisfaction by establishing a hotline for inquiries that will respond sincerely and quickly
to customer inquiries, consultations, and complaints. We will report customers’ valuable information and issues to managers in a timely
fashion and share this information with eachbusiness unit, leading to product and service
improvements. In the event of a serious caserequiring urgent product repairs or replacements, a notification will be posted on our
website. We received 54,305 inquiries in
FY2022.

CITIZEN FLAGSHIP STORE TOKYO

Quality Compliance

CITIZEN Group, under the leadership of theGroup Quality Compliance Committee established in FY2018, has been conducting activities to disseminate the CITIZEN Group Quality
Code of Conduct, which was formulated basedon Article 2 of the CITIZEN Group Code of Conduct and in consideration of the situation ofeach business, to ensure a common recognition of quality compliance, including overseas
bases.
This committee comprises executives in chargeof quality at each company and is working to
spread compliance with quality-related issues.
The committee is also promoting activities to
respond to the requests of stakeholders in eachbusiness field, while taking into consideration

Implementing Employee Training

To raise awareness of quality complianceamong all CITIZEN Group employees, CITIZEN
Group Quality Compliance Training is offeredunder the supervision of the Group Quality
Compliance Committee in an e-learning format
through distributing video as part of the training for new employees and newly appointed
directors. This is done to raise awareness ofquality compliance throughout the Group. In
FY2022, 6,176 people participated in Quality
Compliance Training.

the improvement of the effectiveness of theinternal reporting system and ESG/SDGs
perspectives.
In FY2022, the committee was also joined by agroup of managers from the quality assurance
departments of each Group company asobservers, and through multiple discussions
that include opinions both from the Group's
perspective and from the perspectives ofexecuting operations for each business, thecommittee is working to create an organizationthat does not cause quality scandals. This isdone through initiatives on quality compliance,
which is the source of quality management.

Organizational Chart

Sustainability Committee

Group Sustainable Procurement Committee
Group Environment Committee
Group Human Resources Committee
Group Quality Compliance Committee

Chair Citizen Watch directors responsible
Secretariat Citizen Watch CSR Department
Quality Control Sections

Watches

Devices andComponents

Machine Tools

Electronic andOther Products

Details of Quality Compliance Training
1. Looking back at past cases of improper quality among Group companies
2.Advice and measures from an independent committee

3.Confirming the CITIZEN Group Quality Code of Conduct (its importance and position)

4.Organizing the relationship between quality compliance and ISO9001, and its requirements

5.Improper quality — other cases/commonality among cases of improper quality (data falsification, managing changes in the 4Ms)

6.Mechanisms for cases of improper quality

7.Reconfirming causes based on the KDS framework
8.Sustainability and quality compliance30

Sustainability Sustainable Management and Business Partners
CSR Procurement

CITIZEN Group CSR Procurement Guidelines

To promote ESG initiatives in the entire supply
chain, the CITIZEN Group has established the
CITIZEN Group Basic Procurement Policy and is
promoting CSR procurement. We request ourbusiness partners all over the world and within
Japan to comply with, and raise their awareness of, the CITIZEN Group CSR Procurement
Guidelines. These Guidelines summarize therequirements, including respect for humanrights, environmental protection, labor safety
and health, and fair trade, based on the UN
Global Compact and the CITIZEN Group Codeof Conduct.

We revised what would become the second
edition of our CITIZEN Group CSR Procurement
Guidelines in April 2020. Our stance in response to recent changes in the social environment and economic conditions, international
standards such as the UN Global Compact, andrequests from stakeholders is indicated withinthese guidelines. We also seek support fromour business partners, aiming to sufficiently
spread the guidelines by connecting them withthe content of the Self-Assessment Questionnaires (SAQs) that we seek responses for. These
guidelines widely cover elements aimed atsolving social problems, including areas related to human rights and labor practices, so that
we can contribute to the achievement of SDGs.

31

Initiatives for Responsible Procurement ofMinerals

At the CITIZEN Group, we are aware that conflict minerals involving risks of funding armed
groups and violating human rights are material
procurement risks. In addition to the application of the EU Conflict Minerals Regulation in
2021, we recognized the expansion of thescope of target minerals, areas, and risks andupdated the CITIZEN Group Conflict Minerals
Response Policy into the CITIZEN Group Responsible Minerals Procurement Policy in January of the same year. In revising the policy, weclarified measures to take when we have confirmed the expansion of target minerals and areas as procurement sources or have identified
a risk, among other matters. We strive to eliminate conflict minerals as a supplier. For example, together with suppliers from whom weprocure target minerals, we at the CITIZEN
Group observe the Responsible Business Alliance (RBA) Code of Conduct at the request ofcustomers to whom we deliver parts or otherproducts.

At the CITIZEN Group, we commend residents of Japan, Japanese or non-Japanese, who have made amark on civil society, who have contributed to the development and happiness of civil society, or who
have helped make civil society attractive, as CITIZEN OF THE YEAR every year.

FY2 0 2 2 Reci p i en ts
Interactions and Support for Children
who Stutter and Their Families

A Presence for Cancer Patients andTheir Families

Support for People Seeking
Consultations Without Family Registers

Stuttering Parent-Child Cafe

Maggie’s Tokyo (NPO)Mayumi Ichikawa

Stuttering is still generally not properly understood. It is often seen with prejudice andmisunderstanding, and there are many cases
where people suffering from stuttering become hurt or anxious and cannot talk inpublic. The Stuttering Parent-Child Cafe has
been working to increase understanding ofstuttering by operating get-togethers andlecture sessions where children who stutter
and their parents can share their thoughts,
as well as through creating leaflets tailoredto children’s growth.

Maggie’s Centres are like second homes topeople who have experienced cancer, theirfamilies, friends, and anyone who has felt
the effects of cancer, and they can be visited anytime for free. Those affected by cancer can gradually regain their strength bytalking about their anxieties and worries
with experienced nurses and psychologists
in a garden where you can get a sense forthe four seasons or in a warm, relaxing environment.

“If there is someone in need in front of me, I
can’t just leave them alone or ignore them. I
help them because that is who I am.”Mayumi Ichikawa continues to help people live
together with society as a companion topeople who have lost their family registers
for a variety of reasons. She does so by offering support with procedures to acquirefamily registers and more. In between her
own work, she travels around Japan to help
people seeking consultations with acquiring
their family registers and related matters.

Awareness building activities by creating leaflets tailored to children’ s growth, as well as creating uniquesupport manuals

Maggie’s Tokyo was established in October 2016 as theJapanese equivalent of the Maggie’s Cancer Care Centres in England

It usually takes more than a year to acquire a family register,and she has helped 6 people get family registers, 1 person
get nationality, and 13 people get residence certificates
CITIZEN OF THE YEAR
（Japanese）
https://www.citizen.co.jp/coy/index.html
32

Governance Corporate Governance

Loved by citizens, working for citizens—This is the sentiment from which Citizen Watch Co., Ltd. “the(Company”), de-

rives its name and which it has made its Corporate Philosophy. The Company works to contribute to society and in-crease 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 ensure transparency in management and multifaceted management oversight. Accordingly, the Company is striving to expand and enhance its corporate governance.

CITIZEN has implemented all the principles set forth in the Corporate Governance Code revised in June 2021.

https://www.citizen.co.jp/cms/cwc/global/files/CGR2023E.pdf

Corporate Governance System

CITIZEN has established the following corporate governance system with the aim of ensuring appropriate and efficient execution of duties, transparency of management, and monitoring of management from various perspectives.

Audit & Supervisory Board and Audit &Supervisory Board Members

Nomination Committee

Board of Directors
CITIZEN’s Board of Directors comprises five Directors who supervise the corporate group andperform executive duties with regard to major
businesses, and three Outside Directors who
check and supervise management from an independent standpoint, using their abundant
experience and broad-ranging insights as business managers. The Board of Directors makes
decisions on and supervises the execution ofbusiness.

Chairperson: Outside Director

Audit & Supervisory Board Members conduct
strict audits of the execution of duties by Directors in accordance with the audit policy andaudit plan established by the Audit & Supervisory Board, by attending meetings of the Boardof Directors, the Management Committee, andindividual meetings by business category,making reports on the state of execution of duties by Directors, etc., viewing important approval documents, and investigating the statusof operations and assets. They also receive reports on accounting audits from Nihombashi
Corporation, cooperate with the accounting
auditor to carry out efficient audits of the Company and its subsidiaries, and work to further
enhance corporate governance.

The main duties of the Nomination Committee
include deliberating on matters regarding theselection and/or dismissal of Representative
Directors, the President and CEO, and/or the
Chairperson of the Board of Directors, and offering its proposals to the Board of Directors.

Compensation Committee
Chairperson: Outside Director

The main duties of the Compensation Committee include deliberating on matters relating topolicies and standards for compensation, etc.,
received by Directors and making recommendations to the Board of Directors.

Corporate Governance System Schematic Diagram
LegendInside Directors; Full-time Audit& Supervisory Board Members

Outside Directors; Outside Audit& Supervisory Board Members

General Meeting of Shareholders
Selection/Dismissal

Selection/
Dismissal

Nomination Committee

4 (including 3 Outside Directors)
Proposal/Reporting

Audit & Supervisory Board

Auditing

3 (including two Outside Audit & Supervisory Board Members (one female))

Key Pointsof the Corporate Governance System① One-third of the Directors are independent
Outside Directors② An Outside Director is appointed as the chairperson of the Nomination and Compensationcommittees③ Two-thirds of the Audit & Supervisory Board
Members are independent Outside Audit &Supervisory Board Members

33

Cooperation

Compensation Committee
4 (including 3 Outside Directors)
Proposal/ReportingBoard of Directors

8 (including 3 Outside Audit &Supervisory Board Members (1 female))

ReportingInternal Audit Department
Internal Audit

Selection/Dismissal

Appointment/
Removal/Supervision

Representative Director

Direction/Supervision

Divisions and Operating Companies

Accounting Audit

Reporting

Independent
Auditors

Management
Committee
Cooperation

Officer Compensation

Compensation for Directors of the Company (excluding Outside Directors) consists of fixed compensation and performance-linked compensation.
Our policy for setting the payout ratio of these two types of compensation is based on a level that will increase motivation to produce good businessperformance and enable the Company to attract and retain talent and that will be effective in increasing motivation to contribute to improving business performance and enhancing corporate value in the medium to long term, considering factors such as changes in the business environment, external data, general compensation levels, and the business situation.
Compensation of Outside Directors and Audit & Supervisory Board Members consists only of fixed compensation.

Composition of Compensation for Directors
Fixed compensation

Performance-linked compensation

The Company sets the amount of fixed compensation at a level that will motivate Directors to fully demonstrate their qualities and abilities and to strive
for sustainable growth based on the Company’s corporate philosophy andthat will enable it to attract and retain talent, while considering changes inthe business environment, external data, general compensation levels, andthe business situation.

The ratio of performance-linked remuneration exceeds 50% when the resultsof performance evaluations are at a maximum, and performance-linked
share-based compensation accounts for approximately 15% of that. In somecases, performance-linked compensation might not be paid, as a result of
performance evaluations, etc.
① Bonuses
The Company determines bonus amounts based on financial evaluation
criteria (e.g., net sales, operating profit) and non-financial evaluation criteria (e.g., global situation, disasters, M&A) stipulated in the Directors’ bonus
payment standards.

② Performance-linked share-based compensation
Shares of the Company are acquired through a trust funded by amountsof Directors’ compensation contributed by the Company according toposition, and shares of the Company or cash in the amount equivalent tothe conversion value of the shares are delivered or paid (“delivered, etc.”)
according to the level of achievement of business targets.

Total Amount of Compensation, etc., Officer Category, Total Amount by Type of Compensation, etc.,
and Number of Eligible Officers (138th fiscal period)
Officer classification

Fixed compensation

Bonuses

Performance linked sharebased compensation

18

18

ー

ー

Directors (excluding Outside Directors)

281

Outside Officers

55

Audit & Supervisory Board Members (excluding
Outside Audit & Supervisory Board Members)

Total amount by type of compensation (Millions of yen)

Total amountof compensation, etc.
(Millions of yen)

139
55

99
ー

Number of eligible officers(persons)

43

6

ー

6

2

The performance-linked share-based compensation of 43 million yen for Directors (excluding outside directors and non-residents in Japan) is the amount of expenses posted for the current fiscal year. The difference of 16 million yen from the amount of expenses posted in the 137th fiscal year business report—for share benefit obligations calculated based on the numberof shares delivered to the six Directors (excluding outside directors and non-residents in Japan) as performance-linked share-based compensation for the three fiscal years corresponding
to the Medium-term Management Plan ending in the 137th fiscal year—was posted as expenses for the current fiscal year.

Evaluation of Effectiveness

CITIZEN aims to continuously improve its governance system and function effectively through analysis and evaluation of the effectiveness of its Boardof Directors.

FY2022 Initiatives

・Held a seminar on compliance
as training for Directors andAudit & Supervisory Board
Members.

・We continued to utilize IT, suchas digitalizing materials distributed in advance of meetings,
utilizing web conferencing formeetings of the Board of Directors, and web-based evaluationof the effectiveness of theBoard of Directors.

Surveys Conducted

Evaluation of Effectiveness

Challenges for FY2022

From February to March 2023
We conducted a questionnaire
survey of the Board of Directors
for all Directors and Audit & Supervisory Board Members throughan external organization using
tools to evaluate effectiveness.

 irectors and Audit & Supervisory
D
Board Members generally gavehigh grades, and it was confirmed that the Board of Directors functioned effectively.

We will continue working to increase corporate value by improving upon the issues raised inthis effectiveness evaluation, revitalizing deliberations, and increasing effectiveness.

34

Skills Matrix
The Company has specified the knowledge, experience, and skills needed to fulfill the roles and duties of the Board of Directors effectively for achieving business strategies and discloses the skills matrix as an indicator of the overall balance of knowledge, experience and skills, and diversity of its Board of Directors asa whole.

The expected roles that each Director will take on are as follows.
Corporate Management/Management
Strategy

Sales/Marketing/DX

Toshihiko Sato●

Toshiyuki Furukawa●●

Yoshitaka Oji●●

Keiichi Nakajima●

Yoshiaki Miyamoto●

R&D/Technology

Global Business

HR Development/
Diversity

Finance/Accounting

ESG/Sustainability

●
●
●
●

Toshiko Kuboki

●

●

●

Yoshio Osawa●●

Katsuhiko Yoshida

●

●

●

●

●

●

●
●

Note: Up to three items are listed as the role expectations for each Director.

Group Risk Management

The Group is actively engaged in initiatives thatlead to the enhancement of Group governanceto centrally manage and respond promptly torisks throughout the Group. The Sustainability
Committee — established in FY2020 — is chairedby the President and CEO of the Company andhas established subcommittees according tomajor risk themes, including ESG risks such as
human rights and labor practices, environmental issues, and procurement and supply
chain risks. The committee enables top-level
management to ascertain and respond to ma-

Cross-Shareholding

The Company will hold shares when it isjudged, comprehensively, to contribute to themaintenance and enhancement of the Group’s
medium- to long-term business relationships,
the smooth operation of the Company’ s business operations, and business development.
Regarding verification of individual cross-shareholdings, the Board of Directors follows a basic
policy of verifying the rationality and necessityof such cross-shareholdings every year consid-

35

terial risks.
In addition to financial risks, by placing committees and organizations for risks directly related to compliance, BCP (Business Continuity
Planning), intellectual property, information,and cybersecurity-related management infrastructure under the direct control of the Management Committee, we share information on
important risks common to the Group andrisks specific to each company throughout theGroup. In addition to sharing risk management
know-how among Group companies, this en-ables us to achieve consistent risk management throughout the Group.
The Group will continue to make continuous
improvements to enhance risk management
throughout the Group.

ering factors such as the relationships between
business partners and the Group and the possibility of mutual enhancement of corporate
value and strives to reduce holdings of sharesfor which the significance of continuous retention has been diluted.

Number of Cross-Shareholdings
38

(FY)

2017

37

2018

34

2019

31

2020

29

28

2021

2022

Message Message from Outside Director
Responding to changes with innovative advanced technologies
and continuing to create markets
Citizen Watch Co., Ltd.
Outside Director

Katsuhiko Yoshida

Q. What is your impression of the CITIZEN Group?

CITIZEN is a longstanding company that has been in business formore than 100 years. The history of CITIZEN is a history of taking on
new challenges, applying the advanced technological capabilities cultivated in the watches business to new business areas such as machine tools, devices, and printers. It is also a history of responding tomany changes and creating markets with innovative, advanced technological capabilities.
I have confirmed the Company’s technical capabilities—which are oneof its key strengths — from the perspective of whether employees on
the front line can talk about technologies that they can be proud of. I
found that CITIZEN’ s technologies are highly competitive beyond
imagination, to the extent that I even get the impression that there is
an imbalance between CITIZEN’s true capabilities and its reputation in
the world. I think it is also important to appropriately convey CITIZEN’s technological capabilities to the outside world.
Q. What do you think about the role required of you as an Outside
Director?

I have been involved in business operations and marketing for a longtime. How can we increase the value of our existence as new products
and services continue to emerge, one after another? And how can we
continue to secure profits while exceeding the level (of quality andperformance) demanded by customers? These are the kind of questions I ask. We have also rigorously measured the effectiveness of theCompany’ s investments. I would like to express new opinions thatmake use of these experiences and expertise. I think that by evolving
to incorporate even more diverse opinions in addition to CITIZEN’ s
existing traditions, we will be able to create new corporate value andachieve continuous growth to respond to changes in society.
Q. What are your expectations for CITIZEN in the future?

The waves of change are growing in the current business environment, and the extent of their impact is spreading. Delays in responding to these changes could lead to significant damage to the Company. I think that we must be prepared to abandon past successful
experiences and excessive persistence and respond to changes bytaking on new challenges with an agile approach. To respond to thesechanges, we must increase our level of diversity. By creating an environment that is accepting of diversity and incorporating new perspectives that disregard existing barriers such as age, gender, and nationality, I expect CITIZEN’s growth potential to increase further.

36

Management Team
Directors

President and CEO

Managing Director
In charge of Corporate
Planning Division, Accounting
Department, Public & Investor
Relations Department, and IT
Management Department

Managing Director
Senior General Manager ofWatch Business Division

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. He assumed his current role in 2019.

As General Manager of the Corporate Planning Division, Toshiyuki
Furukawa has a record of achievements in formulating Group management strategy, and as Director has experience leading the Corporate
Planning Division, the Accounting Department, and the Public & Investor Relations Department. He assumed his current post in 2022.

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.
He assumed his current post in 2022.

ToshihikoSato

Director

KeiichiNakajima

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

Independent

Outside Director

ToshikoKuboki

Career Summary
1987
2002
2009
2012
2013
2015
2015
2016
2019
2021
2023

Registered as an attorney-at-law
Conciliation commissioner of Tokyo Family Court (present)
Retirement Benefit Examination Committee member ofBoard of Audit of Japan (present)
Visiting Professor of Graduate School of Law, Chuo University (present)
Municipal Board of Education member of Chuo-ku,
TokyoOutside Director of Qol Co., Ltd. (Currently Qol Holdings
Co., Ltd.) (present)
Outside Auditor of Kyodo News (present)
Outside Audit & Supervisory Board Member of theCompany
Outside Director of the Company (present)
Chuo-ku Specially Appointed Civil Servant Remuneration, etc. Council Member (present)
Vice President of Tokyo Medical and Dental University(present)

Auditors

Toshiyuki
Furukawa

Director
Group Risk Management, General
Manager of General Affairs Divisionand in charge of Personnel
Division, CSR Department, andEnvironmental Management
Department

YoshiakiMiyamoto

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

Independent

Outside Director

Career Summary

Career Summary

2003
2005
2007
2008
2008
2011
2013
2015
2016
2017
2018
2019

Corporate Officer and General Manager of Network
Division of Sumitomo Corporation
Executive Officer and General Manager of Network Division of Sumitomo Corporation
Executive Officer and General Manager of Media Division of Sumitomo Corporation
Managing Executive Officer and General Manager ofMedia, Network & Lifestyle Retail Business Unit of Sumitomo Corporation
Representative Director and Managing Executive Officer
of Sumitomo Corporation
Representative Director and Senior Managing Executive
Officer of Sumitomo Corporation
Representative Director, President and Chief Operating
Officer of SCSK Corporation
Representative Director and President of SCSK Corporation
Director and Chairman of the Board of SCSK Corporation
Director of SCSK Corporation
Outside Director of Canon Marketing Japan Inc. (present)
Outside Director of the Company (present)

Audit & Supervisory Board
Member (Full-time) Outside
Audit & Supervisory Board
MemberAudit & Supervisory Board
Member (Full-time)

Career Summary

Career Summary

2007

2011

1981
2005
2008
2009
2011
2016
2016
2018

37

Joined Dai-Ichi Kangyo Bank, Limited.
General Manager of Asia Corporate Banking of Mizuho
Corporate Bank, Ltd. (Currently Mizuho Bank, Ltd.)
General Manager of Overseas Business Promotion Division of Mizuho Corporate Bank, Ltd.
General Manager of Corporate Banking Division No. 18
of Mizuho Corporate Bank, Ltd.
Executive Officer of Mizuho Corporate Bank, Ltd.
Managing Executive Officer of Century Tokyo Leasing
CorporationCounselor of Century Tokyo Leasing Corporation
Chairman of Fujitsu Leasing Co., Ltd.
Full-time Audit & Supervisory Board Member (Outside)of the Company (present)

Independent

Outside Director

YoshioOsawa

Independent

NoboruAkatsuka

YoshitakaOji

Kazunori
Yanagi

1986
2007
2012
2014
2014
2017
2019
2022

Joined the Company
General Manager of Accounting Department, Administration Division of Citizen Watch Co., Ltd.
General Manager of Accounting Department of Citizen
Watch Co., Ltd.
Executive Officer of Citizen Jewelry Co., Ltd.
Director of ROYAL TIME CITI CO., LTD.
Representative Director and President of ROYAL TIMECITI CO., LTD.
Director of ROYAL TIME CITI CO., LTD.
Director of Citizen Watch Manufacturing Co., Ltd.
Full-time Audit & Supervisory Board Member (Outside)of the Company (present)

Independent

Katsuhiko
Yoshida

2007
2012
2014
2015
2019
2022
2022

Executive Officer of Kao Corporation
Managing Executive Officer of Kao Corporation
Representative Director, Managing Executive Officer of
Kao Corporation
Representative Director, Senior Managing Executive
Officer of Kao Corporation
President of Japan Childcare Support Association(present)
Outside Director of Kawasaki Heavy Industries, Ltd.
(present)
Outside Director of the Company (present)

Independent

Outside Audit & Supervisory
Board Member

Yaeko
IshidaCareer Summary
2000
2007
2016
2019
2021

Registered as an attorney-at-law
Judicial Commissioner of Tokyo Summary Court
Conciliation Commissioner of Tachikawa Branch ofTokyo Family Court (present)
Outside Audit & Supervisory Board Member of theCompany (present)
Outside Director of Inageya Co., Ltd. (present)

Note: Ms. Yaeko Ishida, an Outside Audit & Supervisory
Board Member, uses the name Yaeko Kitadai in her profession as an attorney-at-law.

Independent officer pursuant to Rule 436-2 of the Securities Listing Regulations of Tokyo Stock Exchange, Inc.

Corporate Information

Editorial Policy

Company Overview (as of March 31, 2023)

Stock Information (as of March 31, 2023)

Established May 28, 1930

Stock exchange listing

Corporate name Citizen Watch Co., Ltd.

Headquarters 6-1-12, Tanashi-cho, Nishi-Tokyo-shi,

Tokyo 188-8511, Japan

Representative Toshihiko Sato, President and CEO

7762

Number of shareholders

69,829

Employees 15,402 (consolidated)

Manufacturing and sale of watches and their comBusinessdescription ponents, and as a holding company, planning andimplementation of Group management strategies,
Group business auditing, development of Grouptechnologies, intellectual property management,
and other administrative operations.

●Machine Tools

Forward-Looking Statements

294,000,000

The forward-looking statements in this report are based on information currently available and involve various risks and uncertainties.
Readers should understand that actual results might differ from forecasts due to changes in the market environment and other factors.

Note: At a meeting of the Board of Directors held on June 21, 2023,
the Board resolved to cancel treasury shares. The total number ofissued shares of the Company after cancellation (as of June 30, 2023)
will be 246,000,000 shares.

Principal Places of Business and Group Companies●Watches

Tokyo Stock Exchange
Prime Market

Total number ofshares issued¥32,648 million

CapitalSecurities code

The CITIZEN REPORT aims to summarize andcommunicate the profile and activities of the
CITIZEN Group in an easily understandable format
with consideration for the environment. For more
information, please visit our official website.

●Devices and Components●Electronic and Other Products

DOMESTIC GROUP
3

31
42

61

17
24
27 21 2955 53 37
45

19

40

43 47

Domestic Group

2 Tokorozawa Works

4 CITIZEN FINEDEVICE CO., LTD.

44 46

3 CITIZEN MACHINERY CO., LTD.

10 TOKYO BIJUTSU CO., LTD.

5 CITIZEN ELECTRONICS CO., LTD.

12 CITIZEN CHIBA PRECISION CO., LTD.

8 CITIZEN RETAIL PLANNING CO., LTD.
9 CITIZEN T.I.C. CO., LTD.

11 CITIZEN MICRO CO., LTD.
13 FUJIMI CORPORATION

14 CITIZEN ELECTRONICS TIMEL CO., LTD.
15 CITIZEN CUSTOMER SERVICE CO., LTD.
16 CITIZEN LOGISTICS SERVICE CO., LTD.

EUROPE

34 CITIZEN WATCHES (INDIA) PVT. LTD.

51 FIRSTCOME ELECTRONICS LTD.

18 CITIZEN WATCH IBÉRICA S.A.U.

36 CIVIS MANUFACTURING LTD.

52 JIANG XING ELECTRONICS LTD.

19 CITIZEN WATCH ITALY S.P.A.

20 CITIZEN WATCH UNITED KINGDOM, LTD.
21 FREDERIQUE CONSTANT HOLDING S.A.

22 MANUFACTURE LA JOUX-PERRET S.A.

35 CITIZEN WATCHES (MALAYSIA) SDN. BHD.
37 GUANGZHOU MOST CROWN ELECTRONICS LTD.
広州務冠電子有限公司

38 ROYAL TIME CITI CO., LTD.

首軒電子有限公司

江門市江星電子有限公司

53 CITIZEN SYSTEMS (DONGGUAN) CO., LTD.
西鉄城精電科技（東莞）有限公司

39 SUNCITI MANUFACTURERS LTD.

54 CITIZEN SYSTEMS (H.K.) LTD.

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

40 CITIZEN WATCHES AUSTRALIA PTY LTD.

55 CITIZEN SYSTEMS (JIANGMEN) CO., LTD.

26 EGASCA, S.A.

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

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

43 CITIZEN MACHINERY ASIA CO., LTD.

23 CITIZEN MACCHINE ITALIA S.R.L.
25 CITIZEN MACHINERY UK LTD.
27 HESTIKA FRANCE S.A.S.

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

ASIA, OCEANIA

30 CITIZEN (SHANGHAI) TRADING CO., LTD.
西鉄城（上海）貿易有限公司

31 CITIZEN WATCH (CHINA) CO., LTD.

新星工業有限公司

41 CINCOM MIYANO TAIWAN CO., LTD.
西鉄城（中国）精密机械有限公司

44 CITIZEN MACHINERY PHILIPPINES INC.

45 CITIZEN MACHINERY VIETNAM CO., LTD.

46 CITIZEN FINEDEVICE PHILIPPINES CORP.
47 CITIZEN SEIMITSU (THAILAND) CO., LTD.

48 MASTER CROWN ELECTRONICS (WUZHOU) LTD.
領冠電子（梧州）有限公司

西鉄城（中国）鐘表有限公司

49 C-E (HONG KONG) LTD.

(THAILAND) CO., LTD.

50 CITIZEN ELECTRONICS (CHINA) CO., LTD.

32 CITIZEN WATCH MANUFACTURING
33 CITIZEN WATCHES (H.K.) LTD.
星辰表（香港）有限公司

12

49 51 54

7 CITIZEN WATCH MANUFACTURING CO., LTD.

17 CITIZEN WATCH EUROPE G.M.B.H.

1 10 156 8

33 36 39

6 CITIZEN SYSTEMS JAPAN CO., LTD.

Overseas Group

9

41

48 52

Works

1 Headquarters, Tokyo Works

2

57

38 32

18

16
7

5 14
4 13

30 50

35

22 23
26

11

59

56

ASIA

34

28

58

62

EUROPE252060

西鉄城電子（香港）有限公司

西鉄城精電科技（香港）有限公司
西鉄城精電科技（江門）有限公司

NORTH AMERICA, SOUTH AMERICA

56 CITIZEN DE MEXICO, S. DE R. L. DE C. V.

57 CITIZEN LATINAMERICA CORPORATION
58 CITIZEN WATCH CANADA, LTD.

59 CITIZEN WATCH COMPANY OF AMERICA, INC.
60 CECOL, INC.

61 MIYOTA DEVELOPMENT CENTER OF AMERICA INC.

62 CITIZEN SYSTEMS AMERICA CORP.
63

西鉄城電子貿易（上海）有限公司

38

FINANCIAL DATA FY2022
Analysis of Operating Results
Fiscal Year-End Operating Results(Millions of yen)

Year ended
March 31,2022

Year ended
March 31,2023

Year-on-year change%

Net sales

281,417

301,366+19,949+7.1%

Operating profit or loss

22,27323,708+1,435+6.4%

Ordinary profit or loss

27,34229,096+1,754+6.4%

Profit or loss attributable to owners of parent

22,14021,836(304)(1.4%)

During the consolidated fiscal year under review, the Japanese
economy, while affected by the higher cost of living, among otherfactors, continued to experience a moderate recovery in consumer
spending, reflecting the normalization of economic activity. Therewas growing concern in the North American and European markets
about an economic recession given uncertain circumstances such as
geopolitical instability and inflation linked to rising resource prices,
although consumer spending remained firm. Looking at the
Asian market, China remained slow, despite an about-facein the country’s zero-COVID policy, whereas other Asian countries
experienced weak economic recoveries due to the impact of sharp
price increases.
   In this environment, the Citizen Group’s consolidated results
for the fiscal year under review showed increases in sales andprofits, with net sales of 301.3 billion yen (up 7.1% year on year) andoperating profit of 23.7 billion yen (up 6.4% year on year). These
results were driven mainly by the growth of its core businesses,
Watches and Machine Tools. Ordinary profit increased to 29.0
billion yen (up 6.4% year on year), while profit attributable to ownersof parent came to 21.8 billion yen (down 1.4% year on year).

Analysis of Financial Position
1. Assets Outstanding at Fiscal Year-End
As of the end of the consolidated fiscal year under review, total
assets had decreased by 4.9 billion yen from the end of the previous
consolidated fiscal year to 389.9 billion yen. Of assets, current assets
decreased by 10.4 billion yen, mainly due to a decrease of 28.4
billion yen in cash and deposits due to purchases of treasury stock,etc., offsetting increases in inventories of 11.4 billion yen. Fixed
assets increased by 5.5 billion yen, mainly attributable to anincrease of 4.1 billion yen in leased assets (net) under property,
plant and equipment, because subsidiaries that have adopted theaccounting principles generally accepted in the United States (USGAAP) changed their accounting policies.
   Liabilities had increased by 0.9 billion yen from the end of theprevious consolidated fiscal year to 157.2 billion yen. This wasprimarily due to increases of 0.9 billion yen in other under current
liabilities and 3.9 billion yen in other under non-current liabilities,
which was partly offset by decreases of 3.7 billion yen in retirement
benefit liability. Moreover, 10.0 billion yen was transferred tocurrent portion of bonds payable under current liabilities frombonds payable under non-current liabilities due to the corporate
bonds becoming redeemable within one year.
   Net assets amounted to 232.7 billion yen, down 5.8 billion
yen from the end of the previous fiscal year. Foreign currencytranslation adjustment increased by 9.0 billion yen, reflecting theweaker yen. Retained earnings increased by 4.5 billion yen, as aresult of recording 21.8 billion yen in profit attributable to owners ofparent, which was partly offset by a decrease of 17.2 billion yen in
dividend payments and treasury share cancellation. On the other
hand, treasury shares increased by 20.3 billion yen. This mainly
resulted from the cancellation of treasury shares of 10.1 billion yen
and purchases of treasury shares totaling 30.6 billion yen.

39

2. Cash Flows
For the cash status of the Citizen Group, cash provided fromoperating activities was 16.5 billion yen, a decrease of 18.1 billion
yen in income from the previous fiscal year. This was primarily
attributable to factors of increase such as 28.2 billion yen in profit
before income taxes, 11.2 billion yen in depreciation, and 3.8 billion
yen in loss on impairment, which more than offset factors such as anincrease of 7.6 billion yen in inventories, a decrease of 3.4 billion
yen in liabilities for retirement benefits, and 9.0 billion in income
taxes paid.
   Cash used in investing activities was 13.5 billion yen due toan increase of 3.9 billion yen in expenditure from the previous fiscal
year. Contributing factors include 1.8 billion yen in proceeds fromsales of investment securities, 1.8 billion yen in purchase of property,
plant and equipment, and 15.0 billion yen in purchase of intangible
assets, which more than offset factors such as proceeds from thesale of property, plant and equipment of 1.4 billion yen.
   Cash used in financing activities was 40.0 billion yen due toan increase of 20.1 billion yen in expenditure from the previous
fiscal year. This resulted chiefly from factors such as 3.7 billion yen in
repayments of long-term borrowings, 30.6 billion yen in purchase oftreasury shares, and 7.0 billion yen in dividends paid, which morethan offset factors such as 1.0 billion yen in proceeds fromlong-term debt.
   As a result, cash and cash equivalents decreased by 32.0
billion yen year on year to total 79.2 billion yen at the end of the
fiscal year under review.

3. Fundamental Policy Regarding the Distribution of Profitsand Dividends for the Fiscal Year under Review and the
Fiscal Year Ending March 2024
The Company considers the distribution of profits to shareholders
to be an extremely important management issue, and as part of its
three-year Medium-term Management Plan 2024, covering theperiod from FY2022 (fiscal year ended March 31, 2023) to FY2024(fiscal year ending March 31, 2025), its fundamental policy is toemphasize stable and continuous dividends and to aim for a payout
ratio of 50%.
   The year-end dividend for the fiscal year under review will be
19.00 yen per share. Consequently, the full-year dividend for the
fiscal year under review will be 34.00 yen per share.
   In the next and subsequent fiscal years, the Group willemphasize the stable and continuous payment of dividends as its
shareholder return policy in Medium-term Management Plan 2024,
and aim for a dividend payout ratio of approximately 50%. The
Company expects that the full-year dividend for the next fiscal year
will be 40.00 yen per share, comprehensively taking into
consideration stable dividend payments and results trends, among
other factors.

Business Risks
Of the matters regarding business and accounting situations, etc.,
described in the financial statements in security reports, themain risks that the operator recognizes as having the possibilityof significantly impacting the financial condition, businessperformance, or cash flow condition of consolidated companies
are as follows.

(Millions of yen)

(April 1, 2021,
to March 31, 2022)(April 1, 2022,
to March 31, 2023)

Net sales

Composition
rate (%)

Net sales

Composition
rate (%)

1. Risks in Each of the Group’s Businesses

Japan

74,41826.4

76,502

25.4

The Citizen Group’s main business is to manufacture and sell
watches, machine tools, electronic devices, and electronic
products. The Group operates its business all over the world, andour customers include both individuals and various manufacturers.
Therefore, our operating results are influenced by various factors,some of which are listed below.

Asia

87,681

31.2

78,85926.2

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 is trending downward, primarily in the low-end range,
reflecting an increase in demand for smartwatches. In addition,
unit prices are falling due to an intensifying competitiveenvironment resulting mainly from the rise of Chinese
manufacturers. Consequently, there is a risk of a decline in thequantity and market share.

Machine Tools
The machine tools business is susceptible to the effects of decline
in demand for capital investment caused by economic
fluctuations; soaring natural resource and raw material prices;
regulations or significant changes in laws and regulations incountries and regions in which the Group operates its business;fierce competition in the market; and stagnation, confusion, etc.,
of supply chains. There is a risk that the Group’s businessperformance could be adversely affected by the above in the
future.

Devices and Components
The devices and components business is characterized by the
rapid pace of technological innovation, changes in customer
requirements, and high rates of new product and service
introduction. Accordingly, declining sales prices, etc., caused by
the obsolescence of existing products and services could
significantly affect the Group’s business performance. Precision
machining components are susceptible to the trends of technicalinnovation among customers, including automotive and smart
phone 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 andaccess to the patent be lost.

Electronics and Other Products
The electronic and other products business is susceptible todeclining capital expenditure, customer business activities, andpersonal spending as a result of changing economic conditions,as well as stricter product safety–related laws, regulations, andstandards, that might affect future business performance. Intensecompetition from electronics manufacturers in China and othercountries in addition to domestic manufacturers, as well as rapid
technological innovation, a drop in sales prices, and delays indevelopment, could affect our business performance.

2. Overseas Sales
Overseas sales account for a high percentage of the Group’s
overall product sales. As our products are sold worldwide, ouroperating results might be affected by economic and consumer
trends in each area, as well as by political and socioeconomic
factors.

U.S.

62,52522.2

80,426

26.7

Europe53,58519.0

62,287

20.7

Other

3,207

1.1

3,291

1.1

Total
overseassales

206,998

73.6

224,864

74.6

Total

281,417100.0

301,366

100.0

3. Foreign Currency Fluctuation Risk
As overseas sales account for a high percentage of the Group’s
product sales, 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 andstrengthening our overseas production, currency fluctuations
might still affect the Group’s operating results.

4. Manufacturing in China
China is one of main production bases for the Group’s products. It
is therefore possible for our operating results to be affected byfactors in China, such as the suspension of production due toproblems, 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 theGroup’s assets were to decline significantly or the profitability ofour business were to deteriorate. This might affect the Group’s
operating results and financial position.

6. Patent and Intangible Property
As part of the Group’s R&D and production activities, we make useof a 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 havelegitimately 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 Group’s business results. For someproducts in particular, manufacturing is based on patent licensing
agreements. If a cooperative relationship underpinning such an
agreement were to break down, or access to the relevant patent
were to be lost, it could 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, anearthquake, or other disaster through drills and other safety
activities at our headquarters and works. In the event of aparticularly serious earthquake or other such disaster, however, ourproduction activities and product supplies could be affected.
There might also be a significant impact on our operating results
and financial position due to reconstruction costs, for example.

40

8. Risks Related to M&As and Business Alliances
We are committed to strengthening the Group’s businessfoundations through M&A and business alliances. Whenundertaking such activities, we carry out comprehensive research
into and examinations of the companies involved. Nevertheless,there might be risks that we discover later, such as unrealized
liabilities or obstacles in implementing projects, which could
materially affect the Group’s operating results and financial
position.

9. Risk Related to Borrowings
The Group’s borrowings include syndicated loans andcommitment line agreements with financial institutions. Any
violation of financial restrictions under such agreements could
result in demands for the accelerated repayment of the relevantborrowings, which could affect the Group’s financial position.

10. Risks Related to Information Security
With the number of illegitimate accesses and external cyberattacks
continuously growing globally, the Group has been working tostrengthen information security. However, in the event of any
damages to its information system function due to an externalcyberattack or for other reasons, or the occurrence of incidents
such as the suspension of services by service providers, theGroup’s business activities, business performance, and financial
conditions could 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 and development, manufacturing, and sales of the Groupand customers. The Group has been taking measures to protect
such confidential information. Even so, such measures might notwork effectively if any matters that are not expected to occur arise.
If, therefore, such information is disclosed without any authority,
the Group might be asked for compensation for losses anddamages, or face lawsuits, which might affect the businessperformance, financial conditions, reputation, and credibility of theGroup.

11. Other Risks
The Group’s operating results might be affected by a variety offactors in addition to the above, including changes in social
infrastructure and market competition as a result of rapid advancesin technology, changes in the Group’s financial or managerial
situation as a result of ongoing restructuring initiatives, 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.

41Consolidated Balance Sheets
Citizen Watch Co., Ltd., and Consolidated Subsidiaries
March 31, 2022 and 2023
(Millions of yen)
As of March 31, 2022

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable—trade
Electronically recorded monetary claims—operating
Merchandise and finished goods
Work in process
Raw materials and supplies
Consumption taxes refund receivable
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
Tools, furniture and fixtures, net
Land
Leased assets, net
Construction in progress
Total property, plant and equipment
Intangible assets
SoftwareLeased assets
Other
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¥

110,901
49,3082,037
50,97922,74923,3152,661
9,254(1,069)270,139

As of March 31, 2023¥

82,49053,7182,081
58,60424,291
25,595
3,052
10,907(1,099)259,642

*1

*1

*4*5

*4*5

40,893*4
16,567
3,616
10,371975
2,437*2
74,86241,80815,868
3,899
10,367
5,134
2,443
*2
79,521
*4

3,879
1
954
4,834

3,951
－
799
4,751

*3

¥

37,275
184
5,894
2,151
(236)
(144)
45,125
124,823
394,962*3¥

39,021
163
5,581
1,675
(236)
(138)
46,066130,340
389,98242

(Millions of yen)
As of March 31, 2022

Liabilities
Current liabilities
Notes and accounts payable—trade
Electronically recorded obligations—operating
Notes payable—facilities
Electronically recorded obligations—non-operating
Short-term borrowings
Current portion of bonds payable
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
Total current liabilities
Non-current liabilities
Bonds payable
Long-term borrowings
Deferred tax liabilities
Provision for loss on reorganization
Retirement benefit liability
Lease liabilities
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities

¥

43

¥

10,00051,3822,772
74
20,281790
1,652
86,951
156,289¥

18,88913,325
18
384
*6
3,787
10,0002,179
10,997
6,156
303
1,244
－
110
*7
11,91879,317－51,3283,628
616,572
4,679
1,673
77,889157,206*6

Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

18,354
13,910
25
598
*6
4,773
－
2,826
10,604
5,821
279
1,181
1
362
*7
10,597
69,338

As of March 31, 2023

*6

32,64833,740145,912(8,225)204,076

32,64833,740150,483(28,581)
188,290

8,977

10,161

16,64625,659(394)
25,2289,367
238,673
394,96267
35,888
8,596
232,775
389,982¥

Consolidated Statements of Income
Citizen Watch Co., Ltd., and Consolidated Subsidiaries
March 31, 2022 and 2023
(Millions of yen)
Year ended
March 31, 2022

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
Total non-operating income
Non-operating expenses
Interest expenses
Loss on sale of notes receivable—trade
Depreciation of assets for rent
Commission for syndicate loans
Commission for purchase of treasury shares
Non-deductible consumption taxes
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sale of investment securities
Gain on sale of non-current assets
Other
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 inventories
Reorganization cost
Other
Total extraordinary losses
Profit before income taxes
Income taxes—current
Income taxes—deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent¥*1

281,417
174,578
106,839*2*3
84,56522,273

Year ended
March 31, 2023

¥

*11

*4

*2

*7
*6
*8
*9
*10

¥

*1

301,366
179,186
122,180*2*3
98,472
23,708
*11

276
1,369
161
813
2,192
484
505
5,804

*4

851
1,563
111
1,248
1,237
233
1,002
6,248

294
17
8
71
1
－

297
26
19
48
86
126

341
735
27,342

255
860
29,096

94
1,033
93
1,221
38
79
742
346
209
454
1,869
26,694
5,342(1,075)
4,266
22,427286
22,140

*2

*7
*6
*8

*10

¥

1,530
1,761
427
3,719
17
501
3,887
－
32
138
4,576
28,240
6,400
809
7,210
21,029(807)
21,83644

Consolidated Statements of Comprehensive Income
Citizen Watch Co., Ltd., and Consolidated Subsidiaries
March 31, 2022 and 2023
(Millions of yen)

ProfitYear ended
March 31, 2022

Year ended
March 31, 2023¥¥

22,42721,029Other comprehensive income
Valuation difference on available-for-sale securities

2,474

1,183

Foreign currency translation adjustment

11,578

8,731

692

460

438

446

Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities accounted
for using equity method
Total other comprehensive income*

Comprehensive income

15,182*

37,61010,82331,852Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

45

37,096¥513

32,496¥(643)

Consolidated Statements of Changes in Equity
Financial year ended March 31, 2022
(Millions of yen)
Shareholders’ equity

Balance at beginning of period

Share capital

Capital surplus

32,64833,740

Cumulative effects of changes
in accounting policies
Restated balance

Retainedearnings

Treasury shares

Total
shareholders’equity(1,069)193,713

128,393(1,068)32,64833,740(1,068)

127,324(1,069)

192,644

Changes during period
Change in scope of
consolidation

46

46

Dividends of surplus(3,599)(3,599)Profit attributable to owners ofparent22,14022,140Cancellation of treasury shares-

Purchase of treasury shares
Disposal of treasury shares(0)

Transfer of loss on disposal oftreasury shares
Net changes in items otherthan shareholders’ equity(7,157)

0

0

0

(0)

-

-

18,588(7,156)

11,43132,64833,740145,912(8,225)204,076

Total changes during period
Balance at end of period(7,157)-

Accumulated other comprehensive income

Balance at beginning of period

Valuationdifference on
available-forsale securities

Foreigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plans

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

Total net
assets

6,503

4,871

(1,100)10,273

8,878

212,864

Cumulative effects of changes
in accounting policies
Restated balance(1,068)
6,503

4,871

(1,100)10,273

8,878

211,796

Changes during period
Change in scope of
consolidation

46

Dividends of surplus(3,599)Profit attributable to owners ofparent22,140Purchase of treasury shares(7,157)

Disposal of treasury shares

0

Transfer from retained earnings
to capital surplus
Net changes in items otherthan shareholders’ equity

2,474

11,774706

14,955489

15,444

Total changes during period

2,474

11,774706

14,955489

26,876

Balance at end of period

8,977

16,646(394)

25,2289,367

238,67346

Financial year ended March 31, 2023
(Millions of yen)
Shareholders’ equity

Restated balance

Share capital

Capital surplus

32,64833,740Retainedearnings

Treasury shares

Total
shareholders’equity(8,225)204,076

145,912

Changes during period
Dividends of surplus(7,078)(7,078)

Profit attributable to owners ofparent21,836

21,836

Cancellation of treasury shares(10,199)

Purchase of treasury shares
Disposal of treasury shares

11

Transfer from retained earnings
to capital surplus
Net changes in items otherthan shareholders’ equity-(30,611)(30,611)55

66

10,188(10,188)

-

-

4,570

(20,356)(15,785)

32,64833,740150,483(28,581)

188,290

Total changes during period
Balance at end of period

10,199-

Accumulated other comprehensive income

Restated balance

Valuationdifference on
available-forsale securities

Foreigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plans

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

Total net
assets

8,977

16,646(394)

25,2289,367

238,673

Changes during period
Dividends of surplus(7,078)

Profit attributable to owners ofparent21,836

Cancellation of treasury shares-

Purchase of treasury shares(30,611)

Disposal of treasury shares

66

Transfer from retained earnings
to capital surplus
Net changes in items otherthan shareholders’ equity

47

1,183

9,013

462

10,659

(770)

9,888

Total changes during period

1,183

9,013

462

10,659(770)(5,897)

Balance at end of period

10,16125,65967

35,888

8,596

232,775

Consolidated Statements of Cash Flows
Citizen Watch Co., Ltd., and Consolidated Subsidiaries
March 31, 2022 and 2023
(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 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 refund (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
Proceeds from share issuance to non-controlling shareholders
Dividends paid to non-controlling interests
Purchase of treasury shares
Proceeds from sale of treasury shares
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

Year ended
March 31, 2022

Year ended
March 31, 2023

¥

¥

¥

26,694
11,191
(387)
(251)
1,405
(1,790)(1,645)
(484)
294
(94)
(995)
79
742
(2,025)(1,800)3,920
1,143
35,996
1,633(300)(3,120)484
34,69328,240
11,200
(319)
(58)
321
(3,465)(2,415)(233)
297(1,530)(1,744)501
3,887(1,302)(7,699)(2,573)
146
23,251
2,426(299)(9,035)233
16,576(1)
165(9,566)
2,338(2,117)
(23)
309
(656)
(9,550)0
1,811(15,091)
1,827(1,465)(5)
4(607)(13,526)(737)－(8,048)(3,599)－(55)(7,157)0(359)(19,956)
6,430
11,616
99,5611,653
1,000(3,755)(7,078)25(147)(30,697)66(1,129)(40,062)
4,976(32,036)
111,23759－* 111,237¥*

79,20148

Notes(Significant Matters That Serve as the Basis for the
Preparation of Consolidated Financial Statements)
1. Scope of Consolidation(1) Number of consolidated subsidiaries: 74
Deconsolidation: 3 companies
During the consolidated fiscal year under review, the Company
proceeded with the deconsolidation of Citizen Watch
Goodrington (Hong Kong) Limited, Most Crown Industries
Limited, and Sunciti PVD (Jiangmen) LTD., which wereconsolidated subsidiaries of the Company, due to corporate
liquidation.
New consolidated companies: 1 company
During the consolidated fiscal year under review, Cincom
Miyano Tooling Co., Ltd., was established and has been
included in the scope of consolidation.
Templus has been renamed Frederique Constant Europe SAS.
(2) Non-consolidated subsidiaries: 11
Major non-consolidated subsidiaries
Citizen Customer Service Co., Ltd.
(Reason for exclusion from scope of consolidation)
They were excluded from the scope of consolidation because
the sum of total assets, net sales, current term net profit or loss
(amount corresponding to equity), retained earnings (amountcorresponding to equity), etc., of each of the deconsolidated
subsidiaries is negligible compared to the overall total assets,
net sales, current term net profit or loss, retained earnings, etc.,
in the consolidated financial statements and does not havesignificant impact on the said statements as a whole.

2. Matters Related to the Application of the Equity Method(1) Number of affiliates accounted for using the equity method: 2
Marubeni Citizen-Cincom Inc., First Cainta Resources
Corporation(2) Non-consolidated subsidiaries (Citizen Customer Service Co.,
Ltd.) and affiliates (VELDT Inc., etc.) that are not accounted forusing the equity method are excluded from the scope of
application of the equity method because they have minimal
impact on the consolidated financial statements in light of 
their respective current term net profit or loss (amountcorresponding to equity), retained earnings (amountcorresponding to equity), etc., and because they are notmaterial as a whole.
3. Fiscal Years of Consolidated Subsidiaries(1) Consolidated subsidiaries for which the account closing dates
are different from the consolidated account settlement date areas follows:
December 31 closing dates: 51 companies(2) The Company makes necessary adjustments for formulating
consolidated financial statements on the account closing date,by preparing financial statements that are the basis forconsolidated financial statements.
4. Matters Related to Accounting Policies
Accounting policies adopted by consolidated subsidiaries conformto the standards used by the Company, in principle, and there are
no differences to be specified. Major accounting policies adopted
by the Company and its consolidated subsidiaries are as follows:(1) Valuation standards and methods for important assets(i) Securities
Other securities
Securities other than shares, etc., without market prices
These securities are stated using market value method.
(Unrealized gains and losses are reported as a component of
net assets, and cost of sales is computed primarily by themoving-average method.)
Shares, etc., without market prices
These securities are stated using the moving-average cost
method.
(ii) Derivatives
These securities are stated using the market value method.

49(iii) Inventories
Inventories are stated at cost mainly using the periodic averagemethod. (The amount stated in the balance sheet is calculatedusing the book value write-down method based on a reductionin profitability.)(2) Depreciation method of important depreciable assets(i) Property, plant and equipment (excluding lease assets)
The straight-line method is applied.
The principal useful lives of property, plant and equipment are
as follows:
Buildings and structures: 2 to 60 years
Machinery, equipment and vehicles: 1 to 10 years(ii) Intangible assets (excluding lease assets)
The straight-line method is applied.
(iii) Leased assets
For depreciation of leased assets for finance lease transactions
other than those involving ownership transfer, the useful life isbased on the duration of the lease period, and the straight-line
method is applied with an assumed residual value of zero.
(3) Accounting method for significant deferred assets.
Bond issuance costs
They are collectively amortized in the fiscal year in which they are
incurred.
(4) Accounting for significant allowances and reserves(i) Allowance for doubtful accounts
To reserve for losses on doubtful accounts such as tradereceivables and loans, the Company and its consolidated
subsidiaries in Japan provide an allowance, based on historical
write-off rates for ordinary receivables and estimated amountsof irrecoverable debt for specified receivables such as debt
with a possibility of default which takes into account therecoverability of individual debt. Moreover, estimatedamounts of allowance are recorded for overseas consolidated
subsidiaries, considering the recoverability of individual
receivables.
(ii) Allowance for investment loss
To reserve for a loss from significant declines in the value ofshares, etc., in non-consolidated subsidiaries (excluding thoseto which impairment accounting is applied), an allowance isprovided considering the carrying amount, etc., of the shares,
etc., as of the end of the consolidated fiscal year under review.
(iii) Provision for bonuses
To provide for the payment of bonuses to employees of
the Company and certain of its consolidated subsidiaries,
allowance for bonuses is provided based on estimated future
payments.
(iv) Provision for bonuses for directors (and other officers)
To provide for the payment of bonuses to officers of theCompany and certain of its consolidated subsidiaries,
allowance for bonuses is provided based on estimated future
payments.
(v) Provision for product warranties
A portion of sales is provided for costs for after-sale services,
etc., of products at certain consolidated subsidiaries.
(vi) Provision for loss on business reorganization and liquidation
To reserve for expenses and losses from business restructuring,an estimated required amount is recorded.
(vii) Provision for environmental measures
To provide for expenditures for future environmental measures,a reasonably estimated amount is recorded.
(5) Accounting method for retirement benefits(i) Method for attributing expected retirement benefits toperiods of service
In calculating projected benefits obligations, the periodic
allocation of projected retirement benefits up to the end of thecurrent period is based mainly on the benefit formula basis.
(ii) Treatment of unrecognized actuarial differences and past
service costs
Past service cost is treated as an expense over a fixed numberof years (using the declining balance method on the basis of 5
years, in principle) within the average remaining years ofservice of employees as of the year in which the past service
costs occur.

Actuarial differences are to be charged to expenses from thefiscal year following the year in which the past service costs
occur, over a fixed number of years (using the decliningbalance method on the basis of 5 years, in principle) within the
average remaining years of service of employees as of eachfiscal year in which the past service costs occur.
(iii) Adoption of the simplified method by companies that aresmall in size
Some consolidated subsidiaries adopt, for the purpose of
calculating retirement benefit liability and retirement benefit
expenses, a simplified method involving the recognition ofretirement benefit obligations as the amount of retirement
benefit payable at fiscal year-end due to voluntary termination.
(6) Accounting standards for income and expenses
The Citizen Group’s main business is to manufacture and sell
watches, machine tools, electronic devices, and electronic
products.
The Company believes that its performance obligation regarding
the recognition of revenues from sale of goods is satisfied when
the control over the goods is transferred to customers andrevenues are recognized at the time of the transfer.
Transaction prices are calculated by deducting variableconsideration, including future sales returns and other rebates,from the consideration the customer promises in a contract.
Variable consideration is estimated based on the past trackrecord and information available as of the end of theconsolidated fiscal year under review, and is revaluated at every
fiscal year-end.
In the watches segment, membership-based inspection services
are provided to customers. In the said services, performanceobligations related to the sale of products and performanceobligations related to inspection services are identified
separately and revenue is recognized when each performanceobligation is satisfied. As considerations regarding these
performance obligations are generally paid within one year fromthe time they are satisfied, no significant financing component isinvolved.
(7) Standard for translation of significant foreign currency
denominated assets or liabilities into yen
Foreign currency monetary assets and liabilities are translated
into yen at the year-end spot exchange rate, and translation
adjustments are accounted for as profit or loss. For overseas
subsidiaries, etc., assets and liabilities are converted into yen
based on the spot exchange rate on consolidated accountsettlement day, and revenue and expenses are converted into
yen by using the average exchange rate during the fiscal year,
while the difference arising from the conversion is shown in the
net assets section as foreign currency translation adjustment andnon-controlling interests.
(8) Scope of funds in the consolidated statement of cash flows
Cash and cash equivalents are composed of cash on hand,deposits that can be withdrawn at any time and short-term
investments that are readily convertible into cash and face only
slight risks of fluctuation in value, with redemption due dates
arriving within three months from the acquisition date.

(Significant Accounting Estimates)
1. Impairment Loss on Non-Current Assets(1) Amounts posted to the consolidated financial statements forthe fiscal year under review
The amount of impairment loss on non-current assets is the sameas that described in Notes (Consolidated Statement of Income) 8.
Impairment losses.
(2) Information about important accounting estimates related toitems identified
Regarding assets or asset groups that are determined to show
indications of having suffered impairment losses based onmarket prices of non-current assets and gains/losses stemmingfrom business activities that use the said assets or asset groups, if
the carrying amount of the said asset or asset groups exceeds
the sum of the undiscounted future cash flows, the Group
reduces the book value to their recoverable value and recognizes

the reduction as impairment loss. The recoverable value isdefined as the higher of net selling value and value in use, andvalue in use is calculated as present discounted value of
expected future cash flows. Expected future cash flows arecalculated based on business plans approved by the board of
directors, etc., market outlook, etc.
The Group carefully monitors signs of impairment andrecognizes and measures impairment losses. However, anychanges in conditions or assumptions for impairment loss
estimates due to changes in business plans or the market
environment could have significant effects on the Group’s
financial position and operating results.

2. Valuation of Inventories(1) Amounts posted to the consolidated financial statements forthe fiscal year under review(Millions of yen)
As of March 31,2022

As of March 31,
2023

Merchandise and finishedgoods

50,97958,604Work in process

22,74924,291

Raw materials and supplies

23,31525,595(2) Information about important accounting estimates related toitems identified
The main inventories at the Group are inventories in watches, andthey are stated at cost mainly using the periodic average method.
(The amount stated in the balance sheet is calculated using thebook value write-down method based on reduction in
profitability.) If the net selling price of inventories is below thebook value, the book value is lowered to the net selling price,and the reduction is posted in cost of sales as a loss on valuationof inventories. The Group sets a write-down rate for each slowmoving item that is out of the operating cycle and for each itemof inventories that is expected to be disposed of according to theelapsed time. In this way, the Group writes down the book value
systematically.
The accounting estimates are based on internal rules on thedisposal of inventories and past data. They are affected bychanges in the market environment and are uncertain. Anychanges in assumptions used in the valuation of inventories
that become necessary could significantly affect the amount of
inventories that will be posted in the consolidated financial
statements for the next fiscal year.

(Change in Accounting Policies)(Application of implementation guidance on accounting standard
for fair value measurement)
Guidance on Accounting Standard for Fair Value Measurement(ASBJ Statement No. 31, June 17, 2021; hereinafter the “Fair Value
Measurement Accounting Standard Implementation Guidance”). It
therefore has decided to apply the new accounting policies
specified in the Fair Value Measurement Accounting Standard
Implementation Guidance prospectively in accordance with thetransitional treatment set forth in Paragraph 27-2 of the Fair Value
Measurement Accounting Standard Implementation Guidance. The
application of the accounting standard has no impact on the
consolidated financial statements.
(Adoption of ASC 842 lease accounting)
The Citizen Group’s subsidiaries that have adopted US GAAP
began adopting ASC 842 lease accounting in the current
consolidated fiscal year under review
Accordingly, all leasing transactions of lessees are recorded underassets and liabilities in the balance sheet, in principle. In adopting
these standards, the method of recognizing the cumulative impactof their adoption as of the date of the adoption is used as an
approved interim measure.
With the adoption of these accounting standards, leased assets(net) under property, plant and equipment increased 4,121 million

50

yen, and lease obligations under other of current liabilities
increased 921 million yen, while lease obligations under noncurrent liabilities increased 3,712 million yen in the consolidatedbalance sheet of the fiscal year under review. The impact of thischange on profit and loss for the consolidated fiscal year underreview was immaterial.

(3) Impacts of the application of the relevant accounting standards
The Group is assessing the effects of the application of the
Accounting Standard for Current Income Taxes, etc., on the
consolidated financial statements.

(Performance-linked stock remuneration plan)(1) Transaction overview
The Company has introduced a performance-linked
compensation system (the “System”) for its Directors (excluding
Outside Directors and non-residents in Japan; hereinafterreferred to as “Directors”) for the purpose of further clarifying thelink between the compensation to the Directors and the value of
the Company’s stock and giving them greater motivation to makecontributions to improve business performance and increase
enterprise value over the medium and long term.
The System employs a framework called the Board Incentive Plantrust (hereinafter “the BIP Trust”). The BIP Trust is similar to theperformance-based stock compensation (Performance Share)plan and the restricted stock compensation (Restricted Stock)plan in the United States. Under the BIP Trust, shares of theCompany’s stock are issued, and money obtained by realizing
the said shares is delivered to Directors according to theirpositions and degree of contribution to achievement of theCompany’s performance targets.
(2) The Company’s shares remaining in the BIP Trust
The Company’s shares remaining in the BIP Trust are posted astreasury shares in the net assets section. The book value andnumber of such treasury shares were 241 million yen and373,362 shares, respectively, at the end of the previous
consolidated fiscal year, and 308 million yen and 483,762 shares,
respectively, at the end of the consolidated fiscal year underreview.

(Change in Presentation Method)(Notes to Consolidated Balance Sheets)(Notes to Consolidated Balance Sheets)
Asset retirement obligations that were shown separately undercurrent liabilities in the previous fiscal year are included in other inthe fiscal year under review because they have become
insignificant in monetary terms. To reflect the change inpresentation, it has been reclassified in the consolidated financial
statements for the previous year.
As a result, both asset retirement obligations amounting to 26
million yen and other amounting to 10,571 million yen that wereshown separately under current liabilities in the consolidatedbalance sheet of the previous fiscal year are reclassified underother, amounting to 10,597 million yen.
Asset retirement obligations that were shown separately under
non-current liabilities in the previous fiscal year are included inother in the fiscal year under review because they have become
insignificant in monetary terms. Lease liabilities, which were
included in other in non-current liabilities in the previous fiscal year,
are stated as a separate item in the fiscal year under review due toan increase in their importance in terms of value. To reflect thechange in presentation, it has been reclassified in the consolidated
financial statements for the previous year.
As a result, asset retirement obligations amounting to 49 million
yen and other amounting to 2,392 million yen that were shown
separately under non-current liabilities in the consolidated balance
sheet of the previous fiscal year are reclassified as lease liabilities of
790 million yen and other of 1,652 million yen.

*1. Of notes receivable—trade and accounts receivable—trade, theamounts of those receivables arising from contracts withcustomers are as follows:(Issued but not yet adopted accounting standards)- Accounting Standard for Current Income Taxes (ASBJ Statement
No. 27, October 28, 2022)- Accounting Standard for Presentation of Comprehensive Income(ASBJ Statement No. 25, October 28, 2022)- Guidance on Accounting Standard for Tax Effect Accounting(ASBJ Guidance No. 28, October 28, 2022)(1) Overview
The accounting standards and revised implementation guidance
set forth an accounting classification of income taxes levied onother comprehensive income and tax effect related to the sale ofshares of subsidiaries, etc., if group taxation rules apply.
(2) Scheduled date of application
Scheduled to be applied from the beginning of the fiscal year
ending March 31, 2025.

(Notes to Consolidated Statement of Income)Extra retirement payments and loss on COVID that were shown
separately under extraordinary loss in the previous fiscal year are
included in other in the fiscal year under review because they
have become insignificant in monetary terms. To reflect thechange in presentation, it has been reclassified in the
consolidated financial statements for the previous year.
As a result, extra retirement payments amounting to 15 million
yen, loss on COVID amounting to 166 million yen and otheramounting to 272 million yen that were shown separately under
extraordinary loss in the consolidated statement of income of theprevious fiscal year are reclassified under other, amounting to 454
million yen.

51

(Additional Information)(Millions of yen)

As of March 31,
2022

Notes receivable
Accounts receivable

As of March 31,
2023

843

544

48,46553,173*2. The accumulated depreciation of property, plant andequipment is as follows:(Millions of yen)

Accumulated depreciation

As of March 31,2022

As of March 31,
2023

227,669

236,172*3. Items provided to non-consolidated subsidiaries and affiliates
are as follows:(Millions of yen)

Investment securities (shares)

As of March 31,2022

As of March 31,
2023

5,593

5,861

*4. The accumulated amount of tax purpose reduction entry ofproperty, plant and equipment due to the acceptance ofnational subsidies, etc., is as follows:*3. The total amount of research and development expenses
included in general and administrative expenses is as follows:(Millions of yen)

(Millions of yen)

As of March 31,2022

As of March 31,
2023

Buildings and structures

243

230

Machinery, equipment andvehicles14

12

Fiscal year ended Fiscal year ended
March 31, 2022
March 31, 2023

Research and development
expenses

5,542*4. The content of subsidy income is as follows:*5. Assets pledged as collateral and secured liabilities
Assets pledged as collateral are as follows:

Buildings and structures(Millions of yen)

As of March 31,2022

As of March 31,
2023

1,208

1,334

*6. The Group has signed overdraft agreements and commitmentline agreements with four correspondent banks in order toefficiently procure operating funds. The unused balance ofborrowings under these agreements at the consolidated fiscal
year-end is as follows:(Millions of yen)

Total of overdraft limit andloan commitment
Outstanding borrowing
balance
Difference

5,693(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2022
March 31, 2023

Subsidy income

484

233

Subsidy income in the previous consolidated fiscal year mainly
consisted of subsidies for employment adjustment associatedwith the impact of the spread of the COVID infection.
Subsidy income in the consolidated fiscal year under review
mainly consisted of subsidies for employment adjustment
associated with the impact of the spread of the COVID infection.
*5. Gain on sale of non-current assets mainly consisted of thefollowing.

(Millions of yen)

As of March 31,2022

As of March 31,
2023

59,34859,484

Machinery, equipment andvehicles

32

31

‒

2,600

Land

814

1,721

59,34856,884

Fiscal year ended Fiscal year ended
March 31, 2022
March 31, 2023

*6. Loss on retirement of non-current assets mainly consisted of thefollowing.

(Millions of yen)

*7. Of Other, contract liabilities are as shown below.

Fiscal year ended Fiscal year ended
March 31, 2022
March 31, 2023

(Millions of yen)

As of March 31,
2022

Contract liabilities

2,071

As of March 31,
2023

2,360

(Notes to Consolidated Statements of Income)*1. Revenue from contracts with customers
Net sales are not broken down into revenue from contracts withcustomers and other revenue. The amount of revenue fromcontracts with customers is stated in Notes to the Consolidated
Financial Statements (Revenue Recognition) 1. Information on the
breakdown of revenue from contracts with customers.
*2. Major components of selling, general and administrative
expenses and their amounts are as follows:(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2022
March 31, 2023

Depreciation
Provision of allowance for
doubtful accounts
Provision for bonuses
Provision for bonuses for
directors (and other officers)
Retirement benefit expenses
Personnel expenses
Advertising expenses
Provision for productwarranties
Research and development
expenses

4,257

4,276

(33)

(10)

2,414

2,871

278

262

1,646
29,15815,3601,692
32,561
18,768

87

40

5,542

5,693

Buildings and structures6

389

Machinery, equipment andvehicles27

26

Tools, furniture and fixtures

1731*7. Loss on sale of non-current assets mainly consisted of thefollowing.

(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2022
March 31, 2023

Buildings and structures

25

0

Machinery, equipment andvehicles8

10

Tools, furniture and fixtures22*8. Impairment losses
The Group posted an impairment loss in the asset groups below.
Fiscal year ended March 31, 2022
Location

Use

Type

Japan

Software, electronic
device production
facilities, etc.

Software, tools, furnitureand fixtures, machinery,equipment, vehicles, etc.

China

Idle assets

Buildings and structures

Watch production
Switzerland
facilities, etc.

Machinery, equipment,
and vehicles, etc.

52

Fiscal year ended March 31, 2023
Location

Japan

Use

Category

Electronic device
production facilities,
software, etc.

Buildings and structures;
machinery, equipment,
and vehicles;
construction in progress;
tools, furniture, andfixtures; software; land;
etc.

China

Watch production
facilities

Machinery, equipment,
and vehicles; buildings
and structures; tools,
furniture, and fixtures;
etc.

Philippines

Watch production
facilities, electronic
device production
facilities

Machinery, equipment
and vehicles, tools,
furniture and fixtures,
etc.

The Company and its consolidated subsidiaries are grouped bybusiness unit based on managerial accounting categories, andthese groups are regarded as the smallest units that generatecash flows, in principle. Regarding certain consolidated
subsidiaries, each subsidiary is designated part of a group basedon its size. Moreover, assets for which the association with a
specific business is not clear, such as those for the head office,are considered shared assets.
In the previous consolidated fiscal year, carrying amounts werereduced to recoverable amounts, mainly for assets withno plan to be used in the future and operating assets withdeteriorated profitability, and the said reduction was recorded as
an impairment loss (742 million yen) under extraordinary losses.
The loss mainly consisted of buildings and structures amounting
to 287 million yen; machinery, equipment, and vehicles
amounting to 203 million yen; software amounting to 141 million
yen; and tools, furniture, and fixtures amounting to 76 million
yen.
In the consolidated fiscal year under review, carrying amounts
have been reduced to recoverable amounts, mainly for assets
with no plan to be used in the future ; operating assets withaggravated profitability ; and operating assets for a business forwhich the management environment has been significantly
deteriorated, and the said reduction was recorded as an
impairment loss (3,887 million yen) under extraordinary losses.
The loss mainly consisted of machinery, equipment, and vehicles
amounting to 1,835 million yen ; buildings and structures
amounting to 1,265 million yen ; construction in progress
amounting to 387 million yen ; tools, furniture, and fixtures
amounting to 228 million yen ; software amounting to 98 million
yen; and land amounting to 70 million yen.
The recoverable value is calculated based on the net realizable
sale price or value in use. The net realizable sale price iscalculated rationally. The value of real estate is calculated
according to real estate appraisal standards. The value in use iscalculated by discounting future cash flow using mainly adiscount rate of 8%.
*9. Loss on valuation of inventories for Russia is recorded under
extraordinary losses.
*10. Reorganization cost comprises the following.

(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2022
March 31, 2023

Reorganization cost

209

32

Reorganization cost in the previous consolidated fiscal year
mainly comprised business structural reform expenses for thewatches segment.
Reorganization cost in the consolidated fiscal year under review
mainly comprises business structural reform expenses for thewatches segment.

53*11. Year-end inventories indicate an amount after the carrying
amount is lowered due to a decline in profitability, and thefollowing loss on valuation of inventories is included in cost of
sales. The amounts below indicate those obtained by offsetting
against reversals.

(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2022
March 31, 2023

2,479


46

(Notes to Consolidated Statements of Comprehensive Income)(Notes to Consolidated Statements of Changes in Equity)* Reclassification adjustment and tax effect related to othercomprehensive income

Fiscal year ended March 31, 2022

(Millions of yen)

1. Class and Number of Issued Shares and Class andNumber of Treasury SharesFiscal year
ended March 31,
2022

Fiscal year
ended March 31,
2023

Amount that occurred in thefiscal year under review

3,175

229

Reclassification adjustment

51

1,524

Before tax effectadjustment

3,226

1,753

Commonshares314,353,809‒‒

314,353,809

Amount of tax effect

(752)

(569)

Total

314,353,809‒‒

314,353,809

Valuation difference on
available-for-salesecurities

2,474

1,183

TreasurysharesOrdinaryshares(Notes 1,
2, 3, 4)

1,714,879

14,424,435

1,414

16,137,900

Total

1,714,879

14,424,435

1,414

16,137,900

Number ofshares at
beginning of
consolidated
fiscal year
under review

Valuation difference on
available-for-sale securities:

Foreign currency translation
adjustment:
Amount that occurred in thefiscal year under review

11,5789,029

Reclassification adjustment

‒

(297)

11,578

8,731

‒

‒

11,5788,731

Amount that occurred in thefiscal year under review

559

488

Reclassification adjustment

Before tax effectadjustment
Amount of tax effectForeign currencytranslation adjustment
Remeasurements of defined
benefit plans, net of tax:

256

100

Before tax effectadjustment

816

589

Amount of tax effect

(123)

(128)

Remeasurements ofdefined benefit plans,
net of tax

692

460

Increase in
Decrease in
Number of
number of
number ofshares at end
shares during shares duringofconsolidated consolidated consolidated
fiscal year
fiscal year
fiscal year
under review under review under review

Issuedshares

Notes: 1.The increase of 14,424,435 shares in the number oftreasury stock resulted from an increase of 14,421,100
shares through market purchases and an increase of
3,335 shares through purchases of shares less than one
unit.
2.The decrease of 1,414 shares in the number of treasury
stock resulted from a decrease of 1,290 shares throughthe issuance and sales of shares of the Company’s stock
to persons who had served as Directors based on theexecutive compensation BIP Trust as well as a decreaseof 124 shares through purchases of shares of less than
one unit in response to demand for additionalpurchases.
3.The number of treasury stock at the beginning of theconsolidated fiscal year under review includes 374,652
shares held by the executive compensation BIP Trust.
4.The number of treasury stock at the end of theconsolidated fiscal year under review includes 373,362
shares held by the executive compensation BIP Trust.

2. Dividends

Share of othercomprehensive income ofentities accounted for using
equity method:(1) Dividends paid

Amount that occurred in thefiscal year under review

438

446

Reclassification adjustment‒‒

Share of othercomprehensive income ofentities accounted forusing equity method

438

446

Total othercomprehensive income

15,182

10,823

Resolution

Class ofsharesTotalamount of Dividend
dividends per share Record date(Millions(Yen)of yen)Effective
date

June 28,
2021

Ordinary
GeneralMeeting of Common
Shareholders shareson June 25,
2021

782

2.50

March 31,
2021

Board ofDirectors
meeting on
November11, 2021

2,817

9.00

September December
30, 2021
3, 2021

Commonshares

Notes: 1.Total dividends resolved at the ordinary general meeting ofshareholders on June 25, 2021, included dividends associated withshares of the Company held by the executive compensation BIP Trustamounting to 0 million yen.
2.Total dividends resolved at the Board of Directors’ meeting on
November 11, 2021, included dividends associated with shares of theCompany held by the executive compensation BIP Trust amounting to
3 million yen.

54

(2) Of dividends for which the record date is in the consolidated
fiscal year under review, those for which the effective date is in
the next consolidated fiscal year

Resolution

Class ofsharesTotalamountDividend
Source ofof
Record Effective
per share
dividends dividends
date
date
(Yen)
(Millionsof yen)Ordinary
GeneralMeeting of Common Retained
Shareholders shares earnings
on June 28,
2022

2,687

9.00

March
31,
2022

June
29,
2022

Note: Total dividends resolved at the ordinary general meeting ofshareholders on June 28, 2022, included dividends associated withshares of the Company held by the executive compensation BIP Trustamounting to 3 million yen.

Fiscal year ended March 31, 2023

1. Class and Number of Issued Shares and Class andNumber of Treasury Shares
Number ofshares at
beginning of
consolidated
fiscal year
under review

Increase in
Decrease in
number of
number ofshares during shares duringconsolidated consolidated
fiscal year
fiscal year
under review under review

Number ofshares at endofconsolidated
fiscal year
under review

Commonshares314,353,809‒

20,353,809

294,000,000

Total

314,353,809‒

20,353,809

294,000,000

2. Dividends(1) Dividends paid

Resolution

Class ofsharesTotalamount ofdividends(Millions ofyen)

Dividend
per share(Yen)

Record date

Effective
date

Ordinary
GeneralMeeting of
Shareholders
on June 28,
2022

Commonshares

2,687

9.00

March 31,2022

June 29,
2022

Board ofDirectors
meeting on
November
14, 2022

Commonshares

4,391

15.00

September
30, 2021

December
6, 2022

Notes:

1.Total dividends resolved at the ordinary general meeting ofshareholders on June 28, 2022, included dividends associated withshares of the Company held by the executive compensation BIP
Trust amounting to 3 million yen.
2.Total dividends resolved at the Board of Directors’ meeting on
November 14, 2022, included dividends associated with shares of
the Company held by the executive compensation BIP Trustamounting to 5 million yen.

(2) Of dividends for which the record date is in the consolidated
fiscal year under review, those for which the effective date is in
the next consolidated fiscal year

Issued shares

TreasurysharesOrdinaryshares(Notes 1, 2,
3, 4)

16,137,9007

39,550,127

20,353,837

35,334,190

Total

16,137,9007

39,550,127

20,353,837

35,334,190

Notes:

1.The decrease in the total number of outstanding shares,
20,353,809, is due to the cancellation of treasury stock.
2.The increase of 39,550,127 shares in the number of treasury stock
resulted from an increase of 39,547,400 shares through market
purchases and an increase of 2,727 shares through purchases ofshares less than one unit.
3.The decrease of 20,353,837 in the number of treasury stock
resulted from a decrease of 20,353,809 due to the cancellation oftreasury stock and a decrease of 28 due to requests for additionalpurchases of shares less than one unit.

Resolution

Total
amountDividend
Class of Source ofofper shareshares dividends dividends(Yen)(Millionsof yen)Ordinary
GeneralMeeting ofCommon Retained
sharesearnings
Shareholders
on June 28,
2023

4,923

19.00

Effective
date

March June 29,
31, 2023 2023

Note: Total dividends resolved at the ordinary general meeting ofshareholders on June 28, 2023, included dividends associated withshares of the Company held by the executive compensation BIP Trustamounting to 9 million yen.

(Notes to Consolidated Statements of Cash Flows)* Relationship between “Cash and cash equivalents at end of year”
and account items listed in the Consolidated Balance Sheets(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2022
March 31, 2023

4.The number of treasury stock at the beginning of the consolidated
fiscal year under review includes 373,362 shares held by the
executive compensation BIP Trust.

Cash and deposits

110,901

82,4905.The number of treasury stock at the end of the consolidated fiscal
year under review includes 483,762 shares held by the executive
compensation BIP Trust.

“Other” under current assets(deposits paid to securities
firms)

2,844

96Time deposits for which thedeposit period is more than
three months(2,505)(3,378)Specified deposits for the
BIP Trust

(2)

(5)

Cash and cash equivalents

111,237

79,201(Lease Transactions)(Lessee)
1. Finance Lease Transactions

Non-ownership-transfer finance lease transactions(i) Leased assets
Property, plant and equipment
They mainly consist of buildings and structures.

55

Recorddate

(ii) Method of depreciation/amortization of leased assets
As stated in 2. Depreciation method of important depreciable
assets and 4. Matters related to accounting policies underSignificant Matters That Serve as the Basis for the Preparationof Consolidated Financial Statements.

(iii) Management of liquidity risk in financing (risk of failure to pay
on due dates)
The Company and the Group prepare and update cash flowplans in a timely manner based on reports from the Group
companies and manage liquidity risk by such means as
maintaining liquidity on hand.

2. Operating Lease Transactions
Noncancelable future operating lease payments(Millions of yen)

As of March 31,2022

As of March 31,
2023

Within 1 year

99Over 1 year

8

9

Total

17

18

(Financial Instruments)
1. Matters Related to the Status of Financial Instruments(1) Policy on financial instruments
The Group has the policy of limiting its fund management
activities to short-term deposits and the like and to conduct fundprocurement primarily through loans from banks and otherfinancial institutions and the issuance of bonds. The Group uses
derivative transactions only for the purpose of avoiding the risks
described below and does not conduct derivative transactions
for speculative purposes.
(2) Description of financial instruments and their risks
Notes and accounts receivable—trade, which are operatingreceivables, are exposed to the credit risk of customers. Foreign
currency–denominated trade receivables arising fromconducting business in overseas markets are exposed to foreignexchange fluctuation risk. Investment securities consist primarilyof stock of business partners and are exposed to market pricefluctuation risk. Moreover, the Group provides long-term loans tobusiness partners, etc.
Most of the notes payable—trade and accounts payable—trade,which are operating payables, mature in one year or less.
Borrowings and bonds are mainly for procuring funds that areused for working capital, refinancing for long-term loans, andstrategic investment. The Group is exposed to liquidity risk fromits operating payables and loans payable.
Regarding derivative transactions, the Group uses forward
foreign exchange contracts for the purpose of hedging currency
fluctuation risk associated with foreign currency–denominatedtrade receivables and payables.
(3) Risk management system related to financial instruments(i) Credit risk (risk related to business connections’ contract
nonperformance) management
In accordance with the receivable management rules, theCompany and its consolidated subsidiaries have systems
enabling the management of due dates and balances andperiodic assessment of major trading partners’ credit standing.
In using derivative transactions, the Group uses financial
institutions with high credit standing to mitigate credit risk inthe event of nonperformance by counterparties.
(ii) Market risk management
Regarding foreign currency–denominated trade receivables
arising from conducting business in overseas markets, theGroup uses forward foreign exchange contracts for the
purpose of hedging certain currency fluctuation risk, inprinciple, excluding trade receivables denominated in thesame currencies.
Regarding investment securities, their market values are
periodically reported to the Board of Directors. Moreover,the shareholding status is continually reviewed, taking into
consideration relationships with, and the financial conditions,etc., of, business partners.
Derivative transactions are executed and managed by thesections in charge in accounting divisions, etc., of therespective companies, and the results of transactions arereported to executives in charge of accounting or the relevant
general managers.

(4) Supplementary explanation regarding the fair value of financial
instruments
The fair value of financial instruments is based on market prices
or reasonable calculations in the absence of market quotations.
Because the calculations of fair values include variable factors,
fair values could change when different assumptions are used. In
addition, the contract amounts, etc., of derivative transactions
described in (Note to derivative transactions) are not an indicatorof risk associated with derivative transactions.

2. Matters Related to the Market Prices of Financial
Instruments, etc.
Consolidated Balance Sheet Amounts, Market Prices, andDifferences Between Them Are as Follows:
As of March 31, 2022

(Millions of yen)

Consolidatedbalance sheet
amountFair value

Difference(1) Investment
securities*2
Available-for-salesecurities

20,906

20,906‒(2) Long-term loans
receivable

184

191

6

Total assets

21,09021,097

6(1) Bonds payable(including current
portion of bonds
payable)10,000

9,979

(21)

(2) Long-termborrowings(including current
portion of long-termborrowings payable)

55,24454,893(351)

Total liabilities

65,24464,872(372)

Derivative transactions*3

(351)

(351)

‒

Notes:

1.Information regarding “cash and deposits,“ “notes and accounts
receivable—trade,” “electronically recorded monetary claims—
operating,” “notes and accounts payable—trade,” “electronicallyrecorded obligations—operating,” “electronically recorded
obligations—non-operating,” and “short-term borrowings” has been
omitted because these items are cash and their fair values areproximate to their book values due to settlement in short periods.
2.Stocks and others without quoted market prices are not includedin (1) Investment securities. The said financial instrument’s
consolidated balance sheet amount is as follows:

Category

Unlisted sharesFiscal year ended March 31, 2022
(Millions of yen)

16,3693.Net claims and obligations resulting from derivative transactions
are shown at net amounts. Net obligations are shown inparentheses.

56

As of March 31, 2023

(Millions of yen)

Consolidatedbalance sheet
amountFair value

22,382

22,382‒(2) Long-term loans
receivable

163

162

(0)

Total assets

22,54522,545(0)(1) Bonds payable(including current
portion of bonds
payable)10,0009,994(6)(2) Long-term borrowings(including current
portion of long-termborrowings payable)

52,514

51,843(670)

Total liabilities

62,514

61,837(676)

Derivative transactions*3

(83)

(83)

‒

Within 1
year

Over 5years butwithin 10
years

Over 10years

Cash and deposits

82,490‒‒‒Notes and accounts
receivable—trade

53,687

31‒‒

Electronicallyrecorded monetaryclaims—operating

2,081

‒

‒

‒

-

163

‒

‒

138,259

194‒‒

Long-term loans
receivable
Total*1. Information regarding “cash and deposits,“ “notes and accounts
receivable—trade,” “electronically recorded monetary claims—operating,”“notes and accounts payable—trade,” “electronically recorded obligations—operating,” “electronically recorded obligations—non-operating,” and“short-term borrowings” has been omitted because these items are cash
and their fair values are proximate to their book values due to settlement
in short periods.
*2. As the financial instruments below do not have market quotations and as it
is considered extremely difficult to assess their fair values, they are notincluded in (1) Investment securities.

Fiscal year ended March 31, 2023
(Millions of yen)

Category
Unlisted shares

16,639Note:

Scheduled redemption amounts of bonds, long-term borrowings,
lease obligations, and other interest-bearing liabilities with maturity
after the consolidated accounts settlement date.
As of March 31, 2022
(Millions of yen)

2 Over 3 Over 4
Over 1 Over
years
years
years
Within 1 year but
but
but
but
year
within 2 within 3 within
4 within 5
years
years
years
years
Short-termborrowings

‒

‒

‒

‒

‒

‒

10,000‒‒‒‒Long-term
borrowings

3,862

1,043

10,03915,03910,03915,219Leaseliabilities

295

182

70

78

43

414

Total

5,069

11,226

10,11015,11810,082

15,634Bonds
payableAs of March 31, 2023

Over 5years

Short-termborrowings

2,602

‒

‒

‒

‒

‒

Bonds
payable10,000

‒

‒

‒

‒

‒

Within 1
year

Over 1year butwithin 5
years

Over 5years butwithin 10
years

Over 10years

Cash and deposits

110,901‒‒‒

Long-term
borrowings

1,185

10,067

15,064

10,064

16,04586

Notes and accounts
receivable—trade49,165

142

‒

‒

Lease
liabilities

1,164

1,142

947

682

582

1,323

Electronicallyrecorded monetaryclaims—operating

Total

14,952

11,21016,011

10,747

16,628

1,410

2,037

‒

‒

‒

‒

184

‒

‒

162,104

327‒‒

Long-term loans
receivable
Total

57

(Millions of yen)

(Millions of yen)

3 Over 4
Over 1 Over 2 Over
years
years
Within 1 year but years
but
but
but
year
within 2 within 3 within 4 within
5
years
years
years
years

Amount of money claims to be redeemed after consolidated closing
date

As of March 31, 2022

Over 5years

911*3. Net claims and obligations resulting from derivative transactions areshown at net amounts. Net obligations are shown in parentheses.
Note:(Millions of yen)Over 1year butwithin 5
years

Difference(1) Investment securities*2
Available-for-salesecurities

As of March 31, 2023

3. Breakdown of Financial Instruments by Level of Market
Value
The fair values of financial instruments are classified into thefollowing three levels according to the observability andimportance of inputs used in the calculation of fair values.
Level 1 fair value:
Fair value calculated using market prices, on an active market, ofassets or liabilities for which the fair value is calculated of theobservable inputs related to the calculation of fair value
Level 2 fair value:
Fair value calculated using inputs other than the inputs used forLevel 1 of the observable inputs related to the calculation of fairvalue
Level 3 fair value:
Fair value calculated using inputs that are not observable related
to the calculation of fair value
If more than one input that has a significant effect on thecalculation of fair value is used, the fair value is classified to thelevel of inputs for which the priority is lowest in the calculation offair value.
Derivative transactions(1) Financial instruments stated at fair value in the consolidatedbalance sheet

Fair values of exchange contracts are calculated by the present
discounted value method, using interest rates, foreign exchange
rates, and other observable inputs and are categorized under
Level 2 fair value.

As of March 31, 2022

Category

Fair value (Millions of yen)
Level 1

Level 2

Level 3

Total

Investment securities

Long-term loans receivable

Available-for-salesecurities
Shares

20,906‒‒

20,906

Currency

‒

16

‒

16

Total assets

20,90616‒

20,922Currency

‒

368

‒

368

Total liabilities

‒

368

‒

368

Derivative transactions

Derivative transactions

As of March 31, 2023

Category

Fair value (Millions of yen)
Level 1

Level 2

Level 3

Bonds payable
Fair values of bonds issued by the Company are calculated by thepresent discounted value method, using the total amount ofprincipal and interest and a rate adjusted by remaining periods ofthe said bonds and credit risk. These bonds are categorized under
Level 2 fair value.
Long-term borrowings

Total

Investment securities
Available-for-salesecurities
SharesFair values of long-term loans receivables are grouped by a certain
period of time and calculated by present discounted value method,using future cash flows and individual rates based on the categoryof credit risks in credit management which consist of appropriate
indicators such as government bond yield, and credit spreads.
These loan receivables are categorized under Level 2 fair value.

22,382‒‒

22,382Currency

‒

16

‒

16

Total assets

22,382

16‒

22,398

‒

99

‒

99

Fair values of long-term borrowings are calculated by the present
discounted value method, using the total amount of principal andinterest and a rate adjusted by remaining periods of the saidborrowings and credit risk. These borrowings are categorizedunder Level 2 fair value.

Derivative transactions

Derivative transactions
Currency
Total liabilities‒

99

As of March 31, 2022

Fair value (Millions of yen)
Level 1

Level 2

Level 3Total

Long-term loans
receivable

‒

191

‒

191

Total assets

‒

191

‒

191

Bonds payable

‒

9,979

‒

9,979

Long-term borrowings‒

54,893‒54,893

Total liabilities‒

64,872‒64,872As of March 31, 2023

Category

Fair value (Millions of yen)
Level 1

Level 2

Level 3

1. Available-for-Sale Securities
As of March 31, 2022

99‒(2) Financial instruments other than those stated at fair value in the
consolidated balance sheet

Category(Notes to Securities)

Total

Long-term loans
receivable

‒

162

‒

162

Total assets

‒

162

‒

162

Bonds payable

‒

9,994

‒

9,994

Long-term borrowings‒

51,843‒

51,843

Total liabilities‒

61,837‒

61,837(Millions of yen)Type

Consolidated
Acquisition
balance
Difference
costsheet amount(1) Stocks
Other
securities for (2) Bonds
which the(i) Government
book
bonds, local
carrying
government
amount on
bonds, etc.
theconsolidated (ii) Bonds
payablebalancesheets(iii) Other
exceed theacquisition (3) Other
cost
Subtotal

20,581

9,311

11,270

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

20,581

9,311

11,270Other(1) Stocks
securities for (2) Bonds
which the(i) Government
book
bonds, local
carrying
government
amount on
bonds, etc.
theconsolidated (ii) Bonds
balancepayablesheets do
(iii)
Other
not exceedthe(3) Otheracquisition
Subtotal
cost

324

359

(35)

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

Total

324

359

(35)

20,906

9,671

11,234

Note: Explanations about assessment techniques used in thecalculation of fair value and inputs related to the calculationof fair value
Investment securities
Listed shares are assessed using fair values. Listed shares aretraded on an active market and their fair values are categorized into
Level 1.

58

As of March 31, 2023

(Millions of yen)

Consolidated
Acquisition
balance
Difference
costsheet amountType(1) Stocks
Other
securities for (2) Bonds
which the(i) Government
book
bonds, local
carrying
government
amount on
bonds, etc.
theconsolidated (ii) Bonds
payablebalancesheets(iii) Other
exceed theacquisition (3) Other
cost
Subtotal

22,074‒‒‒22,074

9,084

12,990Other(1) Stocks
securities for (2) Bonds
which the(i) Government
book
bonds, local
carrying
government
amount on
bonds, etc.
theconsolidated (ii) Bonds
balancepayablesheets do
(iii)
Other
not exceedthe(3) Otheracquisition
Subtotal
cost

307

309

(1)

Total

9,084

12,990

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

307

309

(1)

22,382

9,393

12,988(Notes to Derivative Transactions)
1. Derivative Transactions to Which Hedge Accounting Is Not
AppliedCurrencies
As of March 31, 2022

Category

Type(Millions of yen)Contract
value,
etc.

Forwardexchange
contractsLong
positionTransactions
other thanmarkettransactions

USD

294

‒

(3)

(3)

EUR

3,296

‒

(134)

(134)

CNY

2,868

‒

(165)

(165)

EUR

901

‒

(8)

(8)

GBP

872

‒

(40)

(40)

8,233

‒

(351)

(351)

Short
position

Total
As of March 31, 2023

Category

Type(Millions of yen)Contract
value,
etc.

2. Available-for-Sale Securities That Were Sold
Fiscal year ended March 31, 2022

Type

Total gain on
sales

Sale price(1) Stocks

165(Millions of yen)

Forwardexchange
contracts

Total loss on
sales

Long
position

94‒(2) Bonds

Transactions
other thanmarkettransactions

Value ofcontract
Valuation
for more Fair value gains or
than onelosses
year

USD

309

‒

0

0

EUR

1,855

‒

(65)

(65)

CNY

970

‒

5

5

(i) Government
bonds, local
government bonds,
etc.

‒

‒

‒

(ii) Bonds payable

‒

‒

‒

EUR

289

‒

(7)

(7)

GBP

446

‒

(16)

(16)

3,870

‒

(83)

(83)

(iii) Other

‒

‒

‒

‒

‒

‒

165

94

‒

(3) Other
Total
Fiscal year ended March 31, 2023

Type(1) Stocks(Millions of yen)

Total gain on
sales

Sale price
1,811

Total loss on
sales

1,530

‒

(2) Bonds‒‒‒(ii) Bonds payable

‒

‒

‒

(iii) Other

‒

‒

‒

‒

‒

‒

1,811

1,530

‒

Total

Short
positionTotal

2. Fair Values to Which Hedge Accounting Is Applied
Notes related to interest rates
As of March 31, 2022
Not applicable.
As of March 31, 2023
Not applicable.

(Retirement Benefits)(i) Government
bonds, local
government bonds,
etc.

(3) Other

3. Investment securities on which impairment losses were posted
Fiscal year ended March 31, 2022
Not applicable
Fiscal year ended March 31, 2023
Not applicable

59

Value ofcontract
Valuation
for more Fair value gains or
than onelossesyear

1. Outline of the Retirement Benefits System
The Company and its domestic consolidated subsidiaries haveadopted lump-sum withdrawal payment systems and retirement
benefit systems under defined contribution systems.
In addition, some of the overseas consolidated subsidiaries haveadopted defined benefit systems or defined contribution systems.
In calculating their retirement benefits obligations, some of theconsolidated subsidiaries have adopted the simplified method
under which an amount required to be paid for voluntary
resignations at fiscal year-end is assumed to be equal to retirement
benefits obligations.
Moreover, the Company has instituted a retirement benefit trust.

2. Defined Benefit Plans(4) Breakdown of retirement benefit expenses(1) Reconciliation of defined benefit obligation at beginning andend of period(Millions of yen)

Fiscal year
Fiscal year
ended March 31, ended March 31,
2022
2023

Service costs

1,392Interest costs

116

136

Expected return on plan assets

(67)

(140)

Expense for actuarial losses

250

97

5

3

1,696

1,396

Defined benefit obligation at
beginning of period

25,46525,820Service costs

1,392

1,299

Interest costs

116

136

Amortization of prior service
costs

Amount of net actuarial
gain/loss

(299)

(529)

Retirement benefit expenses
related to defined benefit plans

Retirement benefits paid

(1,449)(1,310)

587

491

7

138

25,82026,045

Exchange adjustments
Other
Defined benefit obligation at
end of period

Note: Retirement benefit expenses are included in service cost at
consolidated subsidiaries using the simplified method.
(2) Reconciliation of balance of plan assets at beginning and end of
period(Millions of yen)

Fiscal year
Fiscal year
ended March 31, ended March 31,
2022
2023
Plan assets at beginning of
period

2,875

5,538

Expected return on plan assets

67

140

Amount of net actuarial
gain/loss

236

(204)

(Millions of yen)

Fiscal year
Fiscal year
ended March 31, ended March 31,
2022
2023
1,299

Note: Retirement benefit expenses are included in service cost at
consolidated subsidiaries using the simplified method.
(5) Remeasurements of defined benefit plans, net of tax
Breakdown of remeasurements of defined benefit plans, net oftaxes, is as shown below.

(Millions of yen)

Fiscal year
Fiscal year
ended March 31, ended March 31,
2022
2023
Prior service costs

(5)

(3)

Actuarial gains and losses

(810)

(585)

Total

(816)

(589)

(6) Remeasurements of defined benefit plans
Breakdown of items posted as remeasurements of defined
benefit plans (before deduction of tax effect) is as follows:(Millions of yen)

As of March 31,2022

As of March 31,
2023

Employer contribution

125

173

Retirement benefits paid

(179)

(74)

Exchange adjustments

380

262

Unrecognized prior service
costs

214

211

2,000

3,500

Unrecognized actuarial gains
and losses

293

(292)

31

136

Total

507

(81)

5,538

9,473

Amount of retirement benefit
trust
OthersPlan assets at end of period(3) Reconciliation of retirement benefit obligation and plan assets
with net retirement benefit liabilities and assets reflected on the
consolidated balance sheets(7) Pension plan assets(i) Breakdown of plan assets
The ratios of each of the major categories to total pension
assets are as follows:(Millions of yen)

As of March 31,2022

As of March 31,
2023

Stocks

19.4%

12.2%

Bonds

13.0%

8.9%

(9,473)

Cash and deposits

38.1%

1.4%

(511)

(3,955)General account in life
insurance

27.1%

18.6%

20,792

20,527

Investment trusts

‒

57.0%

As of March 31,2022

As of March 31,
2023

Defined benefit obligation for
funded plan

5,027

5,518

Plan assets(5,538)Retirement benefit obligation
for unfunded plan
Net amount of liabilities andassets on the consolidatedbalance sheets

20,281

16,572Retirement benefit liability

20,281

16,572

Net amount of liabilities andassets on the consolidatedbalance sheets

20,281

16,572Others

2.4%

1.9%

Total

100.0%

100.0%

Note: Of total plan assets, the retirement benefit trust for the fiscal
year ended March 31, 2023, accounts for 57.0%.
(ii) Method for setting expected long-term rate of return
To determine the expected long-term rate of return on pension
plan assets, the Company takes into consideration the current
and expected pension plan asset mix and expected long-term
rates of return on a variety of pension plan assets.

60

As of March 31, 2022

(8) Basis for the calculation of actuarial gains and losses
Major assumptions for the calculation of actuarial gains andlosses (weighted average)
As of March 31,2022

As of March 31,
2023

Discount rate

0.32%–3.45%

0.32%–4.85%

Expected long-term rate of
return

0.15%–4.00%

0.15%–4.00%

3. Defined Contribution Plan
The required contribution amounts for the Company and its
consolidated subsidiaries were 1,172 million yen and 1,174 million
yen for the fiscal years ended March 31, 2022 and 2023,
respectively.

Tax losses
carriedforward*Valuation
allowance
Deferredtax assets(Millions of yen)

As of March 31,2022

As of March 31,
2023

Depreciable assets

4,472

4,011

Inventory write-down andunrealized gain

4,745

5,147

Retirement benefit liability

6,233

5,793

408

383

Deferred tax assets

Allowance for doubtful
accounts
Provision for bonuses

1,631

1,644

Losses carried forward (Note)

10,214

10,435Investment securities

2,086

2,032

107

15

Provision for loss on businessreorganization and liquidation
Others

6,398

6,907

Deferred tax assets subtotal

36,29936,371

Valuation allowance related to
tax losses carried forward(Note)(9,398)(9,565)

Valuation allowance related todeductible temporary
differences(17,414)(17,790)

Valuation allowance subtotal(26,813)(27,355)

9,485

9,015

Total deferred tax assets
Deferred tax liabilities
Valuation difference on
available-for-sale securities(2,326)(2,780)

Undistributed profits ofoverseas affiliated companies(3,510)(3,831)

Reserve for special
depreciation

(168)

(164)

Others

(357)

(286)

Total deferred tax liabilities(6,362)(7,062)

Net deferred tax assets

3,122

1,953

Note: Tax losses carried forward and the related deferred tax
assets allocated to each fiscal year when carryforwards
expired.

61

Total

419

224

274

273

176

(276)

(184)

(238)

(273)

(176) (8,248) (9,398)

142

40

35

‒

‒

8,846 10,214

597

816

* The tax losses carried forward is an amount obtained bymultiplying the effective statutory tax rate.
As of March 31, 2023

(Millions of yen)Over 1 Over 2 Over 3 Over 4
year
years
years
years Over 5
Within
but
but
but
but
1 yearyears
within within within within
2 years 3 years 4 years 5 years(Tax Effect Accounting)
1. Breakdown of Key Factors Contributing to Deferred Tax
Assets and Deferred Tax Liabilities(Millions of yen)Over 1 Over 2 Over 3 Over 4
year
years
years
years
WithinOver 5
but
but
but
but
1 yearyears
within within within within
2 years 3 years 4 years 5 years

Tax losses
carriedforward*Valuation
allowance
Deferredtax assets

Total

271

295

300

214

216

(161)

(254)

(282)

(214)

(216) (8,436) (9,565)

110

41

18

‒

‒

9,137 10,435

700

870

* The tax losses carried forward is an amount obtained bymultiplying the effective statutory tax rate.

2. Breakdown of Major Items That Caused a Significant
Difference Between an Effective Statutory Tax Rate and a
Percentage of Income Taxes After the Application of Tax
Effect Accounting

Statutory tax rate
(Adjustments)
Expenses not deductible fortax purposes
Dividends income, etc., that is
excluded from taxable income
Change in valuation allowance
Differences in tax rates
between the parent andsubsidiaries
Increase/decrease in amountof tax consequences
pertaining to overseas
retained earnings
OthersPercentage of effective income
tax rate after the application oftax effect accounting

As of March 31,2022

As of March 31,
2023

30.6%

30.6%

0.2%

0.3%

(0.1%)(0.1%)(11.9%)

2.8%(3.3%)(4.0%)(2.2%)(1.1%)

2.7%(3.0%)

16.0%

25.5%

3. Accounting Method for Income Taxes and Local
Corporate Taxes or Accounting Method for the Related
Tax Effect Accounting
The Company and certain domestic consolidated subsidiaries areusing the Group Tax Sharing System from the fiscal year underreview. Their accounting for income taxes and local corporate taxes
and the related tax effect accounting and disclosure are inaccordance with the Practical Solution on the Accounting andDisclosure Under the Group Tax Sharing System (Practical Issues
Task Force No. 42 issued on August 12, 2021).
(Revenue Recognition)
1. Information on the Breakdown of Revenue fromContracts with Customers
Fiscal year ended March 31, 2022
(Millions of yen)

Watches

Electronics
Machine Devices andand Other
Tools
Components
Products

Total

Japan

24,152

17,233

24,954

8,015

74,346

Asia

37,71527,81917,405

4,739

87,681

U.S.

48,798

7,726

3,554

2,445

62,525

Europe18,11327,441

4,091

3,939

53,585

Others

2,292

800

39

74

3,207

131,072

81,01150,045

19,215281,344

Revenuefromcontractswithcustomers
Otherrevenue
Sales toexternalcustomers

to delivery of products and when consideration for transactions
accompanying sales of products is received as advances in alump sum in relation to membership-based inspection services in
the watches segment. Contract liabilities are reversed as revenue
is recognized.
The amount of revenue recognized in the previous fiscal year
under review included in the balance of contract liabilities at the
beginning of the fiscal year is 912 million yen.
(2) Transaction prices allocated to outstanding performanceobligations
The Company and its consolidated subsidiaries apply thepractical expedient to notes on the transaction prices allocated to
outstanding performance obligations, and information withrespect to contracts that have an original expected duration of
one year or less is not included in the scope of notes. The sum oftransaction value allocated to remaining performance obligations
and the period of expected income recognition are as follows:(Millions of yen)

‒

‒

‒

72

72

131,072

81,01150,045

19,288281,417

Note: Other income comprises real estate rents, etc.

Fiscal year ended March 31, 2022

Within 1 year

116

Over 1 year

423

Total

540

(1) Balance of contract liabilities

Fiscal year ended March 31, 2023

(Millions of yen)

(Millions of yen)

Watches

Fiscal year ended March 31, 2023

Electronics
Machine Devices andand Other
Tools
Components
Products

Total

Balance at beginningof period

Japan

25,194

19,68522,175

9,385

76,440Asia

33,39025,96014,794

4,714

78,859U.S.

66,015

8,397

3,413

2,599

80,426

Europe23,40430,918

4,318

3,645

62,287

Others

1,997

1,209

35

48

3,291

150,00286,17144,737

20,392

301,305

‒

‒

‒

61

61

150,00286,17144,737

20,454

301,366

Revenuefromcontractswithcustomers
Otherrevenue
Sales toexternalcustomers

Note: Other income comprises real estate rents, etc.

2. Basic Information for Understanding Revenue fromContracts with Customers
Underlying information for understanding income is as stated in (6)Accounting standards for income and expenses and 4. Mattersrelated to accounting policies.

3. Information About the Relationship Between the
Fulfillment of Performance Obligations Based on theContract with the Customer and the Cash Flow
Generated from the Contract, and the Amount of
Revenue Expected to Be Recognized from the Contract
with the Customer Existing at the End of the Current
Fiscal Year After the Next Fiscal Year and the Timing of
Cash Flows

Contract liabilities

Balance at endof period

2,071

2,360

Contract liabilities are presented under “Other” in current
liabilities in the consolidated balance sheet. Contract liabilities
are recognized mainly when consideration for transactions
accompanying the sale of products is received as advances prior
to delivery of products and when consideration for transactions
accompanying sales of products is received as advances in alump sum in relation to membership-based inspection services in
the watches segment. Contract liabilities are reversed as revenue
is recognized.
The amount of revenue recognized in the fiscal year under review
included in the balance of contract liabilities at the beginning of
the fiscal year is 1,648 million yen.
(2) Transaction prices allocated to outstanding performanceobligations
The Company and its consolidated subsidiaries apply thepractical expedient to notes on the transaction prices allocated to
outstanding performance obligations, and information withrespect to contracts that have an original expected duration of
one year or less is not included in the scope of notes. The sum oftransaction value allocated to remaining performance obligations
and the period of expected income recognition are as follows:(Millions of yen)
Fiscal year ended March 31, 2023

Within 1 year

123

Over 1 year

382

Total

505

(1) Balance of contract liabilities(Millions of yen)
Fiscal year ended March 31, 2022

Balance at beginningof period
Contract liabilities

1,376

Balance at endof period
2,071

Contract liabilities are presented under “Other” in current
liabilities in the consolidated balance sheet. Contract liabilities
are recognized mainly when consideration for transactions
accompanying the sale of products is received as advances prior(Segment Information)
1. Outline of Reportable Business 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.

62

Consequently, the Citizen Group, starting from a foundation ofoperating companies, manages its businesses through four
reportable segments—Watches, Machine Tools, Devices andComponents, and Electronic products—based on factors likesimilarity of types and characteristics of products.
Each segment and its major products are as shown below.
Segment

Net sales

Watches

Watches, Movements

Machine Tools

CNC lathes

Devices andComponents

Auto parts, Quartz crystals, Motors, Chip LEDs

Electronics andOther Products

Printers, Health care equipment, etc.

2. Method for Calculating Sales, Profit/Loss, Assets,
Liabilities, and Other Items for Reportable Segments

3. Net Sales, Profit or Loss, Assets, Liabilities, and Other
Items by Reportable Segment(Millions of yen)

MachineTools

Watches

Electronics
Devices andand Other
Components
Products

Net sales
Sales to externalcustomers
Inter-segment
sales and transfers

131,072

81,01150,045

19,288

83

60

1,479

669
19,958

Total

131,155

81,071

51,525

Segment income

10,305

12,591

2,864

1,172

Segment assets

169,526

82,90475,206

20,455

4,382

1,917

3,638

261

‒

4,732

‒

‒

Other items
Depreciation
Investment inequity method
affiliates
Increase inproperty, plantand equipment
and intangible
assetsSales to externalcustomers

281,417‒

281,417

Inter-segment
sales and transfers

2,292(2,292)‒
281,417

Total

283,710(2,292)

Segment income

26,934(4,661)

22,273

Segment assets

348,092

46,870394,962

Depreciation

10,199992

11,191

Investment inequity method
affiliates

4,732

‒

4,732

Increase inproperty, plantand equipment
and intangible
assets

10,462

307

10,770

Other items

The accounting methods applied to the business segments
reported are generally the same as those described under Basis of
Presenting the Consolidated Financial Statements.
Reportable segment income is based on operating profit.
Inter-segment earnings and transfers are based on market prices.

Fiscal year ended March 31, 2022

Adjustments(Note 1)

Total

Major products

Notes: 1.The following is descriptions of the adjustments.
(1) The 4,661 million yen negative adjustment to segment
income (operating profit) includes 121 million yen ininter-segment eliminations and 4,782 million yen incorporate expenses that could not be allocated to aparticular segment.
(2) The 46,870 million yen positive adjustment to segment
assets includes 73,692 million yen in corporate assetsthat could not be allocated to a particular segment
and 26,821 million yen to eliminate inter-segment
obligations.
(3) Depreciation cost adjustments apply to the entire
company.
(4) The adjusted increases in property, plant andequipment and intangible assets apply to the entire
company.
2.Segment income is adjusted with operating profit on the
consolidated financial statements.
Fiscal year ended March 31, 2023

3,371

3,431

Amount posted
in theconsolidated
financialstatements(Note 2)

3,277

381

(Millions of yen)

MachineTools

Watches

Electronics
Devices andand Other
Components
Products

Net sales
Sales to externalcustomers
Inter-segment
sales and transfers

150,00286,17144,737

20,454

94

236

1,369

630
21,084

Total

150,097

86,408

46,107

Segment income

16,632

12,203

(818)

1,145

Segment assets

189,683

92,622

66,362

21,233

Other items
Depreciation

63

4,239

2,203

3,355

306

Investment inequity method
affiliates

‒

5,437

‒

‒

Increase inproperty, plantand equipment
and intangible
assets

5,235

8,493

2,012

614

3. Information by Major Customer
Amount posted
in theconsolidated
financialstatements(Note 2)Adjustments(Note 1)

Total

There is no information to state because net sales to any particularoutside customer do not account for 10% or more of net sales on
the consolidated statement of income.
Fiscal year ended March 31, 2023

1. Information by Product/Service

Net sales
Sales to externalcustomers

301,366‒

301,366

Inter-segment
sales and transfers

2,331(2,331)‒

Total

303,697(2,331)

301,366

Segment income

29,162(5,454)23,708Segment assets

369,901

20,080389,982

Other items
Depreciation

10,105

1,094

11,200Investment inequity method
affiliates

5,437

‒

5,437

This information is omitted because the same information isdisclosed in the segment information section.

2. Information by Region(1) Net sales(Millions of yen)

Asia

U.S.
Of
which, Europe Others
theUnitedStatesOf
which,
China

Japan

76,502 78,859 53,747 80,426 67,410 62,287

16,356

1,071

17,428(2) Property, plant and equipment(Millions of yen)

Notes: 1.The following is descriptions of the adjustments.
(1) The 5,454 million yen negative adjustment to segment
income (operating profit) includes 133 million yen ininter-segment eliminations and 5,588 million yen incorporate expenses that could not be allocated to aparticular segment.
(2) The 20,080 million yen positive adjustment to segment
assets includes 52,217 million yen in corporate assetsthat could not be allocated to a particular segment
and 32,136 million yen to eliminate inter-segment
obligations.
(3) Depreciation cost adjustments apply to the entire
company.
(4) The adjusted increases in property, plant andequipment and intangible assets apply to the entire
company.
2.Segment income is adjusted with operating profit on the
consolidated financial statements.

Asia
Japan
47,832

19,631

7,996

12,057

79,521

There is no information to state because net sales to any particularoutside customer do not account for 10% or more of net sales on
the consolidated statement of income.
Impairment Loss on Non-Current Assets by Reportable
Segment
Fiscal year ended March 31, 2022

(Millions of yen)
Devices

WatchesandMachine
Tools
Compo-

Impairment
loss

Fiscal year ended March 31, 2022

Fiscal year ended March 31, 2023

This information is omitted because the same information isdisclosed in the segment information section.

365

221

132

Electronics
Corporate/
and Otherelimination
Products

Total

22

742

‒

(Millions of yen)
Devices

Watches

Electronics
andMachineCorporate/
and OtherTools
elimination
CompoProducts

Total

nents

2. Information by Region(1) Net sales(Millions of yen)

Asia

Total

3. Information by Major Customer(Reference Information)
1. Information by Product/Service

OthersOf which,
Thailandnents

Impairment
loss

146

‒

3,740

‒

‒ 3,887

U.S.
Of
which, Europe Others
theUnitedStatesOf
which,
China

74,418 87,681 63,966 62,525 51,593 53,585

Total

3,207 281,417

Note: Net sales are based on the geographical area of thecustomers and categorized by country or region.
(2) Property, plant and equipment(Millions of yen)

Asia
Japan
47,607

3,291 301,366

Note: Net sales are based on the geographical area of thecustomers and categorized by country or region.

Increase inproperty, plantand equipment
and intangible
assets

Japan

Total

Of which,
Thailand
20,032

8,016

Others
7,222

Total

Information Related to Amortization of Goodwill andUnamortized Balance by Reportable Segment
Fiscal year ended March 31, 2022
Not applicable.
Fiscal year ended March 31, 2023
Not applicable.
Information on Negative Goodwill Generated for Each
Reportable Segment
Fiscal year ended March 31, 2022
Not applicable.
Fiscal year ended March 31, 2023
Not applicable.

74,86264

Related Party Information
Fiscal year ended March 31, 2022
(1) Transactions between the company submitting consolidated
financial statements and related parties
No applicable significant matter.
(2) Transactions between consolidated subsidiaries of the company
submitting consolidated financial statements and related parties
No applicable significant matter.
Fiscal year ended March 31, 2023
(1) Transactions between the company submitting consolidated
financial statements and related parties
No applicable significant matter.

(Significant Subsequent Events)(2) Transactions between consolidated subsidiaries of the company
submitting consolidated financial statements and related parties
No applicable significant matter.

(Per Share Information)
Fiscal year
Fiscal year
ended March 31, ended March 31,
2022
2023
Net assets per share

768.92 yen

866.68 yen

Earnings (loss) per share

71.38 yen75.25 yen

The basis for calculation of earnings (loss) per share is as shown
below.
Fiscal year
Fiscal year
ended March 31, ended March 31,
2022
2023
Earnings (loss) per share
Profit (loss) attributable toowners of parent (Millions ofyen)

22,14021,836‒‒

Profit (loss) attributable toowners of parent in relation tocommon shares (Millions ofyen)

22,14021,836

Average number of shares ofcommon stock outstanding
during the period (thousand
shares)

310,189

Amount not attributed tocommon shareholders(Millions of yen)

(Cancellation of Treasury Shares)
The Company resolved at a meeting of the Board of Directors heldon June 21, 2023, to retire treasury stock in accordance with theprovisions of Article 178 of the Companies Act. Details are as
follows:
1. Type of shares to be cancelled
Common shares of the Company
2. Total number of shares to be cancelled
48,000,000 shares (Percent of the total number of shares
outstanding before cancellation: 16.33%)
3. The total number of outstanding shares after cancellation
246,000,000 shares
4. Scheduled date of cancellation
July 30, 2023

(Issuance of Bonds)
At a meeting of the Board of Directors held on June 21, 2023, theCompany passed a comprehensive resolution on issuance ofdomestic unsecured straight bonds.
The overview is as follows:
1.Class of bond: domestic unsecured straight bond

290,183

2.Total amount of bonds for subscription: 10 billion yen maximum(multiple issues are possible within the limit)
3.Time of issuance: from September 1, 2023, to September 30,
2023

The basis for calculating net assets per share is as follows:

4.Interest rate: the comparable government bond yield +1.0% or
less

As of March 31,2022

As of March 31,
2023

Net assets (Millions of yen)

238,673

232,775

Amount deducted from total
net assets (Millions of yen)

9,367

8,596

6.Maturity: five years or lessNon-controlling interests(Millions of yen)

(9,367)(8,596)

Net assets related to commonshares at the end of the fiscal
year (Millions of yen)

229,305

224,179

7.Method of redemption: redemption in a lump sum at maturity (aretirement by purchase clause or an advanced redemption clausemay be added)

Number of common shares at
end of term used in thecalculation of net assets per
share (thousand shares)

298,215

5.Amount to be paid: 100 yen per 100 yen of each bond

8.Special financial provision: There will be a limitation on a pledgeof security provision.
258,665

The computation of the amount of net assets per share isbased on the number of shares calculated by deducting
the number of treasury shares at the end of a term andthe number of shares owned under the BIP Trust at theend of the term from the total number of outstanding
shares at the end of that term. The calculation of earnings
per share or loss per share is based on the number ofshares calculated by deducting the average number of65

treasury shares during a term and the average number ofshares owned under the BIP Trust during the said termfrom the average total number of outstanding shares
during the said term.
The average number of the Company’s shares owned
under the BIP Trust for the previous consolidated fiscal
year was 373,686 and the number of the Company’s
shares at the end of the fiscal year was 373,362. The
average number of the Company’s shares owned underthe BIP Trust for the consolidated fiscal year under review
was 408,352 and the number of the Company’s shares atthe end of the fiscal year was 483,762.

9.Use of proceeds: redemption of bonds
10.Decisions on matters set out in each item of Article 676 of theCompanies Act and other necessary matters are left to thediscretion of the director in charge of accounting, including thetotal amount of bonds for subscription to be issued, interest rate,
amount to be paid, maturity, and subscription application period
for each issuance within the aforementioned limit.

Consolidated Supplementary Schedules
Bonds Schedule
Balance atBalance at end
beginning ofof period
period (Millions(Millions of yen)of yen)Company nameStock

Date ofissuance

Interest rate(%)

Citizen Watch
Co., Ltd.

3rd unsecured
bonds

September 25,
2018

10,00010,000

0.130

Total

‒

‒

10,00010,000‒Collateral

Maturity date

None

September 25,
2023

‒

‒

Note: The scheduled amount of depreciation for five years from the consolidated account settlement date is as follows:(Millions of yen)

Within 1 year
10,000Over 1 year but
within 2 years

Over 2 years but
within 3 years‒

Over 3 years but
within 4 years‒‒

Over 4 years but
within 5 years‒

Borrowings Schedule
Balance at end of
period(Millions of yen)

Averageinterest rate (%)

Due date

911

2,602

1.6

‒

3,862

1,185

0.4

‒

Current portion of lease liabilities

295

1,164

‒

‒

Long-term borrowings (excluding
current portion of long-termborrowings)

51,382

51,3280.4

2024–2039

Lease liabilities (excluding current
portion of lease liabilities)

790

4,679

‒

2024–2065

‒

‒

‒

‒

57,24160,960‒‒Category

Balance at beginning of
period(Millions of yen)

Short-term borrowings
Current portion of long-termborrowings

Other interest-bearing debt
Total
Notes:

1.The average number for the period is used to calculate the average rate.
2.The average interest rate for lease obligations is not stated because lease obligations before the deduction of interest included in total lease
payments are posted in the consolidated balance sheets.
3.Lease obligations are accounted for by including the amounts in Other (current liabilities) and Other (non-current liabilities).
4.Long-term borrowings and lease liabilities (excluding the current portion of them) scheduled to be repaid within five years of the end of the
fiscal year are as shown below.
(Millions of yen)

Category

Over 1 year but
within 2 years

Over 2 years but
within 3 years

Over 3 years but
within 4 years

Over 4 years but
within 5 years

Long-term borrowings

10,067

15,064

10,064

16,045

Lease liabilities

1,142

947

682

582

Asset Retirement Obligations Schedule
The amount of asset retirement obligations at both the beginning and end of the fiscal year ended March 31, 2023, are less than 1% of
the combined total of liabilities and net assets at the beginning and end of the fiscal year ended March 31, 2023, and so have been
omitted in accordance with Article 92-2 of the Regulations for Consolidated Financial Statements.

Other
Quarterly information in the fiscal year under review(Cumulative period)

Fiscal year ended
March 31, 2023

1st quarter2nd quarter3rd quarter

Net sales (Millions of yen)

71,358

147,695

230,178

301,366

Profit (loss) before income taxes(Millions of yen)

10,22017,752

25,10528,240

Profit (loss) attributable to ownersof parent (Millions of yen)

7,260

12,645

19,697

21,836

Earnings (loss) per share (yen)

24.72

43.15

67.26

75.25

1st quarter2nd quarter3rd quarter

4th quarter

24.72

18.42

24.12

7.58

(Accounting period)
Earnings per share (yen)66English Translation

INDEPENDENT AUDITOR’S REPORT

June 28, 2023
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

OpinionPursuant to Article 193-2, paragraph 1 of the Financial Instruments and Exchange Law of Japan, we have audited theconsolidated financial statements of Citizen Watch Co., Ltd. and its subsidiaries (the Group), which comprise the consolidatedbalance sheet as at March 31, 2023, and the consolidated statements of income, comprehensive income, changes in net
assets and cash 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, 2023, and its consolidated financial performance and its consolidated cash flows
for the year then ended in accordance 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 thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements sectionof our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of
the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient 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 most significance 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 these matters.

67

Impairment of Long-lived Assets in the Device Division
Description of Key Audit Matter

How the Key Audit Matter Was Addressed in the Audit

As disclosed in the consolidated income statement and thenotes to consolidated income statement (*8 impairment
loss) and segment information, an impairment loss of JPY
3,887 million was recorded in the consolidated income
statement for the year ended March 31, 2023 for assets thatare not expected to be used in the future and businessassets with deteriorated profitability, of which JPY 3,740
million was recorded in the Device Division.
The Company examines the need to recognize an
impairment loss for the assets or the asset group that has
been determined to show signs of impairment. When it isdetermined that an impairment loss should be recognized,
the Company reduces the carrying amount to therecoverable amount and records the decrease as an
impairment loss. As the net selling price exceeds the value
in use for the assets or the asset group, the recoverable
amount is measured based on the net selling price.
In the calculation of the net selling price for real estate, thereal estate appraisal value calculated by a real estateappraiser who is an external appraisal expert is used, andthe value includes professional judgment. In addition, forassets other than real estate, estimation methods andimportant assumptions are subject to subjective judgmentby management.
Based on the aforementioned factors, we identified the
impairment of long-lived assets as a key audit matter.

We performed the following audit procedures in examining
the impairment of long-lived assets:• Evaluated the design and tested the operating
effectiveness of internal controls over the signs,
recognition and measurement of impairment loss,• Interviewed management on the market environment andfuture prospects,• Reviewed the materials prepared by the Company thatwere used to assess signs and recognition of impairment,
as well as to measure it, and compared them with theunderlying supporting documentation,• Conducted field visits to assess the validity of theCompany's views on the operating status of long-lived
assets, etc.,• Verified future cash flows for consistency with businessplans approved by management, and evaluated theaccuracy of management's estimates by comparing thebusiness plans in previous years with their results, and• In the calculation of the net selling price for real estate,evaluated the aptitude, ability and objectivity of the realestate appraiser used by management as an expert, andthe suitability of the assumptions and methods used in thework of the expert, and, for assets other than real estate,evaluated the management's choice of estimation
method, important assumptions, and the appropriatenessof the calculated valuation by checking with the relevant
data on which they are based.

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

How the Key Audit Matter Was Addressed in the Audit

Merchandise and finished goods of JPY 58,604 million wererecorded in the consolidated balance sheet for the year
ended March 31, 2023, and they account for 15.0% of thetotal assets, of which two thirds is the merchandise andfinished goods in the Watch Division.
Regarding a method of valuation of inventories held by the
Watch Division, as disclosed in the notes to importantaccounting estimate, the cost method based on the grossaverage method (for balance sheet values, the method of
write-down of book values based on the profitability
decline) is adopted. Also, in order to properly reflect the factof a decline in profitability, a method of regularly writing
down book values is adopted for slow-moving inventories orinventories that are expected to be disposed of, that are notincluded in the operating cycle, by setting a write-down ratio
for each item according to a certain duration.
This estimate was calculated based on internal inventory
disposal rules and historical data and thus needs
management’s judgment. Also, it is affected by changes in
the market environment and thus subject to uncertainty.
Based on the aforementioned factors, we identified thevaluation of inventories as a key audit matter.

We performed the following audit procedures to examine
the reasonableness of valuation of inventories held by the
Watch Division:• Evaluated the design and tested the operating
effectiveness of internal controls over the Company’s
inventory valuation process,• Evaluated the reasonableness of the method of
identifying slow-moving inventories related to profitability
decline and the method of calculating the write-down
ratio by examining historical data, and• Obtained the materials on the write-down of book values
prepared by the Company, tested the completeness ofinventories subject to the write-down, and examined theappropriateness of the write-down of book values byreviewing and recalculating related internal materials.

68Other Information
The other information comprises the information included in the Annual Securities Report, but does not include theconsolidated financial statements, the financial statements and our auditor’s reports thereon. Management is responsible forpreparation and disclosure of the other information. The Audit & Supervisory Board Member and the Audit & Supervisory
Board are responsible for overseeing the Group’s reporting process of the other information.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.

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 accordancewith accounting principles generally accepted in Japan, and 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 the Group’s ability to continue asa 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 for overseeing 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 freefrom 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 are considered 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, and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion.
• Consider internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances
for our risk assessments, while the purpose of the audit of the consolidated 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 theGroup’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’s report 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’sreport. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,69

and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves
fair presentation in accordance with accounting principles generally accepted in Japan.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervisionand 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 othermatters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies ininternal 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 mattersthat 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 ourreport because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefitsof 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 the provisions 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.

70https://www.citizen.co.jp/global

Front Cover Visual Concept

The regularly connected lines of the front cover visual represent the sophisticatedprecision technological capabilities of the CITIZEN Group, while the expanding circle ofdouble gradations represents a prosperous future leading to the next generation.

2023.8