Ticker Code: 7762 June 6, 2016

NOTICE OF THE 131st ORDINARY GENERAL MEETING OF SHAREHOLDERS

[Disclaimer: Please note that the following purports to be a translation from the original Japanese version prepared for the convenience of our shareholders with voting rights outside Japan for reference. In the case of any discrepancy between the translation and the Japanese original, the latter shall prevail.]

Dear shareholders,

You are cordially invited to attend the 131st Ordinary General Meeting of Shareholders of Citizen Holdings Co., Ltd. (the “Company”), which will be held as described below.

If you cannot attend on that day, you can exercise your voting right in either of the following ways. Please review “Reference Materials for the General Meeting of Shareholders” below and exercise your voting right by no later than 5:45 p.m. on Monday June 27, 2016.

[Exercise of voting right by mail] Indicate your approval or disapproval on the enclosed Voting Right Exercise Form and send it to us to arrive by the above deadline. [Exercise of voting right via the Internet] Please carefully access the website (http://www.evote.jp/) designated by the Company, follow the directions on the screen, and indicate your approval or disapproval by the above deadline. Note: Shareholders outside Japan shall not use these voting procedures.

Very truly yours,

Toshio Tokura President and CEO Citizen Holdings Co., Ltd. 6-1-12 Tanashi-cho, Nishitokyo, Tokyo

If you attend in person, please submit the enclosed Voting Right Exercise Form to the reception desk. In case of any revision to the Reference Materials for the General Meeting of Shareholders, the Business Report, or consolidated financial statements and non-consolidated financial statements, we will post the revision on our website.

Our website http://www.citizen.co.jp/english/ir/stocks/meeting.html

- 1 - 1. Time and Date: 10:00 a.m. on Tuesday, June 28, 2016 *Please come early to the venue as the reception area will be congested as it becomes close to the commencement of the meeting. The reception is scheduled to open at 9:00 a.m.

2. Place: HILTON TOKYO, 4F “Kiku Ballroom” 6-6-2, Nishi-Shinjuku, Shinjuku-ku, Tokyo 3. Agenda: Items to be reported: Item 1: Business Report, consolidated financial statements, and audit report on the consolidated financial statements by the Independent Auditors and Audit & Supervisory Board for the 131st term (April 1, 2015 to March 31, 2016) Item 2: Report on the non-consolidated financial statements for the 131st term (April 1, 2015 to March 31, 2016)

Items to be resolved: Item 1: Appropriation of Surplus Item 2: Partial Amendments to the Articles of Incorporation Item 3: Election of Nine (9) Directors Item 4: Election of Two (2) Audit & Supervisory Board Members Item 5: Approval for Renewal of the Policy for a Large-Scale Purchase of Citizen Shares (Anti-Takeover Measures)

- 2 - Reference Materials for the General Meeting of Shareholders

Item 1: Appropriation of Surplus The Company considers the distribution of profits to shareholders to be an extremely important management issue of the Company. The Company has made it a fundamental policy to keep the average of the “shareholder return ratio” (which is the percentage of total amount of dividends and treasury shares purchased to consolidated profit for the fiscal year under review) at 30% or more on a three year basis. As for the year-end dividend for the current fiscal year, thoroughly considering the above fundamental policy, performance for this fiscal year and future business development, the Company proposes a payment of 8.50 yen per share as shown below. This payment, combined with the interim dividend of 8.50 yen per share, will bring the total annual cash dividend for this fiscal year to 17.00 yen per share, an increase of 1.00 yen per share from the previous fiscal year. 1. Type of dividend Cash 2. Allotment and total amount of dividend 8.50 yen per common share of the Company Total amount of dividends: 2,705,489,812 yen 3. Effective date of dividends from surplus June 29, 2016

- 3 - Item 2: Partial Amendments to the Articles of Incorporation 1. Reasons for amendments (1) To push ahead with the “Citizen Global Plan 2018,” medium-term management plan and realize further growth of the entire Group driven by the core watches and clocks business while strengthening the head office functions, the Company has decided to make the transition to an operating holding company structure as of October 1, 2016 through a merger in which the Company is the surviving entity and Citizen Watch Co., Ltd. and Citizen Business Expert Co., Ltd. will be extinguished (hereinafter the “Merger”). Upon the Merger, the Company’s trade name will be changed from Citizen Holdings Co., Ltd. to Citizen Watch Co., Ltd. Accordingly, some necessary amendments will be made to the Article 1 of the current Articles of Incorporation. (2) The “Act for Partial Revision of the Act for Securing the Proper Operation of Worker Dispatching Undertakings and Protection for Dispatched Workers” (Act No. 73 of 2015), which took effect on September 30, 2015, eliminated the distinction between the “specified worker dispatching undertaking” and the “general worker dispatching undertaking.” In response to this development, the Company proposes to make necessary changes to Article 2 of the current Articles of Incorporation. 2. Contents of amendments The proposed amendments are as follows: The resolution concerning the amendment to Article 1 will take effect on the effective date of the Merger on condition that the Merger has taken effect. (Amendments are indicated below with underlines.) Current Articles Proposed Amendments Article 1 (Trade Name) Article 1 (Trade Name) The Company shall call itself Citizen Holdings The Company shall call itself Citizen Tokei Kabushiki Kaisha and write it as Citizen Kabushiki Kaisha and write it as Citizen Watch Holdings Co., Ltd. in English. Co., Ltd. in English. Article 2 (Purpose) Article 2 (Purpose) The purpose of the Company is to engage in the The purpose of the Company is to engage in the following businesses and to own shares or following businesses and to own shares or interest in companies or foreign companies that interest in companies or foreign companies that engage in the following businesses to control engage in the following businesses to control and manage their business activities: and manage their business activities: 1. Manufacture and sale of watches and 1. (The same as present) clocks and their parts; 2. Manufacture and sale of machine tools and 2. (The same as present) other tools; 3. Manufacture and sale of measuring 3. (The same as present) instruments; 4. Manufacture and sale of cameras and their 4. (The same as present) parts; 5. Manufacture and sale of office appliances 5. (The same as present) and their parts;

- 4 - (Amendments are indicated below with underlines.) Current Articles Proposed Amendments 6. Operation and leasing of sports and 6. (The same as present) amusement facilities; 7. Sales, purchases and leasing of real estate 7. (The same as present) such as land and buildings and personal property attached thereto; 8. Manufacture and sale of electronic devices 8. (The same as present) and their parts; 9. Manufacture and sale, and import and 9. (The same as present) export of medical devices and their parts; 10. Manufacture and sale of toys, playing 10. (The same as present) equipment, and sporting and athletic goods; 11. Manufacture and sale of tableware; 11. (The same as present) 12. Manufacture and sale of jewelry, precious 12. (The same as present) metals, and related fashion accessories; 13. Manufacture and sale of glasses, optical 13. (The same as present) equipment, and their parts; 14. Manufacture and sale of plastic containers; 14. (The same as present) 15. Manufacture and sale of automotive parts; 15. (The same as present) 16. Travel agency business under the Travel 16. (The same as present) Agency Act; 17. Non-life insurance agency business and 17. (The same as present) business concerning the solicitation of life insurance; 18. General worker dispatching undertaking; 18. Worker dispatching undertaking; 19. Financial services; and 19. (The same as present) 20. Any businesses that are incidental to the 20. (The same as present) businesses listed in the preceding items.

- 5 - Item 3: Election of Nine (9) Directors The terms of office of all of the present seven (7) Directors will expire at the conclusion of this General Meeting of Shareholders. The Company has decided to make the transition to an operating holding company structure as of October 1, 2016 through a merger in which the Company is the surviving entity and Citizen Watch Co., Ltd. and Citizen Business Expert Co., Ltd. will be extinguished (hereinafter the “Merger”). Citizen Watch Co., Ltd. is an operating subsidiary playing a central role in the watches and clocks business of the Group. As of April 1, 2016, its business is executed by nine (9) Directors including four (4) Directors who concurrently serve as Directors of the Company and three (3) Operating Officers. Citizen Business Expert Co., Ltd. is mainly responsible for the operation and management of major places of business of the Group and business efficiency improvement through the provision of shared services. As of April 1, 2016, its business is executed by four (4) Directors including two (2) Directors who concurrently serve as Directors of the Company. Accordingly, in preparation for the transition to an operating holding company structure, the Company proposes to elect a total of nine (9) Directors, increasing the number of Directors by two (2). The candidates for the positions of Director are as follows: Number of the Name Career summaries, position and areas of responsibility in the Company, and No. Company’s (Date of birth) significant concurrent roles held at other corporations shares held April 1973 Joined Citizen Trading Co., Ltd. June 2002 Director of Citizen Trading Co., Ltd. October 2004 Operating Officer of the Company April 2007 Managing Director of Citizen Watch Co., Ltd. April 2009 Senior Managing Director of Citizen Watch Co., Ltd. June 2010 Managing Director of the Company June 2010 General Manager of Corporate Planning Division of the Company 12,256 June 2011 In charge of Corporate Planning Division, Intellectual Property Department and R&D Division of the Company 1 April 2012 President and CEO of the Company (present) March 2014 Director of Citizen Watch Co., Ltd. April 2014 President and CEO of Citizen Watch Co., Ltd. (present) Toshio Tokura (December 6, 1949) May 2015 Chairman of Japan Clock & Watch Association (JCWA) (present)

For reelection Reasons for nominating the candidate for Director Attendance at As President and CEO of the Company, Mr. Toshio Tokura has been Board of responsible for the management of the Citizen Group. In light of his Directors achievements in strong formulation and execution of “Citizen Global Plan meetings 2018,” the medium-term management plan, and his considerable experience and knowledge in all areas of corporate management, the Company believes he will 17/17 continue to contribute to the promotion of the Citizen Group business and (100%) nominated him as a candidate for Director.

- 6 - Number of the Name Career summaries, position and areas of responsibility in the Company, and No. Company’s (Date of birth) significant concurrent roles held at other corporations shares held April 1975 Joined the Company July 2000 Manager of Legal Department of General Affairs Division of the Company April 2007 General Manager of General Affairs Division of the Company June 2008 Director of Citizen Miyota Co., Ltd. (Currently CITIZEN FINEDEVICE CO., LTD.) June 2008 Director of Citizen Fine Tech Co., Ltd. June 2010 President of Citizen Finetech Miyota Co., Ltd. (Currently CITIZEN FINEDEVICE CO., LTD.) April 2012 Operating Officer of the Company April 2012 Director of Citizen Watch Co., Ltd. (present) 7,533 April 2012 In charge of Corporate Planning Division, Intellectual Property Department and R&D Division of the Company (present) 2 June 2012 Director of the Company (present) June 2013 Outside Director of Rhythm Watch Co., Ltd. Shigeru Kabata (present) (August 8, 1951) April 2014 In charge of Personnel Division of Citizen Watch Co., Ltd. (present)

For reelection April 2015 In charge of Personnel Division of the Company (present) April 2016 President and CEO of Citizen Business Expert Co., Ltd. (present) Reasons for nominating the candidate for Director Attendance at In light of Mr. Shigeru Kabata’s achievements in managing the Citizen Group’s Board of devices and components business as Director and President of Citizen Finetech Directors Miyota Co., Ltd. (Currently CITIZEN FINEDEVICE CO., LTD.) and meetings experience in promoting the Citizen Group’s management strategy and personnel strategy as Director of the Company and Citizen Watch Co., Ltd., the 17/17 Company believes he will continue to contribute to the promotion of the Citizen (100%) Group business and nominated him as a candidate for Director.

- 7 - Number of the Name Career summaries, position and areas of responsibility in the Company, and No. Company’s (Date of birth) significant concurrent roles held at other corporations shares held April 1982 Joined the Company March 2001 President of Citizen Machinery Asia Co., Ltd. August 2004 General Manager of Corporate Planning Division of CITIZEN PRECISION MACHINERY CO., LTD. March 2008 President of Citizen (ZIBO) Precision Machinery Co., Ltd. April 2008 Senior General Manager of Administration Center of CITIZEN MACHINERY CO., LTD. June 2008 President of Citizen Machinery Asia Co., Ltd. June 2008 President of Citizen Machinery Vietnam Co., Ltd. June 2008 Director of CITIZEN MACHINERY CO., LTD. March 2009 Outside Director of Miyano Machinery Japan Inc. 13,306 (Currently CITIZEN MACHINERY CO., LTD.) June 2010 Operating Officer of CITIZEN MACHINERY CO., 3 LTD. April 2011 Operating Officer of CITIZEN MACHINERY MIYANO CO., LTD. (Currently CITIZEN Keiichi Nakajima MACHINERY CO., LTD.) (August 14, 1958) April 2012 Director and Operating Officer of CITIZEN MACHINERY MIYANO CO., LTD. For reelection April 2013 President of CITIZEN MACHINERY MIYANO CO., LTD. (present) June 2013 Director of the Company (present) Reasons for nominating the candidate for Director Attendance at Mr. Keiichi Nakajima has mainly been involved in the Citizen Group’s machine Board of tools business, driving the Citizen Group’s overall machine tools business as Directors President of CITIZEN MACHINERY CO., LTD., and in light of his meetings achievements and experience in promoting the Company’s business strategy, 17/17 the Company believes he will continue to contribute to the promotion of the Citizen Group business and nominated him as a candidate for Director. (100%)

- 8 - Number of the Name Career summaries, position and areas of responsibility in the Company, and No. Company’s (Date of birth) significant concurrent roles held at other corporations shares held April 1981 Joined the Company May 2003 Director and General Manager of Technology Department of CITIZEN L.C. TEC CO., LTD. April 2005 Director and Head of Hachinohe plant of Citizen Displays Co., Ltd. June 2008 Managing Director of Citizen Displays Co., Ltd. August 2009 General Manager of R&D Division of the Company March 2012 Director of CITIZEN FINETECH MIYOTA CO., LTD. (Currently CITIZEN FINEDEVICE CO., 4,752 LTD.) April 2012 President of CITIZEN FINETECH MIYOTA CO., LTD. 4 June 2015 Director of the Company (present) April 2016 Director of Citizen Watch Co., Ltd. (present)

Toshihiko Sato April 2016 Responsible for Production, General Manager of (November 16, 1955) Product Development Division, and in charge of Quality Assurance Department of Citizen Watch For reelection Co., Ltd. (present) Reasons for nominating the candidate for Director Attendance at Mr. Toshihiko Sato has mainly been involved in the Citizen Group’s devices Board of and components business, and in light of his achievements and experience in Directors being responsible for the management of the Citizen Group’s devices and meetings components business as Director and President of CITIZEN FINETECH MIYOTA CO., LTD. (Currently CITIZEN FINEDEVICE CO., LTD.), the 13/13 Company believes he will continue to contribute to the promotion of the Citizen (100%) Group business and nominated him as a candidate for Director.

- 9 - Number of the Name No. Career summaries, position and areas of responsibility in the Company, and Company’s (Date of birth) significant concurrent roles held at other corporations shares held April 1981 Joined the Company October 2004 General Manager of Strategic Planning Department, Marketing Division, Watch Business Center of the Company November 2005 Assigned to Marketing Division, Watch Business Center of the Company (assigned to Germany) April 2007 Assigned to CB Business Division of Citizen Watch Co., Ltd. (assigned to Germany) June 2010 Operating Officer of Citizen Watch Co., Ltd. June 2010 Senior General Manager of Watch Business Control Center of Citizen Watch Co., Ltd. July 2010 Senior General Manager of Planning Center of Citizen Watch Co., Ltd. June 2011 Director of Citizen Watch Co., Ltd. (present) September 2011 Senior General Manager of Strategic Planning Center of Citizen Watch Co., Ltd. June 2012 Senior General Manager of Citizen Brand Business Center of Citizen Watch Co., Ltd. January 2013 Representative Director of Citizen Watch Europe GmbH (present) 5 October 2013 General Manager of Citizen Brand Center of Citizen 1,937 Watch Co., Ltd. (present) Norio Takeuchi May 2014 President of Citizen Watch España, S.A. (present) (August 31, 1958) June 2014 President of Citizen Watch Italy S.p.A. (present) October 2014 Chairman of Citizen Watch Company of America, For new election Inc. (present) October 2014 Chairman of Citizen Watch Company of Canada, Ltd. (present) October 2014 Chairman of Citizen Watch United Kingdom Limited. (present) January 2015 In charge of Design Division of Citizen Watch Co., Ltd. (present) April 2016 Citizen Brand Manager and in charge of BULOVA Department of Citizen Watch Co., Ltd. (present) Reasons for nominating the candidate for Director In light of Mr. Norio Takeuchi’s achievements in promoting the business plan, sales strategy, and brand strategy in the Citizen Group’s watches and clocks business as Operating Officer and Director of Citizen Watch Co., Ltd. and his experience in managing the overseas subsidiaries responsible for watch and clock sales, the Company believes he will contribute to the promotion of the Citizen Group business and newly nominated him as a candidate for Director.

- 10 - Number of the Name Career summaries, position and areas of responsibility in the Company, and No. Company’s (Date of birth) significant concurrent roles held at other corporations shares held April 1981 Joined the Company April 2003 Assigned to Overseas Trade Division of Citizen Trading Co., Ltd. (assigned to Germany) April 2007 General Manager of MB Business Division of Citizen Watch Co., Ltd. October 2007 General Manager of Sales Planning Division, Domestic Watch Business Division of Citizen Watch Co., Ltd. April 2009 Operating Officer of Citizen Watch Co., Ltd. April 2009 General Manager of Domestic Watch Business Division of Citizen Watch Co., Ltd. June 2010 Director of Citizen Watch Co., Ltd. (present) June 2012 Chairman of Citizen Watch Company of America, Inc. 6,143 6 June 2012 Chairman of Bulova Corporation January 2015 Senior General Manager of Global Marketing Fusamitsu Natori Division of Citizen Watch Co., Ltd. (present) (May 3, 1957) April 2015 In charge of Movement Division of Citizen Watch Co., Ltd. (present) For new election October 2015 President of CITIZEN RETAIL PLANNING., LTD. (present) Reasons for nominating the candidate for Director Mr. Fusamitsu Natori has mainly been involved in overseas sales in the Citizen Group’s watches and clocks business, and in light of his experience in managing sales subsidiary in the United States as Chairman and his achievements being in charge of the Global Marketing Division and Movement Division as Director of Citizen Watch Co., Ltd., the Company believes he will contribute to the promotion of the Citizen Group business and newly nominated him as a candidate for Director.

Number of the Name Career summaries, position and areas of responsibility in the Company, and No. Company’s (Date of birth) significant concurrent roles held at other corporations shares held April 1986 Joined the Company March 1993 Assigned to Products Marketing Division of the Company (assigned to New York, U.S.A.) April 2009 Manager of Investor and Public Relations Department of the Company July 2010 Deputy General Manager of Corporate Planning Division of the Company June 2011 General Manager of Corporate Planning Division of the Company April 2015 Director of Citizen Watch Co., Ltd. (present) April 2015 General Manager of Management Planning 7 Department and in charge of Accounting Department 4,778 of Citizen Watch Co., Ltd. (present)

Toshiyuki Furukawa April 2016 President and CEO of Citizen Financial Service Co., (January 19, 1963) Ltd. (present) Reasons for nominating the candidate for Director

In light of Mr. Toshiyuki Furukawa’s achievements in formulating the Citizen For new election Group’s management strategy as General Manager of the Company’s Corporate Planning Division and experience being in charge of the Corporate Planning Department and Accounting Division of Citizen Watch Co., Ltd. after being involved in the Company’s investor dialogue and public relations strategy as General Manager of the Company’s Investor and Public Relations Department, the Company believes he will contribute to the promotion of the Citizen Group business and newly nominated him as a candidate for Director.

- 11 - Number of the Name Career summaries, position and areas of responsibility in the Company, and No. Company’s (Date of birth) significant concurrent roles held at other corporations shares held June 2000 Corporate Officer of TOTO Kiki Ltd. (Currently TOTO LTD.) June 2001 Corporate Officer and Director of TOTO Kiki Ltd. June 2002 Executive Officer and Director of TOTO Kiki Ltd. June 2006 Senior Executive Officer and Director of TOTO Kiki Ltd. 10,000 April 2009 Executive Vice President and Representative 8 Director of TOTO LTD. Kenji Ito June 2013 Adviser of TOTO LTD. (present) (October 5, 1950) June 2013 Outside Director of the Company (present) Reasons for nominating the candidate for Outside Director Attendance at For reelection Board of To utilize his considerable experience in and extensive knowledge of Directors management to check and supervise the Company’s management and in light of meetings Candidate for Outside his achievements as an Outside Director of the Company, the Company again nominated him as a candidate for Outside Director. 17/17 Director (100%)

Number of the Name Career summaries, position and areas of responsibility in the Company, and No. Company’s (Date of birth) significant concurrent roles held at other corporations shares held June 1996 President, Shiseido International France SAS December 2000 President & Representative Director, Shiseido Kako Co., Ltd. June 2003 Director, Corporate Officer of Shiseido Company, Limited 3,000 April 2006 Director, Corporate Executive Officer of Shiseido Company, Limited April 2009 Director, Corporate Senior Executive Officer of 9 Shiseido Company, Limited Masaaki Komatsu June 2012 Outside Director of Ryosan Company, Limited (January 4, 1947) June 2015 Outside Director of the Company (present)

For reelection Reasons for nominating the candidate for Outside Director Attendance at Board of To utilize his considerable experience in and extensive knowledge of Directors management to check and supervise the Company’s management and in light of Candidate for Outside meetings his achievements as an Outside Director of the Company, the Company again Director nominated him as a candidate for Outside Director. 13/13 (100%)

Notes: 1. Number of the Company’s shares held includes the shares held through the officers’ stock ownership plan. 2. No conflict of interest exists between the Company and any of the above candidates. 3. The activities of the candidates Mr. Toshihiko Sato and Mr. Masaaki Komatsu shown above were those during their term, for they were newly elected as Directors at the 130th Ordinary General Meeting of Shareholders held on June 25, 2015. 4. The candidates Mr. Kenji Ito and Mr. Masaaki Komatsu are candidates for Outside Directors of the Company. The Company has appointed them as Independent Officers defined by the Tokyo Stock Exchange and registered them with the Exchange as such. The term of office of Mr. Kenji Ito as Outside Director from his initial appointment will be three (3) years at the conclusion of this General Meeting of Shareholders. The term of office of Mr. Masaaki Komatsu as Outside Director from his initial appointment will be one (1) year at the conclusion of this General Meeting of Shareholders. The Company, pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act, has an agreement with each of the Outside Directors to limit their liability for damages under Article 423, Paragraph 1 of the Companies Act, in order to enable them to fully perform their duties as Outside Directors as expected, and if the reelection of these Outside Directors is approved at the meeting, the Company intends to continue the agreement. The amount of their total maximum liability for damages under such an agreement is the higher of 10,000,000 yen or the minimum liability amount provided for under the relevant laws and regulations.

- 12 - Item 4: Election of Two (2) Audit & Supervisory Board Members The terms of office of Audit & Supervisory Board Member Mr. Haruhisa Shiraishi and Mr. Masaomi Suizu will expire at the conclusion of this General Meeting of Shareholders. The Company accordingly proposes to elect two (2) Audit & Supervisory Board Members. The candidates for the positions of Audit & Supervisory Board Member are as follows. Regarding this item, the consent of the Audit & Supervisory Board has been obtained. Number of the Name Career summaries, position in the Company, and significant concurrent roles No. Company’s (Date of birth) held at other corporations shares held April 1974 Joined the Dai-Ichi Kangyo Bank, Ltd. April 2002 General Manager, Consumer & Private Banking Planning Division of Mizuho Bank, Ltd. April 2004 Executive Officer and Head of System Integration Project Team of Mizuho Bank, Ltd. April 2005 Managing Director of Mizuho Bank, Ltd. 5,000 June 2008 Chief Operating Officer, Representative Director of FUJISOFT INCORPORATED June 2012 Audit & Supervisory Board Member (Full-time) (Outside Audit & Supervisory Board Member) of the Company (present) Reasons for nominating the candidate for Outside Audit & Supervisory Board Attendance at 1 Member Board of Haruhisa Shiraishi Mr. Haruhisa Shiraishi has been managing banks and companies for many years Directors (September 28, 1950) and has extensive knowledge and experience thereof, and to utilize this to the meetings audit of the Company, and in light of his achievements as the Full-time Outside For reelection Audit & Supervisory Board Member of the Company, the Company again 17/17 nominated him as candidate for Outside Audit & Supervisory Board Member. (100%)

Candidate for Outside Attendance at Audit & Supervisory Audit & Board Member Supervisory Board meetings

13/13 (100%)

Number of the Name Career summaries, position in the Company, and significant concurrent roles No. Company’s (Date of birth) held at other corporations shares held April 1987 Registered as an attorney-at law February 2002 Conciliation commissioner, Tokyo Family Court (present) April 2009 Retirement Benefit Examination Committee member, Board of Audit of Japan (present) April 2012 Visiting Professor, Graduate School of Law, Chuo University (present) December 2013 Municipal Board of Education member, Chuo-ku, Tokyo (present) June 2015 Outside Director, Qol Co., Ltd. (present) June 2015 Outside Auditor, Kyodo News (present)

2 Reasons for nominating the candidate for Outside Audit & Supervisory Board – Toshiko Kuboki Member (February 26, 1960) Ms. Toshiko Kuboki has extensive experience and knowledge as an attorney-at-law, and to utilize her professional point of view as an For new election attorney-at-law to the audit of the Company, and in light of her experience as an auditor of a nonprofit cooperative organization, the Company believes she is Candidate for Outside suitable for the position of Outside Audit & Supervisory Board Member. While Audit & Supervisory Ms. Toshiko Kuboki has not been involved in the management of a company Board Member aside from her position as Outside Audit & Supervisory Board Member, the Company deems that she has thorough knowledge of corporate legal affairs as an attorney-at-law and will be able to properly perform her duties as Outside Audit & Supervisory Board Member, and newly nominated her as a candidate for Outside Audit & Supervisory Board Member.

- 13 - Notes: 1. No conflict of interest exists between the Company and any of the above candidates. 2. The candidates Mr. Haruhisa Shiraishi and Ms. Toshiko Kuboki are candidates for Outside Audit & Supervisory Board Members of the Company. The Company intends to appoint Mr. Haruhisa Shiraishi and Ms. Toshiko Kuboki as Independent Officer defined by the Tokyo Stock Exchange and register them with the Exchange as such. Mizuho Bank, Ltd. (hereafter, “The Former Mizuho Bank, Ltd.”), where Mr. Haruhisa Shiraishi formerly served as Managing Director, was dissolved on July 1, 2013 when it merged with Mizuho Corporate Bank, Ltd. (hereafter, “The Present Mizuho Bank, Ltd.). The Present Mizuho Bank, Ltd., which is an entity into which The Former Mizuho Bank, Ltd. was merged, is one of principal lenders of the Company, but does not have any relationship with the Company that may have the same degree of influence on the Company’s management decision-making as a parent company, subsidiary, or an affiliate of the Company. Furthermore, Mr. Haruhisa Shiraishi left his position as executive officer of The Former Mizuho Bank, Ltd. on April 1, 2008. He formerly served as Representative Director of FUJISOFT INCORPORATED, and while a subsidiary of the Company did have transactions with FUJISOFT INCORPORATED including software purchasing, the scale of the transactions does not present any risk of a conflict of interest with the general shareholders, and Mr. Haruhisa Shiraishi left his position as executive officer of FUJISOFT INCORPORATED on September 30, 2011. Given his dedication to his duties after being appointed as Outside Audit & Supervisory Board Member (Full-time) of the Company on June 22, 2012, the Company has determined that he will be able to perform the audit from an independent position, without causing any conflicts of interest with general shareholders. 3. The term of office of the candidate Mr. Haruhisa Shiraishi as Outside Audit & Supervisory Board Member from his initial appointment will be four (4) years at the conclusion of this General Meeting of Shareholders. The Company, pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act, has an agreement with Mr. Haruhisa Shiraishi to limit his liability for damages under Article 423, Paragraph 1 of the Companies Act, in order to enable him to fully perform his duties as Outside Audit & Supervisory Board Member as expected, and if the reelection of Mr. Haruhisa Shiraishi is approved at the meeting, the Company intends to continue the agreement. The amount of his total maximum liability for damages under such an agreement is the higher of 10,000,000 yen or the minimum liability amount provided for under the relevant laws and regulations. 4. The Company will, pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act, enter into an agreement with the candidate Ms. Toshiko Kuboki to limit her liability for damages under Article 423, Paragraph 1 of the Companies Act, in order to enable her to fully perform her duties as Outside Audit & Supervisory Board Member as expected, if her election is approved at the meeting. The amount of her total maximum liability for damages under such an agreement is planned to be the higher of 10,000,000 yen or the minimum liability amount provided for under the relevant laws and regulations.

- 14 - Item 5: Approval for Renewal of the Policy for a Large-Scale Purchase of Citizen Shares (Anti-Takeover Measures)

The Company has passed a resolution approving the renewal of the “Policy for a Large-Scale Purchase of Citizen Shares” (hereinafter the previous version shall be referred to as the “Old Policy”) at the meeting of the Board of Directors held on May 23, 2013 and obtained approval from its the shareholders at the 128th Ordinary General Meeting of Shareholders held on June 27, 2013. Since the Old Policy will expire at the conclusion of the 131st Ordinary General Meeting of Shareholders scheduled for June 28, 2016 (hereinafter, “this Ordinary General Meeting of Shareholders”), the Old Policy was carefully examined, specifically for pros and cons of its renewal and the necessity of its revisions in view of matters such as legal changes after it came into effect, changes of financial environment, judicial ruling and discussions and policies on anti-takeover measures. As a result, at the meeting of the Board of Directors held on May 26, 2016, it was resolved with the unanimous approval of all Directors including two (2) Outside Directors to maintain the basic policy relating to persons who hold control over the financial and business policies of the Company, which is prescribed in Article 118, Item 3 of the Ordinance for Enforcement of the Companies Act (hereinafter, the “Basic Policy”) as described in “1. Outline of the Basic Policy” of this Item, and to renew the Old Policy (hereinafter, the relevant version with the relevant revisions shall be referred to as the “Policy”) as described in “3. Efforts to prevent inappropriate persons from controlling decision-making over the financial and business policies of the Company in light of the Basic Policy (the Policy)” of this Item, as efforts to prevent inappropriate persons from controlling decision-making over the Company’s financial and business policies in light of the Basic Policy, subject to approval1 at this Ordinary General Meeting of Shareholders. The Policy is a countermeasure against any purchases of the Company’s share certificates, etc.2 which will either intentionally or as a consequence increase the voting ratio3 of a group of shareholders4 up to 20% or more (regardless of whether by a market transaction,

1 The term “approval” means to obtain approval from a majority of shareholders who attend the meeting by person or by proxy and are entitled to exercise their voting rights thereat.

2 The term “Company’s share certificates, etc.” means “Share Certificates, etc.” as prescribed in Article 27-23, Paragraph 1 of the Financial Instruments and Exchange Act (the “Act”). The same interpretation shall apply to the term “share certificates, etc.” hereinafter.

3 The term “voting ratio” means: (i) with respect to a group of shareholders which falls under the criteria of Note 4 (i) below, the holding ratio of share certificates, etc. (meaning “Holding Ratio of Share Certificates, etc.” as prescribed in Article 27-23, Paragraph 4 of the Act, which includes, for the purpose of this definition, the number of share certificates, etc. held by the joint holder of such group of shareholders as prescribed in the same Paragraph) of such group of shareholders; and (ii) with respect to a group of shareholders which falls under the criteria of Note 4 (ii) below, the total of the holding ratio of share certificates, etc. (meaning “Share Certificates, etc. Ownership Ratio” as prescribed in Article 27-2, Paragraph 8 of the Act) of the relevant Large-Scale Purchaser and of the specially related parties (as defined in Note 4 below). For the purpose of calculating each such ratio, the total number of voting rights (meaning the “number of the voting rights” as prescribed in Article 27-2, Paragraph 8 of the Act) and the total number of shares outstanding (meaning the “total number of shares outstanding” as prescribed in Article 27-23, Paragraph 4 of the Act) contained in the Company’s latest annual securities report (yuuka shouken houkouksho), quarterly securities report (shinahki houkokusho) or the treasury stock purchase report (jiko kabuken kaitsuke jyokyo houkokusho) may be referred to.

4 The term “a group of shareholders” means: (i) the holder (meaning a “Holder” as prescribed in Article 27-23, Paragraph 1 of the Act, including those deemed to be a Holder in accordance with Article 27-23, Paragraph 3 of the Act; the same interpretation shall apply to the term “Holder” hereinafter) of the Company’s share certificates, etc. (meaning “Share Certificates, etc.” as prescribed in Article 27-23, Paragraph 1 of the Act) and his/her joint holder (meaning a “Joint Holder”

- 15 - a tender offer, or other methods, but except those to which the Board of Directors has consented in advance: hereinafter, these purchases or similar acts shall be referred to as “Large-Scale Purchase(s)” and purchaser(s) that conduct or contemplate a Large-Scale Purchase shall be referred to as “Large-Scale Purchaser(s)”), and the details are as described in “3. Efforts to prevent inappropriate persons from controlling decision-making over the financial and business policies of the Company in light of the Basic Policy (the Policy)” of this Item. The key revision proposed to be made to the Old Policy is that independent committee members shall be elected from the Company’s Outside Directors, who are independent from the executive management of the Company.

1. Outline of the Basic Policy The mission of the Citizen Group is to provide the best products and services to all citizens around the world, as its name implies. Under its corporate principle “contribute to the better lives of citizens and remain loved by citizens,” the Company has been making its utmost efforts to protect and enhance the corporate value and the common interest of shareholders, by contributing to the better lives of citizens all over the world through manufacturing of products that are loved and supported by them. The Company believes that persons who control decision-making over its financial and business policies should appropriately and consistently implement the Group’s management strategies with medium-and long-term perspectives, with a good understanding of its corporate principle and unique business profiles, thereby achieving the further creation and enhancement of the corporate value and the common interest of shareholders. In the meantime, the Company holds a view that if a Large-Scale Purchase of the Company’s shares is offered, the Company will give consideration as long as such Large-Scale Purchase is beneficial to its corporate value and the shareholders’ common interest, and a decision of acceptance or rejection of such issue should be made ultimately by its shareholders. However, in light of the current legal framework and financial environment, it is difficult to deny the possibility of a Large-Scale Purchase that would not be beneficial to the corporate value of the Company or the common interest of its shareholders. Examples of such a Large-Scale Purchase would include those that, judging from the objectives and the manner in which it is conducted, is not the one which sincerely seeks streamlining of the Company’s operation, but rather, which could cause irreparable harm to the Company; those that could virtually force the shareholders to sell their shares of the Company; those that do not provide sufficient time and information for the shareholders and the board of directors of the targeted company to examine the purchase conditions or for the board of directors of the targeted company to make alternative proposals; and those that require the targeted company to further negotiate with the Large-Scale Purchaser to obtain more favorable conditions than those offered by the Large-Scale Purchaser. The Company considers that persons who carry out these Large-Scale Purchases should

as prescribed in Article 27-23, Paragraph 5 of the Act, including those deemed to be a Joint Holder in accordance with Article 27-23, Paragraph 6 of the Act; the same interpretation shall apply to the term “Joint Holder” hereinafter); or (ii) a person who conducts purchase (meaning “Purchase, etc.” as prescribed in Article 27-2, Paragraph 1 of the Act, including those conducted in a financial instruments market of an exchange) of share certificates, etc. (meaning “Share Certificates, etc.” as prescribed in Article 27-2, Paragraph 1 of the Act) of the Company, and such person’s specially related parties (meaning “Persons in Special Relationship” as prescribed in Article 27-2, Paragraph 7 of the Act).

- 16 - be given exceptional treatment, as they are not suitable in controlling decision-making over the financial and business policies of the Company; in order to do so, introduction of a certain framework which prevents any purchase detrimental to the corporate value of the Company or the common interest of its shareholders is imperative.

2. Special efforts to implement the Basic Policy The Company has implemented various efforts to encourage more people to understand its corporate value and hold its shares in the long run. For example, under the “Aiming to Be a Solid Global Company - business group with speed and dynamics -” slogan prescribed in the “Citizen Global Plan 2018” medium-term management plan, which was established in February 2013 and covers years until the fiscal year ending March 31, 2019 (hereinafter, the “Management Plan”), the Company implemented the following measures during the first three (3) years (FY2013 – FY2015):  In the watches and clocks business, which is the core business of the Company, the Company, as part of efforts to strengthen the manufacturing capability, established Citizen Watch Manufacturing Co., Ltd. and implemented the restructuring of major domestic manufacturing functions to reinforce the domestic manufacturing capability by integrating technologies that had been held separately by watches and clocks business subsidiaries.  Aiming to achieve further growth and development in the devices and components business, the Company completed a merger between Citizen Fintech Miyota Co., Ltd. and Citizen Seimitsu Co., Ltd., which had unique core technologies and business domains (Currently Citizen Finedevice Co., Ltd.).  To stabilize profit in the devices and components business, the Company reviewed its business portfolio so as to focus more on business domains in which it can secure profit by withdrawing from certain quartz crystals and liquid crystal domains in which profitability had declined due to increased competition. In February 2016, the Company also revised part of the original management policy in response to a significant change in the external environment during the first three years (FY2013 – FY2015) of the Management Plan. The details are described in “I. MATTERS RELATING TO THE CURRENT SITUATION OF THE GROUP, 6. Challenges Going Forward” (see pages 36-37) of the “BUSINESS REPORT.”

3. Efforts to prevent inappropriate persons from controlling decision-making over the financial and business policies of the Company in light of the Basic Policy (the Policy) (1) Large-Scale Purchase Rules The Board of Directors believes that any purchase of the Company’s share certificates, etc. which will either intentionally or as a consequence increase the voting ratio of a group of shareholders up to 20% or more (regardless of whether by a market transaction, a tender offer, or other methods, but except those to which the Board of Directors has consented in advance: hereinafter, these purchases or similar acts shall be referred to as “Large-Scale Purchase(s)” and purchaser(s) that conduct or contemplate a Large-Scale Purchase shall be referred to as “Large-Scale Purchaser(s)”), should be subject to the rules prescribed below (hereinafter, the “Large-Scale Purchase Rules”) in order to secure the corporate value of the Company and the common interest of its shareholders. The Large-Scale Purchase Rules stipulate that: a) a Large-Scale Purchaser must provide necessary and sufficient information to the Board of Directors before he/she gives effect to the Large-Scale Purchase, and b) the Large-Scale Purchase may be commenced only

- 17 - after the expiration of the review period during which the Board of Directors makes necessary assessments. The Board of Directors has established an independent committee to properly apply the Large-Scale Purchase Rules and avoid any arbitrary judgments by the Board of Directors. The independent committee consists of three or more members, elected from the outside officers, all of whom are independent from executive management of the Company. The independent committee will make recommendations on matters prescribed in the Large-Scale Purchase Rules and other matters referred to the committee by the Board of Directors. The Board of Directors respects such recommendations to the fullest extent in making resolutions as an organization established pursuant to the Companies Act. In addition to provision of recommendations, the independent committee is also empowered to engage in the acts prescribed in the Large-Scale Purchase Rules and other acts designated by the Board of Directors. The independent committee may seek advice from outside experts including legal counsels and financial advisers at the expense of the Company. Other matters relating to the independent committee will be prescribed in the independent committee rules (see Exhibit 1 for details). Mr. Kenji Ito and Mr. Masaaki Komatsu will continue to be members of the independent committee, and Ms. Toshiko Kuboki will become a new member after the Policy comes into effect (see Exhibit 2 for the names and brief histories of each member). Among other things, the Large-Scale Purchase Rules provide that the Large-Scale Purchaser shall be required to firstly submit to the Board of Directors a document in Japanese containing sufficient information for the shareholders to make judgments and the Board of Directors to render opinion (hereinafter, “Large-Scale Purchase Information”). The items to be contained therein in general are as follows: (a) Details (including names, capital structures, businesses, and financial data) of the Large-Scale Purchaser and the members of its group (including joint holders, specially related parties, and in the case of funds, its partners and other members); (b) Objectives, methods, and details of the contemplated Large-Scale Purchase (including the price and type of consideration proposed to be paid for the contemplated purchase, purchase period, structures of related transactions, legality of the purchase method, and viability of the contemplated purchase); (c) Basis upon which the consideration proposed to be paid for the contemplated purchase is calculated (including, to a reasonable extent, facts and assumptions, calculation method, numerical data used in the calculation and the details of expected synergic effects produced by a series of transactions related to the contemplated purchase and the details of the economic benefits of the synergic effects to be distributed to minority shareholders); (d) The sources of the funding of the contemplated purchase (including names of the fund providers (including the substantial providers), financing method, and the details of related transactions); (e) Management policy, business plans, capital policy and dividend policy of the Group after the contemplated purchase; (f) Policy for treatment of employees, business partners, customers and other stakeholders of the Company after the contemplated purchase; and (g) Specific measures to be taken to avoid a conflict of interest with other shareholders of the Company. The Large-Scale Purchase Information required for individual Large-Scale Purchases may vary depending on the details of the Large-Scale Purchase. Any purchaser intending to conduct a Large-Scale Purchase is required to submit to the Board of Directors a confirmation letter executed in Japanese in the form designated by the

- 18 - Company, which will contain, including without limitation, the purchaser’s covenant to comply with the Large-Scale Purchase Rules. This confirmation letter shall clearly show the name, address, the law of establishment, and contact address in Japan of the Large-Scale Purchaser and a summary of the Large-Scale Purchase proposed. Upon receipt, the Board of Directors will immediately forward the confirmation letter to the independent committee, and the independent committee, within 10 business days after receiving the same, will deliver to the Large-Scale Purchaser either directly or through the Board of Directors, a list of the Large-Scale Purchase Information which must be submitted by the Large-Scale Purchaser at the beginning of the process. If the independent committee concludes that the information submitted by the Large-Scale Purchaser is insufficient as the requested Large-Scale Purchase Information, the independent committee may request, either directly or through the Board of Directors, the Large-Scale Purchaser to provide additional information until the independent committee concludes that it has been provided with sufficient Large-Scale Purchase Information. The independent committee may also request the Board of Directors to submit its opinion regarding the proposed Large-Scale Purchase and supporting documents of such opinion, an alternative proposal (if any), and other information and materials deemed necessary by the independent committee. The reservation of the Board’s opinion is one possible response to such request of the independent committee. The independent committee will set the period for the Board’s response as it deems appropriate (up to 60 days maximum). When the independent committee determines it necessary to do to enable the shareholders to make judgment, the independent committee, either directly or through the Board of Directors, will disclose to the shareholders all or part of the fact that a Large-Scale Purchase has been proposed, and the Large-Scale Purchase Information provided to the Board of Directors or to the independent committee, as well as the information and materials submitted by the Board of Directors to the independent committee, at such time as is deemed appropriate. Then, after the receipt of Large-Scale Purchase Information, and receipt of information and materials provided by the Board of Directors, the independent committee will have 60 days as a period to assess, examine, negotiate and form opinions (this period shall be referred to as the “Independent Committee Assessment Period”). The independent committee may extend the Independent Committee Assessment Period for up to 30 days and, if extended, the Company will promptly disclose a summary of the resolution of the independent committee, the reasons for the extension, and the new Independent Committee Assessment Period. Accordingly, a Large-Scale Purchase may only be conducted after the Independent Committee Assessment Period has expired. During the Independent Committee Assessment Period, the independent committee will fully assess and analyze the provided Large-Scale Purchase Information, and carefully study the results thereof before it forms and announces its opinion. In addition, the independent committee may, either directly or through the Board of Directors, negotiate and exchange views with the Large-Scale Purchaser to seek better conditions in respect of the Large-Scale Purchase as necessary. The independent committee may also recommend that the Board of Directors submit an alternative proposal to the shareholders. The Large-Scale Purchaser must immediately respond to any request of the independent committee for information, negotiation or exchange of views. (2) Policy for responding to a Large-Scale Purchase (a) In case a Large-Scale Purchaser does not observe the Large-Scale Purchase Rules If a Large-Scale Purchaser does not observe the Large-Scale Purchase Rules, and the independent committee determines that the allotment of stock acquisition

- 19 - rights without contribution is appropriate, the independent committee will recommend the Board of Directors to implement such allotment as a countermeasure against the Large-Scale Purchase in order to protect the corporate value of the Company and the common interest of its shareholders. In this case, the Board of Directors will respect such recommendation to the fullest extent, and make resolutions required as an organization under the Companies Act as to allotment of stock acquisition rights without contribution. The terms of the allotment of stock acquisition rights without contribution are summarized in Exhibit 3. Further, when implementing the allotment, the Company may designate the exercise period, exercise conditions, and rights of the Company to acquire the stock acquisition rights from the holders, with the view to obtaining the effects of the allotment which the Company seeks as a countermeasure against the Large-Scale Purchase. (b) In case the Large-Scale Purchaser observes the Large-Scale Purchase Rules So long as a Large-Scale Purchaser observes the Large-Scale Purchase Rules, the independent committee will in principle recommend that the Board of Directors should not trigger countermeasures against the Large-Scale Purchase. In this case, even if the Board of Directors is against such Large-Scale Purchase, it will limit itself to express its dissent to the proposed purchase, submit an alternative proposal, and/or persuade the shareholders, and will not take a countermeasure against the Large-Scale Purchase. In such case, the shareholders will determine whether or not the Company should agree to the proposed purchase by the Large-Scale Purchaser, considering the proposals of the Large-Scale Purchaser and the opinions and alternative plans concerning the proposals provided by the Company. However, even if the Large-Scale Purchaser observes the Large-Scale Purchase Rules, if the independent committee concludes that the contemplated Large-Scale Purchase may significantly damage the corporate value of the Company or the common interest of its shareholders, the independent committee will recommend that the Board of Directors implement the allotment of stock acquisition rights without contribution to protect the corporate value of the Company and the common interest of its shareholders as a countermeasure against the Large-Scale Purchase. In this case, the Board of Directors will respect such recommendation to the fullest extent and make resolutions required as an organization under the Companies Act as to allotment of stock acquisition rights without contribution. The independent committee will draw such a conclusion if the Large-Scale Purchase in question falls under any of the following criteria, and the independent committee determines that the allotment of stock acquisition rights without contribution is appropriate: 1) Where the Large-Scale Purchaser is judged to intend only to raise the share price of the Company to make the Company or its related parties purchase those shares back from the Large-Scale Purchaser at a higher price, while having no true intention of taking part in the management of the Company through its holding of shares of the Company. 2) Where the Large-Scale Purchaser is judged to intend to temporarily hold control over the management of the Company, to have it transfer to the Large-Scale Purchaser or its group companies the intellectual property rights, know-how, business secrets, or major business partners or customers required for the operation of businesses of the Company or its Group companies. 3) Where the Large-Scale Purchaser is judged to intend to hold control over the management of the Company, to utilize assets of the Company or the Group

- 20 - companies as collateral or source of payment of debts owed by the Large-Scale Purchaser or its group companies. 4) Where the Large-Scale Purchaser is judged to intend to temporarily hold control over the management of the Company, to have it sell or otherwise dispose of valuable assets of the Company or any of the Group companies, including real estate properties and securities which are not necessary for its day to day business for the time being, and have it pay a large amount of dividend to its shareholders including the Large-Scale Purchaser with the proceeds of the disposition, or to seek soaring of its share price caused by such a temporary high dividend with the view to selling its shares of the Company at a higher price. 5) Where the Large-Scale Purchaser employs a strategy that may in effect force the shareholders of the Company to sell the Company’s shares to the Large-Scale Purchaser, including implementation of a TOB where the Large-Scale Purchaser does not solicit all of the shares of the Company at the first TOB and make the terms of the second TOB less favorable to the remaining shareholders, or does not make the terms of the second TOB clear at the time of the first TOB. In addition, when the independent committee judges it appropriate to seek resolution of the General Meeting of Shareholders on the allotment of stock acquisition rights without contribution, the independent committee will recommend so. In this case, the Company’s Directors shall, respecting the recommendations of the independent committee to the fullest extent, call a General Meeting of Shareholders (hereinafter “General Meeting of Shareholders for Confirmation”) as early as practically possible and submit an agenda on the allotment of stock acquisition rights without contribution. If the General Meeting of Shareholders for Confirmation resolves to approve the proposed allotment of stock acquisition rights without contribution, the Board of Directors shall perform necessary procedures for the allotment pursuant to the resolution. In this case, the Large-Scale Purchase shall not commence until the General Meeting of Shareholders for Confirmation adopts a resolution on whether the said allotment be performed. (c) Suspension of countermeasures If the relevant circumstance changes or the Large-Scale Purchaser clearly changes its Large-Scale Purchase plan after the independent committee has recommended the allotment of stock acquisition rights without contribution as a countermeasure against the Large-Scale Purchase, the independent committee may recommend suspension of the allotment if it is before its effective date or, if it is after the effective date but before the commencement of the exercise period of the stock acquisition rights, recommend the acquisition by the Company of the stock acquisition rights from the holders without consideration. Conversely, if, after the independent committee has decided not to recommend the implementation of the allotment of stock acquisition rights without contribution as a countermeasure against a Large-Scale Purchaser, there is any change in the relevant circumstances causing the independent committee to come to conclude that the Large-Scale Purchase significantly damages the corporate value of the Company or the common interest of its shareholders, the independent committee may, in order to protect the corporate value of the Company and the common interest of its shareholders, recommend the allotment of stock acquisition rights without contribution as a countermeasure against the Large-Scale Purchase. In these cases, the Board of Directors will respect to the fullest extent the

- 21 - recommendation of the independent committee and make resolutions required as an organization under the Companies Act in relation to the suspension of the allotment of stock acquisition rights without contribution, the Company’s acquisition of the stock acquisition rights from the holders without consideration, or the implementation of the allotment of stock acquisition rights without contribution, as the case may be. (3) Effective date and term of the Policy The Policy will become effective as of the date of this Ordinary General Meeting of Shareholders subject to an approval of shareholders at the meeting, and remain effective until the end of an Ordinary General Meeting of Shareholders to be held for the final fiscal year of the Company which ends within the three year period thereafter. However, in the event that the Board of Directors determines to abolish the Policy even during its effective term, the Policy will be abolished with immediate effect. Furthermore, the Board of Directors may amend the Policy even during its effective term upon approval of the independent committee, under the condition that such amendment would not impair the purpose and contents of the Policy which are to be approved by this Ordinary General Meeting of Shareholders. Circumstances giving rise to the amendment may include those where a modification is necessary and proper to conform to the revisions of applicable laws and regulations or rules of the financial instruments exchanges; where a correction of wording is necessary and proper due to typographical errors or inadvertent omissions; or where it is confirmed that the amendment would not be detrimental to our shareholders. If abolishment or amendment of the Policy is enforced, the Company will promptly make an announcement of the effect thereof to its shareholders. (4) Possible effects on shareholders and investors of the Company (a) Possible effects of the Large-Scale Purchase Rules on the shareholders and investors The purpose of the Large-Scale Purchase Rules is to ensure provision to the shareholders with information necessary for them to decide whether or not they should agree to a Large-Scale Purchase as well as the opinion of the Board of Directors in charge of the management of the Company, and to guarantee an opportunity for the shareholders to receive an alternative proposal from the Company where necessary. Thus, the Large-Scale Purchase Rules enable the shareholders to make an appropriate decision with sufficient information as to whether or not they should agree to a Large-Scale Purchase. Therefore, the Company believes that the introduction of the Large-Scale Purchase Rules is a prerequisite for the shareholders of the Company and its investors to make an appropriate investment decision and should serve for their benefit. When a Large-Scale Purchase is proposed, the Company would like to draw the attention of its shareholders and investors to the actions of the Large-Scale Purchaser and the Company’s responses thereto; as mentioned in (2) above, the policy which the Company adopts to the Large-Scale Purchase will depend on whether or not the Large-Scale Purchaser observes the Large-Scale Purchase Rules. (b) Possible effects on the shareholders and investors when the countermeasures are triggered If the Large-Scale Purchaser does not observe the Large-Scale Purchase Rules, or even if the Large-Scale Purchaser observes the Large-Scale Purchase Rules,

- 22 - when the independent committee determines that the Large-Scale Purchase significantly damages the corporate value of the Company or the common interest of its shareholders, the independent committee will recommend to the Board of Directors the allotment of stock acquisition rights without contribution to protect the corporate value of the Company and the common interest of its shareholders. The Board of Directors will then respect such recommendation to the fullest extent, and may make resolutions required as an organization under the Companies Act as to allotment of stock acquisition rights without contribution. In case that the allotment of stock acquisition rights without contribution is indeed implemented, the Company does not anticipate that the allotment will cause any particular damage to the legal rights or economic interests of the Company’s shareholders (excluding a shareholder belonging to the group of shareholders which includes the Large-Scale Purchaser, or having any other relationship with the Large-Scale Purchaser). When the Board of Directors, respecting the recommendation of the independent committee to the fullest extent, decides to give effect to an allotment of stock acquisition rights without contribution as a countermeasure as an organization established under the Companies Act, the Company will make timely and appropriate disclosure in compliance with applicable laws and regulations and rules of the financial instruments exchanges. When the Company implements allotment of stock acquisition rights without contribution as a countermeasure, the shareholders of the Company will need to be listed on the final list of shareholders of the Company as of the allotment date in order to receive the allotment of stock acquisition rights. This allotment date will be determined and officially announced by the Board of Directors after the determination. In addition, for receipt of shares upon exercise of stock acquisition rights, the holders of such rights must complete payment of a certain amount of money within a predetermined period. When the Board of Directors determines that the Company purchases the stock acquisition rights from the holders, the Company may issue new shares to the shareholders in consideration of its acquisition of such rights from them, in lieu of paying the amount equal to the exercise price of such right. As to the details of these procedures, the Company will notify the shareholders in accordance with applicable laws and regulations and rules of the financial instruments exchanges, when the Company actually allots the stock acquisition rights without contribution. If the Company suspends allotment of the stock acquisition rights without contribution after the shareholders entitled to receive the same are determined, or the Company acquires without consideration any stock acquisition rights from the holders who have been allotted such rights without contribution, the value of the Company’s stock per share will not be diluted; accordingly, investors who have traded shares of the Company assuming that the value of the Company’s stock per share will be diluted may suffer damages corresponding to the change in the share price. (5) Determination of the Board of Directors on the Policy and reasons therefor The Board of Directors believes that the Policy is consistent with the Basic Policy and meets the common interest of its shareholders, and should not and will not be implemented for the sake of the Company’s officers maintaining their position, as it reflects and embodies all of the following elements: (a) Full satisfaction of the requirements under the guidelines for anti-takeover measures etc. The Policy fully satisfies the requirements of the three principles stipulated in the “Guidelines Regarding Takeover Defense for the Purposes of Protection and

- 23 - Enhancement of Corporate Value and Shareholders’ Common Interest” jointly released by the Ministry of Economy, Trade and Industry and the Ministry of Justice on May 27, 2005, and is also based upon “Takeover Defense Measures in Light of Recent Environmental Changes” released by the Corporate Value Study Group of the Ministry of Economy, Trade and Industry on June 30, 2008, and Principle 1.5 and Supplementary Principle 1.5.1 of Japan’s Corporate Governance Code. (b) Respect of shareholders’ intentions (resolutions of general meeting of shareholders and adoption of a Sunset Provision) As described in (3) above, the Policy will come into effect subject to approval of shareholders of the Company to be adopted at this Ordinary General Meeting of Shareholders. In addition, since the Policy includes a sunset provision which remains in force for around three (3) years, and the term of office of the Directors of the Company is limited to one year, the shareholders will be able to additionally express their intention for the Policy through the election of directors, even during the effective period of the Policy. (c) Respect of judgment of independent outside officers and disclosure of information Even after revising the Policy, for the purposes of prevention of arbitrary judgments of the Directors, the Company will maintain the independent committee as an organization to make decisions in an objective manner on behalf of the shareholders as to the substantive issues of the Policy including decisions to implement or abolish the Policy. The Board of Directors will appoint the members of the independent committee from among the outside officers of the Company, all of whom are independent from the Company’s executive management. When a Large-Scale Purchase is actually proposed for the Company’s shares, the independent committee, as mentioned in (2) above, will make recommendations to the Board of Directors pursuant to the independent committee rules as to, among other things, whether or not the Large-Scale Purchase damages the Company’s corporate value or the shareholders’ common interest. The Board of Directors, respecting such recommendations to the fullest extent, will make resolutions required as an organization under the Companies Act to decide whether or not to implement the allotment of stock acquisition rights without contribution. The independent committee will closely see to it that the Directors should not arbitrarily implement the countermeasures, and the gist of the judgment of the independent committee will be disclosed to the shareholders. Thus the Company believes that the Company has established a structure to ensure that the Policy is applied in a transparent manner and serve for the benefit of the corporate value of the Company and the common interest of its shareholders. (d) Reasonable and objective conditions precedent for the countermeasure As discussed in (2) above, the Company has set in the Policy reasonable and objective conditions which need to be satisfied before the countermeasures can be implemented. This will prevent the Board of Directors from making arbitrary decisions to implement the countermeasures. (e) Third party expert opinion available to the independent committee When a Large-Scale Purchaser is contemplated, the independent committee is entitled to obtain advice from independent third parties (including financial advisers, certified public accountants, legal counsels, consultants, and other

- 24 - experts) at the expense of the Company. Thus, the fairness and objectivity of the independent committee’s judgment will be further secured. (f) The Policy do not have an anti-takeover provision similar to a “dead-hand” or “slow- hand” provision The Policy can be abolished at any time in the judgment of the Board of Directors, of which members are elected at the General Meeting of Shareholders of the Company. Therefore, it is possible for any prospective large-scale purchaser to appoint its nominees as Directors and have them abolish the Policy by way of Board resolutions. Therefore, the Policy is not a dead-hand anti-takeover measure (which means that triggering of countermeasures cannot be prevented even by changing a majority of the Directors on the Board). In addition, the term of office of the Company’s Directors is one year, and the Company has not adopted a system to appoint Directors at different times. Therefore, the Policy is not a slow-hand anti-takeover measure (which means that prevention of countermeasures takes time because the Directors cannot be replaced all at one time), either.

- 25 - Item 5: Exhibit 1 Summary of Independent Committee Rules

1. The independent committee shall be established by resolution of the Board of Directors. 2. The independent committee shall consist of three or more members, appointed by the Board of Directors from the outside officers of the Company, all of whom are independent from the executive management of the Company. 3. The term of the independent committee members shall expire at the end of the Ordinary General Meeting of Shareholders held for the final fiscal year ending within three years after their election, unless otherwise determined by the resolution of the Board of Directors. In addition, when independent committee members who are outside officers are no longer officers (excluding those who are re-elected), their term as independent committee members shall expire at the same time. 4. The independent committee shall make decisions on the items specified below and, based upon the decisions, shall give recommendations with reasons to the Board of Directors. The Board of Directors, respecting the recommendations of the independent committee to the fullest extent, shall make resolutions as an organization under the Companies Act to determine whether or not to implement allotment of stock acquisition rights without contribution. (If, however, a General Meeting of Shareholders for Confirmation resolves otherwise upon the matter set forth in (b) below, such resolution shall be respected.) Each independent committee member and each Director of the Company shall make these decisions by taking into account solely whether or not their decisions benefit the corporate value of the Company and the common interest of its shareholders, and they shall not make decisions for their own personal interest or personal interest of the management of the Company. (a) To determine whether or not an offer constitutes a Large-Scale Purchase to which the Policy applies (b) To implement or not to implement the allotment of stock acquisition rights without contribution (including the bringing of these matters before a General Meeting of Shareholders for Confirmation.) (c) To suspend the allotment of stock acquisition rights without contribution (d) To acquire the stock acquisition rights from shareholders without consideration (e) To abolish or change the Policy (f) Matters that the Board of Directors is responsible for determining and with respect to which the Board of Directors has requested the view of the independent committee 5. In addition to the items specified in 4. above, the independent committee may conduct the following activities: (a) To designate the information to be provided to the independent committee by the Large-Scale Purchaser and the Board of Directors, and the period for the Board of Directors to reply to the request for such information; (b) To closely review and examine the details of the Large-Scale Purchase contemplated by the Large-Scale Purchaser; (c) To negotiate and exchange views with the Large-Scale Purchaser regarding the Large-Scale Purchase; (d) To request the submission of alternative plan by the Board of Directors and examine

- 26 - such alternative plan; (e) To extend the Independent Committee Assessment Period; (The extension period, however, shall not exceed 30 days.) (f) To conduct other activities that the independent committee is authorized to engage in under the Policy; and (g) To conduct other activities that the independent committee is authorized to engage in by resolution of the Board of Directors separately from the Policy. 6. Within 10 business days after receiving a confirmation letter from the Large-Scale Purchaser, the independent committee shall, either directly or through the Board of Directors, deliver to the Large-Scale Purchaser a list of Large-Scale Purchase Information that must be submitted by the Large-Scale Purchaser at the beginning of the process. If the independent committee concludes that the information submitted by the Large-Scale Purchaser is insufficient as the requested Large-Scale Purchase Information, the independent committee shall require, either directly or through the Board of Directors, the Large-Scale Purchaser to provide additional information until the independent committee concludes that it has received sufficient Large-Scale Purchase Information. The independent committee may also request the Board of Directors to submit its opinion regarding the proposed Large-Scale Purchase and supporting documents of such opinion, an alternative plan (if any), and other information and materials deemed necessary by the independent committee. The reservation of the Board’s opinion is one possible response to such request of the independent committee. The independent committee shall set the period for the Board’s response as it deems appropriate (up to 60 days maximum). 7. The independent committee may directly or indirectly negotiate or exchange views with the Large-Scale Purchaser if necessary in order to seek better conditions in respect of the contemplated Large-Scale Purchase to benefit the corporate value of the Company and the common interest of its shareholders. 8. For collection of necessary information, the independent committee is entitled to request the Directors, Audit & Supervisory Board Members, or employees of the Company and other parties who are deemed necessary by the independent committee to report to the independent committee and explain matters designated by the independent committee. 9. The independent committee may obtain the advice of independent third parties (including financial advisers, certified public accountants, legal counsels, consultants, and other professionals) at the expense of the Company. 10. The independent committee members may convene their meetings upon the occurrence of a Large-Scale Purchase or at any other time. 11. The resolution of the independent committee shall in principle be made with the majority of the members present who constitute two-thirds of the independent committee members. However, in case there is a compelling reason, the resolution may be made with a majority of the members present who constitute a majority of the independent committee members.

- 27 - Item 5: Exhibit 2 Names and Resumes of the Independent Committee Members

Kenji Ito Date of birth: October 5, 1950 June 2000 Corporate Officer of TOTO Kiki Ltd. (Currently TOTO LTD.) June 2001 Corporate Officer and Director of TOTO Kiki Ltd. June 2002 Executive Officer and Director of TOTO Kiki Ltd. June 2006 Senior Executive Officer and Director of TOTO Kiki Ltd. April 2009 Executive Vice President and Representative Director of TOTO LTD. June 2013 Advisor of TOTO LTD. (present) June 2013 Outside Director of the Company (present) * Mr. Kenji Ito is an Outside Director. The Company has appointed Mr. Kenji Ito an Independent Officer defined by the Tokyo Stock Exchange and registered him with the Exchange as such. There are no specific conflicts of interest between Mr. Kenji Ito and the Company.

Masaaki Komatsu Date of birth: January 4, 1947 June 1996 President, Shiseido International France SAS December 2000 President & Representative Director, Shiseido Kako Co., Ltd. June 2003 Director, Corporate Officer of Shiseido Company, Limited April 2006 Director, Corporate Executive Officer of Shiseido Company, Limited April 2009 Director, Corporate Senior Executive Officer of Shiseido Company, Limited June 2012 Outside Director of Ryosan Company, Limited June 2015 Outside Director of the Company (present) * Mr. Masaaki Komatsu is an Outside Director. The Company has appointed Mr. Masaaki Komatsu an Independent Officer defined by the Tokyo Stock Exchange and registered him with the Exchange as such. There are no specific conflicts of interest between Mr. Masaaki Komatsu and the Company.

- 28 - Toshiko Kuboki Date of birth: February 26, 1960 April 1987 Registered as an attorney-at-law February 2002 Conciliation commissioner, Tokyo Family Court (present) April 2009 Retirement Benefit Examination Committee member, Board of Audit of Japan (present) April 2012 Visiting Professor, Graduate School of Law, Chuo University (present) December 2013 Municipal Board of Education member, Chuo-ku, Tokyo (present) June 2015 Outside Director, Qol Co., Ltd. (present) June 2015 Outside Auditor, Kyodo News (present) * Ms. Toshiko Kuboki is a candidate for Outside Audit & Supervisory Board Member and will assume office upon election at this Ordinary General Meeting of Shareholders. There are no specific conflicts of interest between Ms. Toshiko Kuboki and the Company. The Company will appoint Ms. Toshiko Kuboki an Independent Officer defined by the Tokyo Stock Exchange and will register her with the Exchange as such.

- 29 - Item 5: Exhibit 3 Summary of allotment of stock acquisition rights without contribution

1. Decisions on the matters related to allotment of stock acquisition rights without contribution (1) The terms and number of the stock acquisition rights to be allotted The terms of the stock acquisition rights shall be as specified in 2. below, and the number of stock acquisition rights to be allotted shall be determined by the Board of Directors, but shall not exceed twice the latest aggregate number of the outstanding shares of the Company (excluding the treasury stock owned by the Company) as of the date determined by the Board of Directors for the allotment of the stock acquisition rights (the “Allotment Date”). (2) Eligible shareholders to whom the allotment shall be made The Board of Directors shall determine the allotment ratio of stock acquisition rights, for up to two stock acquisition rights per share held by the shareholder and effect the allotment of the stock acquisition rights to the shareholders recorded in the final list of shareholders on the Allotment Date. (3) Effective date of the allotment of the stock acquisition rights The date separately determined by the Board of Directors.

2. Terms of the stock acquisition rights (1) Type and number of shares to be issued upon exercise of stock acquisition rights The type of shares to be issued upon exercise of the stock acquisition rights shall be the common stock of the Company, and the number of shares to be issued upon exercise of the stock acquisition rights (hereinafter, “Number of Shares to be Issued”) shall be one share per one stock acquisition right. The Company shall make necessary adjustments in the event of a stock split or consolidation of shares. (2) Amount of consideration to be paid upon exercise of stock acquisition rights The amount of consideration to be paid upon exercise of stock acquisition rights shall be one yen or more per share of the Company being issued, as shall be determined by the Board of Directors. (3) Exercise period of the stock acquisition rights The exercise period of the stock acquisition rights shall commence on the date when the allotment of the stock acquisition rights becomes effective or on another date determined by the Board of Directors and shall last for the period as determined by the Board of Directors. However, if the stock acquisition rights are acquired by the Company from the holders, the exercise period shall end on the one business day prior to the date on which the stock acquisition rights are to be acquired by the Company. (4) Conditions for the exercise of the stock acquisition rights Exercise of the stock acquisition rights may be subject to conditions including the restriction that a party belonging to a group of shareholders which includes the Large-Scale Purchaser is not able to exercise the stock acquisition rights5. The Board of

5 However, even if such restriction applies, if a person belonging to a group of shareholders which includes a Large-Scale Purchaser or similar person shall have made a covenant to the Company as required by the Board of Directors, and shall

- 30 - Directors shall determine the details of such conditions. (5) Restrictions on transfer of the stock acquisition rights Obtaining stock acquisition rights by transfer shall require the approval of the Board of Directors. (6) Acquisition of the stock acquisition rights by the Company The Company may determine, as a condition for any person to acquire stock acquisition rights, that the Company may acquire such stock acquisition rights from such person, if he/she does not belong to a group of shareholders which includes the Large-Scale Purchaser, and may deliver to such person the Number of Shares to be issued per each stock acquisition right acquired by the Company. The Board of Directors shall determine the details of such condition. (7) Others The Board of Directors shall determine any other matters as necessary.

have sold not less than the required number of the Company’s shares in a financial instruments market of an exchange via a securities firm approved by the Company, the Board of Directors may approve the exercise of stock acquisition rights by such person to the extent that the total number of shares delivered to such person upon the exercise does not exceed the number of shares sold by such person. In such case, the Board of Directors shall determine the requirements, procedures and other details.

- 31 - (Attachments) BUSINESS REPORT From April 1, 2015 to March 31, 2016

I. MATTERS RELATING TO THE CURRENT SITUATION OF THE GROUP 1. Review of Operations During the fiscal year under review, the Japanese economy experienced a trend toward a recovery in personal spending and demand for capital investment, amid signs of a moderate recovery including an improvement in corporate earnings and the employment situation, supported by various policies implemented by the government and the Bank of Japan. In spite of a minor slowdown in current growth rates, consumption was also boosted by an increased number of foreign visitors to Japan. The U.S. economy, which continued to recover steadily and remained solid, continued to expand gradually amid the interest hike in December. In spite of vigorous demand for capital spending however, the effects of the slowdown in the Chinese economy became a cause for concern. In Europe, although the economy was driven by recovery trends in some of the major countries, the outlook remains uncertain in light of heightened geopolitical risks. Markets in the Asian economy struggled due to the increased slowdown of Chinese businesses, along with political instability and weaker currencies in the ASEAN region. Under these circumstances, the Citizen Group has been pursuing new growth strategies to become a true global company, while continuing to strive to further strengthen its business structure through structural reform under the “Citizen Global Plan 2018,” a medium-term management plan formulated in February 2013. The Citizen Group’s consolidated results included net sales of 348.267 billion yen (up 6.0% year-on-year), and operating income of 30.467 billion yen (up 9.2% year-on-year), achieving strong growth both in sales and profits partly due to the impact of the weaker yen in addition to the effect of structural reforms. The results also included ordinary income of 30.619 billion yen (down 2.5% year-on-year) due to the recognition of foreign exchange losses, etc. Profit attributable to owners of parent was 13.201 billion yen (down 24.9% year-on-year) as a result of extraordinary losses from loss on business restructuring and liquidation.

Consolidated Results (Billions of yen) Net sales 348.267 (up 6.0% year-on-year) Operating income 30.467 (up 9.2% year-on-year) Ordinary income 30.619 (down 2.5% year-on-year) Profit attributable to owners of parent 13.201 (down 24.9% year-on-year)

Net sales by segment for the fiscal year under review were as follows:

[Watches and Clocks] Revenues from CITIZEN brand watches in the domestic market grew on the whole, supported by a recovery in personal spending, as well as increased spending due to more foreign visitors coming to Japan, which resulted in significant growth in sales at major department stores, mass merchandise outlets and duty-free shops. Despite a slight

- 32 - slowdown in demand from foreign customers, sales continued to grow at a moderate pace during the second half of the year, due to strong sales from core brands such as xC and ATTESA, as well as the effects of advertisements and publicity for new GPS satellite wave watches. Following its release in November, the CAMPANOLA has been steadily introduced into department stores and large specialist outlets, and has performed well in department stores in particular, driving up sales of high-end products. Revenues from overall overseas markets increased due to robust sales mainly in the North American and European markets, coupled with the effect of the weaker yen. In the North American market, overall revenues increased due to healthy sales via major jewelry chain stores and travel outlets, in spite of sluggish sales growth in department stores. Revenues from the European market also increased on the back of economic stability, with strong sales at large department stores in Germany, a long-awaited return to underlying positivity in the Italian and Spanish economies, and the effects of releasing new products. In Asia, sales remained healthy on the whole thanks to an increase in visitors to certain areas, in spite of a decline in spending in ASEAN markets due to weaker currencies. The Chinese market meanwhile saw increasingly difficult conditions due to the country’s economic slowdown. Sales did increase in certain channels. Revenues increased across the Asian market as a whole however, helped along by favorable exchange rates. Revenues from the BULOVA brand climbed on the back of increased sales to major customers such as large department stores and jewelry chains, supported in part by favorable exchange rates. The Q&Q brand continued to perform well on the domestic market, with steady sales to major customers in the Asian and Middle East markets too. Overall revenues from the Q&Q brand decreased however due to a decline in sales caused by weak currencies in Latin America, which affected purchasing power. Sales of movements remained steady during the first half of the year, but slowed down rapidly during the second half of the year, reflecting the economic slowdown in China in particular. Nonetheless, revenues increased thanks to sales growth from products such as mechanical and slim watches, further boosted by the weak yen. As a result of these developments, the watches and clocks segment achieved increases in both revenue and profits, with net sales of 181.241 billion yen (up 5.2% year-on-year) and operating income of 20.582 billion yen (up 4.6% year-on-year).

[Machine Tools] Revenues from the domestic market increased thanks to positive conditions across a wide range of industries and healthy sales of automobile-related products in particular. Elsewhere in Asia, some markets saw strong sales of OA-related products. Overall revenues declined however due to the economic slowdown in China affecting sales growth. In the Americas, sales increased across a wide range of industries in North America, including medical services, automobiles and aviation components. There were strong sales of automobile-related products to Japanese manufacturers in Central America. In the European market, sales of automobile-related products remained steady in some areas. Revenues nonetheless decreased due to an overall decline in sales across Europe. Under these circumstances, revenue from Cincom brands increased while revenue from Miyano brands decreased. As a result of these developments, the machine tools segment recorded a decline in revenue and an increase in profits, with net sales of 51.517 billion yen (down 0.4% year-on-year) and operating income of 7.151 billion yen (up 5.3% year-on-year).

- 33 - [Devices and Components] Revenues from automobile components, among other precision machining components, increased thanks to growth in orders for brake and engine components, both in Japan and overseas, supported by the booming automotive industry. Revenues from switches were affected by sluggish sales of smartphone switches for some customers. Thanks to a significant contribution from sales of new products however, revenues increased considerably, echoed by an increase in overall revenues across all precision machining components. In terms of opto-devices, sales of LED lighting chips increased thanks to sales growth in Japan and Europe as a result of new product launches, in spite of a fiercely competitive market environment due to an escalation in price reductions and performance competition while the market expands. Overall revenues from opto-devices increased as a result of steady sales growth, including increasing orders for automotive LED products, shipping new back light products, and securing orders for new lighting unit products. Among other products, revenues from quartz crystals decreased due to poor sales of both tuning fork type quartz crystal and quartz crystal blanks, due in part to sluggish market growth and certain customers undertaking inventory adjustment. Although sales of ferroelectric micro LCDs increased through the development of new product markets, they were insufficient to make up for the under-performing digital camera market, resulting in a decline in overall revenues for other products. As a result of these developments, the devices and components segment achieved increases in both revenue and profits, with net sales of 80.632 billion yen (up 19.4% year-on-year) and operating income of 6.880 billion yen (up 45.7% year-on-year).

[Electronic Products] In the printer sector, sales of label printers were strong across all areas. Sales of POS printers were however stagnant affected by customer inventory adjustment and sales of photo printers were sluggish due to a decline in demand for replacements, while sales of large dot matrix printers also fell due the slowdown of the Chinese economy and delays with the anticipated changes to the tax system. As a result, overall revenues for printers decreased. Revenues from healthcare equipment increased overall, thanks to strong sales of core blood-pressure monitors and various new products in the domestic market, as well as overseas sales growth in the Asian and Middle East markets. Revenues from calculators on the other hand declined due to sluggish sales in Asia. As a result of these developments, the electronic products segment recorded decreases in both revenue and profits, with net sales of 23.371 billion yen (down 5.4% year-on-year) and operating income of 0.342 billion yen (down 62.1% year-on-year).

[Other Products] Revenues from pachinko-related products decreased as a result of continued difficult conditions. Due to the fact that there is no prospect of recovery in the future, the Company decided to withdraw from this business. In spite of plummeting share prices since the start of the year, revenue from jewelry products increased thanks mainly to bridal jewelry driving overall sales. As a result of these developments, the other products segment recorded decreases in both revenue and profits, with net sales of 11.504 billion yen (down 5.8% year-on-year) and operating loss of 0.542 billion yen (operating loss of 0.464 billion yen for the previous fiscal year).

- 34 -

Note: The difference between each segment’s operating income of 34.416 billion yen in total and those of 30.467 billion yen (the Company’s operating income) is a miscellaneous expense used to write off transactions between each segment and not reported to each segment.

[Sales by Business Segment] Amount Change from the Business segment Percentage of total (Millions of yen) previous fiscal year Watches and Clocks 181,241 52.0 5.2 Machine Tools 51,517 14.8 (0.4) Devices and Components 80,632 23.2 19.4 Electronic Products 23,371 6.7 (5.4) Other Products 11,504 3.3 (5.8) Total 348,267 100.0 6.0 Note: The rate of the sales in the overseas to the gross sales is 67.3%.

2. Financing Not applicable

3. Capital Expenditures Capital expenditures during the fiscal year totaled 22.882 billion yen, the major expenditures of which are as follows: (1) 10.345 billion yen for production facilities in Watches and Clocks (2) 2.268 billion yen for production facilities in Machine Tools (3) 7.9 billion yen for production facilities in Devices and Components (4) 0.385 billion yen for production facilities in Electronic Products (5) 0.067 billion yen for production facilities in Other Products

4. Important corporate restructuring Citizen Finetech Miyota Co., Ltd. and Citizen Seimitsu Co., Ltd. merged on April 1, 2015, with Citizen Finetech Miyota Co., Ltd. as the surviving company, which changed its trade name to Citizen Finedevice Co., Ltd. on the same date. On April 27, 2016, the Company, Citizen Watch Co., Ltd., and Citizen Business Expert Co., Ltd. concluded an agreement for a merger with the Company as the surviving company, with the effective date of October 1, 2016. The Company plans to change its trade name to Citizen Watch Co., Ltd. on October 1, 2016.

5. Acquisition or Disposition of Shares, Other Equity Interests, or Stock Acquisition Rights of Other Companies The Company and Citizen Electronics Co., Ltd. acquired 10,000 shares and 28,000 shares, respectively, in Nichia Corporation that were newly issued by the company through a third-party allotment with a payment due date of June 4, 2015, for the purpose of strengthening the capital and business alliance relationships with the company. In order to realize greater asset efficiency, the Company subscribed to an offer by Rhythm

- 35 - Watch Co., Ltd. to purchase its own shares, which had been offered using ToSTNeT-3 on June 22, 2015. The Company sold 3,000,000 of the said company’s shares to the said company.

6. Challenges Going Forward The Company in February 2013 established the “Citizen Global Plan 2018” medium-term management plan, which covers years until the fiscal year ending March 31, 2019 (hereinafter the “Management Plan”). Having set out a slogan for the Management Plan, “Aiming to Be a Solid Global Company - business group with speed and dynamics -,” the Company has been working towards that goal ever since. As the external environment changed considerably during the first three years (FY2013 - FY2015) of the Management Plan, the Company made partial revisions to the original management policy in February 2016, setting the following two points as the basic management policy, in the aim of becoming a “Solid Global Company” capable of consistently providing the sort of value required by the global market. 1. The Company will focus on the business area it can make use of the strengths developed and accumulated on years of experience of the watches and clocks business, and aim to establish an industry leading business group with global competitiveness. 2. The Company will enhance its earning power through manufacturing innovation, to establish a high profit structure. When the Company initially formulated the Management Plan, one of the management policies was “considering China and other emerging countries in Asia as its strategic markets, the Company will accelerate growth in profit through boosting sales concurrently with the promotion of streamlining.” During the first three years of the plan (FY2013 - FY2015) however, the external environment changed considerably, affecting prospects of achieving initially forecast growth and ruling out the relevant management policy. Nonetheless, the Company still believes that this is a market that will return to growth over the long term, and therefore intends to work on laying foundations from a long-term perspective. During the first three years (FY2013 - FY2015), the Company implemented comprehensive structural reform and improvements, in an effort to establish a more robust management structure. During the latter three years (FY2016 - FY2018), it intends to further strengthen manufacturing capabilities, with the aim of overcoming increasingly fierce global competition and improving profitability, and to increase performance through active investment in growth, with the goal of becoming a “Solid Global Company” by fiscal 2018. During the latter three years (FY2016 - FY2018), the Company will focus on the following four tasks to overcome its management challenges. 1. Comprehensively strengthening the Company’s structure and manufacturing capabilities During the first three years (FY2013 - FY2015), the Company implemented structural reform and a range of other related initiatives. During the latter three years (FY2016 - FY2018), it intends to step up initiatives even further, with the aim of reducing cost prices through manufacturing reform and improving asset efficiency. 2. Actively investing in business growth and strengthening marketing capabilities The Company intends to actively invest in growth, using funds generated through structural reform during the first three years (FY2013 - FY2015), in order to increase its performance.

- 36 - 3. Refining and targeting products and businesses During the first three years (FY2013 - FY2015), the Company worked to clarify its business portfolio. During the latter three years (FY2016 - FY2018), it intends to refine and target businesses and products from individual group companies, in order to clarify core businesses and products. 4. Improving human productivity and strengthening human resources The Company intends to focus on developing human resources that are able to deal with any and all changes in the global environment, and on strengthening organizational capabilities as an elite corporate group.

Strategies of each business segment 1. Watches and clocks The Company intends to implement a multi-brand strategy revolving primarily around growing the Citizen brand product business, based on the slogan “From Functionality to Corporate Branding.” Initiatives will be firmly targeted at Japan and North America, as priority markets. The Company will also continue to effectively strengthen manufacturing capabilities, in order to overcome fierce competition and improve profitability. 2. Machine tools The Company intends to establish a position as a “new manufacturing company” that creates the most advanced production innovation solutions in the world, based on miniaturization and high-rigidity technologies developed through the manufacture of watch parts, and to secure a stable position with a leading share in the automatic lathe market. 3. Devices and components The Company intends to expand its precision component business to outperform competitors in global niche markets, based on the Group’s strengths in terms of processing technologies for metallic parts and brittle materials. With regard to LED products, the Company is looking to stabilize and increase profits by refining the Group’s unique strengths in terms of miniaturization and ultra-thin technologies, whilst at the same time making the most of its capital and business alliance with Nichia Corporation. With regard to other devices products, the Company intends to prioritize stable profits ahead of increasing sales. 4. Electronic products Having commercial and photo printers of high quality/reliability as the core products, the Company will seek to generate stable profits by developing businesses mainly in the global niche market.

During the fiscal year under review, by working on our efforts to strengthen business structures through rigorous structural reform including optimization of global production systems, the Company has laid a solid foundation toward the growth stage contemplated for the latter three years (FY2016 - FY2018) of the Management Plan. The Company will continue to strengthen its structure and promote its growth strategies as a way to bring about profitability improvement and sales expansion. We thank our shareholders for their continuing support.

- 37 - 7. Assets and Profit and Loss of the Company 128th 129th 130th 131st

(FY2012) (FY2013) (FY2014) (FY2015) Net sales (millions of yen) 272,050 309,994 328,456 348,267 Ordinary income (millions of yen) 13,805 25,307 31,403 30,619 Profit attributable to owners of parent (8,855) 17,434 17,572 13,201 (millions of yen) Basic earnings per share (yen) (27.33) 53.81 54.24 41.32 Total assets (millions of yen) 354,670 383,920 421,563 406,462 Net assets (millions of yen) 192,409 217,412 247,972 237,469 Net assets per share (yen) 583.03 660.83 736.17 715.38 Notes: 1. Parentheses of profit attributable to owners of parent and basic earnings per share represent losses. 2. Basic earnings per share is calculated based on the number of shares deducting the average total number of treasury shares during the term from the average total number of shares outstanding during the term. Net assets per share is calculated based on the number of shares deducting the total number of treasury shares at the fiscal year-end from the total number of shares outstanding at the fiscal year-end.

8. Details of Important Subsidiaries Voting Right Percentage of Name Capital Major Business the Company (%) Citizen Watch Co., Ltd. 5,000 million yen 100.0 Watches and Clocks Citizen Watch Manufacturing Co., Ltd. 300 million yen *100.0 Watches and Clocks Citizen Machinery Co., Ltd. 2,651 million yen 100.0 Machine Tools Citizen Electronics Co., Ltd. 5,488 million yen 79.3 Devices and Components Citizen Finedevice Co., Ltd. 1,753 million yen 100.0 Devices and Components Citizen Systems Japan Co., Ltd. 450 million yen 100.0 Electronic Products Citizen Financial Service Co., Ltd. 50 million yen 100.0 Financial Services in the Group Citizen Watch Company of America, Inc. US$ 43.66 million *100.0 Watches and Clocks Citizen Watches (H.K.) Ltd. HK$ 10 million *100.0 Watches and Clocks Bulova Corporation US$ 1,000 *100.0 Watches and Clocks Notes: 1. Those with an asterisk mark indicate indirect holdings. 2. Citizen Machinery Miyano Co., Ltd. changed its trade name to Citizen Machinery Co., Ltd. on April 1, 2015 3. Citizen Finetech Miyota Co., Ltd. and Citizen Seimitsu Co., Ltd. merged on April 1, 2015, with Citizen Finetech Miyota Co., Ltd. as the surviving company, which changed its trade name to Citizen Finedevice Co., Ltd. on the same date. 4. The status of specified wholly-owned subsidiaries as of March 31, 2016 is as follows: Name of the specified wholly-owned subsidiary: Citizen Watch Co., Ltd. Address of the specified wholly-owned subsidiary: 6-1-12, Tanashi-cho, Nishi-Tokyo-shi, Tokyo Total book value of the specified wholly-owned subsidiary: 52,522 million yen Total assets of the Company: 193,612 million yen

9. Principal Products of Business (as of March 31, 2016) Business segment Principal products Watches and Clocks Watches, movement Machine Tools NC automatic lathes Devices and Automotive parts, switches, LED, micro display devices, quartz crystals Components Electronic Products Printers, healthcare equipment, calculators Other Products Pachinko-related products, jewelry

- 38 - 10. Principal Places of Business (as of March 31, 2016) Name Location Citizen Holdings Co., Ltd. Nishitokyo, Tokyo Citizen Watch Co., Ltd. Nishitokyo, Tokyo Citizen Watch Manufacturing Co., Ltd. Tokorozawa, Saitama Citizen Machinery Co., Ltd. Kitasaku-gun, Nagano Citizen Electronics Co., Ltd. Fujiyoshida, Yamanashi Subsidiaries and others Citizen Finedevice Co., Ltd. Minamitsuru-gun, Yamanashi Citizen Systems Japan Co., Ltd. Nishitokyo, Tokyo Citizen Watch Company of America, Inc. California, U.S.A. Citizen Watches (H.K.) Ltd. Hong Kong, China Bulova Corporation New York, U.S.A. Notes: 1. Citizen Machinery Miyano Co., Ltd. changed its trade name to Citizen Machinery Co., Ltd. on April 1, 2015. 2. Citizen Finetech Miyota Co., Ltd. and Citizen Seimitsu Co., Ltd. merged on April 1, 2015, with Citizen Finetech Miyota Co., Ltd. as the surviving company, which changed its trade name to Citizen Finedevice Co., Ltd. on the same date, and the address of the head office is Minamitsuru-gun, Yamanashi.

11. Employees (as of March 31, 2016) Business Segment Number of employees Change from the previous fiscal year-end Watches and Clocks 7,463 [3,359] (408) [51] Machine Tools 1,601 [193] 2 [13] Devices and Components 5,892 [852] (1,670) [83] Electronic Products 1,487 [26] (27) [(1)] Other Products 357 [152] 4 [(8)] General Corporate 246 [37] (28) [3] Total 17,046 [4,619] (2,127) [141] Notes: 1. The number of employees covers all those engaged in operations and figures in brackets represent average annual temporary workers in addition to the number of employees. 2. Decrease in the number of employees for Devices and Components is primarily due to the decreases in the numbers of employees at overseas subsidiaries following production cuts.

12. Principal Lenders (as of March 31, 2016) (Millions of yen) Name Borrowed Amount Mizuho Bank, Ltd. 10,500 Mitsubishi UFJ Trust and Banking Corporation 9,800 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 6,000 Sumitomo Mitsui Banking Corporation 5,800 Nippon Life Insurance Company 3,600 The Hachijuni Bank, Ltd. 3,100 The Yamanashi Chuo Bank, Ltd. 2,000

- 39 - II. MATTERS CONCERNING COMPANY STOCK AND STOCK ACQUISITION RIGHTS, ETC. 1. Condition of Stocks (as of March 31, 2016) (1) Total number of authorized shares: 959,752,000 shares (2) Total number of shares issued: 330,353,809 shares (3) Number of shareholders: 31,973 (4) Major shareholders (Top 10)

Number of the Company’s Shareholding ratio Name shares held (Thousands of shares) (%) The Master Trust Bank of Japan, Ltd. (trust account) 27,771 8.73 Japan Trustee Services Bank, Ltd. (trust account) 20,538 6.45 Nippon Life Insurance Company 13,275 4.17 Nichia Corporation 10,000 3.14 National Mutual Insurance Federation of 8,160 2.56 Agricultural Cooperatives Japan Trustee Services Bank, Ltd. (trust account 9) 7,202 2.26 Mizuho Bank, Ltd. 6,109 1.92 Mitsubishi UFJ Trust and Banking Corporation 5,375 1.69 Trust & Custody Services Bank, Ltd. (securities 4,821 1.52 investment trust account) Marubeni Corporation 4,496 1.41 Note: Shareholding ratio is calculated after deducting 12,060,890 treasury shares.

2. Status of Stock Acquisition Rights (as of March 31, 2016) Not applicable

- 40 - III. MATTERS CONCERNING DIRECTORS AND AUDIT & SUPERVISORY BOARD MEMBERS 1. Names, etc. of Directors and Audit & Supervisory Board Members (as of March 31, 2016) Area of responsibility and significant concurrent Title Name role held at other companies (if any) President and CEO Toshio Tokura President and CEO of Citizen Watch Co., Ltd. Chairman of Japan Clock & Watch Association Managing Director Ryota Aoyagi In charge of Accounting Division and General Affairs Division Executive Vice President of Citizen Watch Co., Ltd. President and CEO of Citizen Business Expert Co., Ltd. President and CEO of Citizen Financial Service Co., Ltd. Director Shigeru Kabata In charge of Corporate Planning Division, Personnel Division, Intellectual Property Department, and R&D Division Director in charge of Personnel Division of Citizen Watch Co., Ltd. Outside Director of Rhythm Watch Co., Ltd. Director Keiichi Nakajima President of Citizen Machinery Co., Ltd. Director Toshihiko Sato President of Citizen Finedevice Co., Ltd. Outside Director Kenji Ito Adviser, TOTO LTD. Outside Director Masaaki Komatsu Audit & Supervisory Board Haruhisa Shiraishi Member (Full-time)

Outside Audit & Supervisory Board Member Audit & Supervisory Board Kenichiro Hanyu

Member (Full-time) Outside Audit & Supervisory Masaomi Suizu Attorney-at-law Board Member Notes: 1. In accordance with the provisions of Article 427, Paragraph 1 of the Companies Act, the Company has entered into agreements with each Outside Director and Audit & Supervisory Board Member that limit the maximum liability for damages under Article 423, Paragraph 1 of the said Act. The maximum amount of liability for damages based on such agreements shall be the higher of 10 million yen or the lowest total maximum liability amount stipulated by laws and regulations. 2. Full-time Audit & Supervisory Board Member Mr. Haruhisa Shiraishi has been managing banks and companies for many years and has extensive knowledge of finance and accounting. 3. Outside Audit & Supervisory Board Member Mr. Masaomi Suizu is thoroughly experienced in corporate legal affairs as an attorney-at-law and has extensive knowledge of finance and accounting. 4. The Company has appointed Outside Directors, Mr. Kenji Ito and Mr. Masaaki Komatsu as Independent Officers defined by the Tokyo Stock Exchange and registered them with the Exchange as such.

- 41 - 5. The title and area of responsibility and significant concurrent role held at other companies of Managing Director Ryota Aoyagi, Directors Shigeru Kabata and Toshihiko Sato changed on April 1, 2016 as follows: Area of responsibility and significant concurrent Title Name role held at other companies (if any) Managing Director Ryota Aoyagi In charge of Accounting Division and General Affairs Division Executive Vice President of Citizen Watch Co., Ltd. Director of Citizen Business Expert Co., Ltd. Director Shigeru Kabata In charge of Corporate Planning Division, Personnel Division, Intellectual Property Department, and R&D Division Director in charge of Personnel Division of Citizen Watch Co., Ltd. President and CEO of Citizen Business Expert Co., Ltd. Outside Director of Rhythm Watch Co., Ltd. Director Toshihiko Sato Director responsible for Production, General Manager of Product Development Division, and in charge of Quality Assurance Department of Citizen Watch Co., Ltd.

2. Directors and Audit & Supervisory Board Members Who Retired during This Fiscal Year Position, area of responsibility, and significant Name Retirement date Reason for retirement concurrent role held at other companies at the time of retirement Expiration of term of Director Takao Nakajima June 25, 2015 office Outside Director Expiration of term of Teruaki Aoki June 25, 2015 Outside Director of Anritsu office Corporation

3. Total Amount of Directors’ and Audit & Supervisory Board Members’ Compensation Amount of bonus out Amount of Number of officers to of all compensation, compensation, etc. receive compensation etc. (millions of yen) (millions of yen) Director 9 94 18 [Out of which, Outside Directors] [3] [19] [––] Audit & Supervisory Board Member –– 3 42 [Out of which, Outside Audit & Supervisory [––] [2] [25] Board Members] Total 12 136 18 [Out of which, outside officers] [5] [44] [––] Notes: 1. The above figures include Directors who retired upon conclusion of the 130th Ordinary General Meeting of Shareholders held on June 25, 2015. 2. The above amount of the bonuses (18 million yen) for Directors (excluding Outside Directors) is the amount to be paid after the conclusion of the 131st Ordinary General Meeting of Shareholders scheduled to be held on June 28, 2016. 3. The maximum allowance for the total amount of compensation, etc. for Directors (excluding Outside Directors) was set at 270 million yen per year (inclusive of bonuses, etc.) at the 122nd Ordinary General Meeting of Shareholders held on June 26, 2007. Prior to the resolution, employee salaries (including bonuses) for employees who also serve as Directors used to be paid in addition to the compensation, etc. for Directors. However, after the resolution, compensation for the performance of the duties of Directors is consolidated into the above compensation, etc. for Directors, and will be paid within the above maximum allowance. 4. The maximum allowance for the total amount of compensation, etc. for Outside Directors was set at 30 million yen per year at

- 42 - the 122nd Ordinary General Meeting of Shareholders held on June 26, 2007. No bonuses will be paid to Outside Directors. 5. The maximum allowance for the total amount of compensation, etc. for Audit & Supervisory Board Members was set at 80 million yen per year at the 122nd Ordinary General Meeting of Shareholders held on June 26, 2007. No bonuses will be paid to Audit & Supervisory Board Members.

4. Matters Relating to Outside Officers (1) Relationships between the Company and organizations where important concurrent positions are held The Company has no special interest with the organizations where Outside Officers hold important concurrent positions. (2) Major activities during the fiscal year ended March 31, 2016

Attendance at Attendance at Audit & Board of Supervisory Directors Name Title Board Principal comments meetings meetings (attendance (attendance rate) rate) Comments as needed 17 of 17 primarily from the Kenji Ito Outside Director — (100%) viewpoint of a highly experienced executive Comments as needed 13 of 13 primarily from the Masaaki Komatsu Outside Director — (100%) viewpoint of a highly experienced executive Comments as needed Outside Audit & 17 of 17 13 of 13 primarily from the Haruhisa Shiraishi Supervisory (100%) (100%) viewpoint of a highly Board Member experienced executive Comments as needed Outside Audit & 17 of 17 13 of 13 primarily from the Masaomi Suizu Supervisory (100%) (100%) professional viewpoint of Board Member an attorney-at-law Note: The activities of Outside Director Mr. Masaaki Komatsu shown above were those during his term, for he was newly elected as Outside Director at the 130th Ordinary General Meeting of Shareholders held on June 25, 2015.

- 43 - IV. INDEPENDENT AUDITORS 1. Name: Nihombashi Corporation

2. Amount of Compensation Millions of yen (1) Compensation for Independent Auditors for the fiscal year under review 34 (2) Total amount of money and other material benefits to be paid to Independent 88 Auditors by the Company and subsidiaries Notes: 1. In the audit agreement by and between the Company and the Independent Auditors, the Company does not clearly differentiate, and it is also practically impossible to differentiate, between compensation for audits under the Companies Act and compensation for audits under the Financial Instruments and Exchange Act. Thus, the amount stated in (1) above includes compensation for audits under the both Acts. 2. The Audit & Supervisory Board consented to the amount of compensation, etc. of the Independent Auditors after determining that, among others, the content of the audit program, the execution status of accounting audits, and the basis for calculation of compensation estimates of the Independent Auditors were appropriate. 3. Citizen Watch Company of America, Inc., Citizen Watches (H.K.) Ltd. and Bulova Corporation each of which is the Company’s important subsidiary, undertook an audit by KPMG LLP, PHILIP LEE & CO., CERTIFIED PUBLIC ACCOUNTANTS and Grant Thornton LLP respectively. 3. Non-audit Services The Company entrusts the Independent Auditors to provide advisory and guidance services concerning the preparation of Annual Reports.

4. Decision Making Policy for Dismissal or Non-reappointment of Independent Auditors It is the policy of the Company that if the Independent Auditors fall under any of the dismissal events listed in the items of Article 340, Paragraph 1 of the Companies Act, the Audit & Supervisory Board shall remove those Independent Auditors with the consents of all Audit & Supervisory Board Members. In this case, an Audit & Supervisory Board Member appointed by the Audit & Supervisory Board shall report on the decision of dismissal and its reasons at the first General Meeting of Shareholders convened after the dismissal. In addition to the cases mentioned above, if the Audit & Supervisory Board determines that the incumbent Independent Auditors are inadequate as Independent Auditors in consideration of the audit quality, the effectiveness and efficiency of audit processes, the number of successive years for which they served as Independent Auditors, etc., it shall draft a proposal for dismissal or non-reappointment of Independent Auditors. In addition, the Board of Directors shall request the Audit & Supervisory Board to discuss at a General Meeting of Shareholders the dismissal or non-reappointment of Independent Auditors if it determines it to be necessary due to, for example, difficulties in the execution of duties by the Independent Auditors. In this case, the Audit & Supervisory Board shall draft a proposal to be submitted to the General Meeting of Shareholders after determining whether the dismissal or non-reappointment is appropriate.

- 44 - V. SYSTEM AND POLICIES OF THE COMPANY 1. System to Ensure the Appropriateness of the Company’s Business and its Operation Status (1) Summary of the decisions on the development of a system to ensure the appropriateness of the Company’s business a) System to ensure that the Directors and employees perform their duties in conformance with relevant laws and regulations and the Articles of Incorporation 1) The Company shall hold, in principle, a regular meeting of the Board of Directors at least once a month, and shall make decisions on significant matters concerning the performance of business and other matters to be submitted for discussion. In addition, the Company shall supervise the Directors’ performance of their duties. 2) In order to ensure that Directors and employees of the Group perform their duties in conformance with relevant laws and regulations, the Articles of Incorporation, and other internal rules, and to ensure that the Company commits to corporate social responsibility, the Company shall stipulate the Citizen Group Code of Conduct (hereinafter the “Citizen Code of Conduct”) as a code of conduct which is applicable in common to all of the companies constituting the Citizen Group. In addition, the Company shall establish the Group Risk Management Committee and CSR Department, which are directly controlled by the President and CEO, and shall thoroughly inform Directors and employees of the Group of the Citizen Code of Conduct in order to enhance their knowledge and awareness of compliance and foster their adherence to the Citizen Code of Conduct. 3) The Company shall also create an internal reporting system, and thereby aim to prevent, find at an early stage, and correct voluntarily any violation of laws and regulations or misconduct caused by fraudulent acts. 4) The Company shall establish the Internal Audit Department, which is directly controlled by the President and CEO, and the Internal Audit Department shall, based on the audit program, audit as to whether the business of the Group is performed in conformance with relevant laws and regulations and internal rules. 5) It shall be clearly stated in the Citizen Code of Conduct and the like that the Company will decisively reject demands for illegal payoffs from anti-social forces that threaten social order and sound business activities. The Company shall also develop and enhance its system to cooperate with the police and other related external organizations and block any link with anti-social forces. (b) System for storage and management, etc. of information relating to Directors’ performance of their duties 1) The Company shall properly keep and manage the Minutes of General Meetings of Shareholders, Minutes of Board of Directors Meetings, Minutes of Group Management Committee Meetings, Written Requests for Managerial Decisions, and other information relating to the performance of the duties of Directors in accordance with relevant laws and regulations, the Articles of Incorporation, the Rules on Board of Directors, the Rules on Group Management Committee, the Rules on Request for Decisions, and other internal rules.

- 45 - 2) The Company shall develop and maintain a system to ensure that the Company is able to disclose information regarding the Directors’ performance of their duties in a timely and appropriate manner pursuant to relevant laws and regulations, the Articles of Incorporation, the Rules on Information Control and Prevention of Insider Trading by the Citizen Group, and other internal rules, when such disclosure of information is requested by Directors, Audit & Supervisory Board Members, shareholders, creditors, and other interested parties, by setting up a position of the General Manager of Information Control and an Information Control Section. (c) Regulations and other systems relating to management of risks of loss 1) Business strategy risks inherent in significant decision-making made by the Citizen Group through resolutions of the Board of Directors or determinations by the President and CEO or the Directors in charge of respective operations shall be appropriately managed based on careful deliberations at the Group Management Committee meetings or the Business Control and Management Committee meetings to be held by the subsidiaries controlling each business of the Citizen Group (hereinafter the “Business Controlling Companies”) pursuant to the Rules on Group Management Committee, Affiliates Management Rules, Citizen Code of Conduct, the management policies and management plan, and the like. 2) In addition to 1) above, the Company shall appropriately manage operational risks inherent in processes, the activities of Directors and employees, systems, external events, etc. through risk management based on our Basic Risk Management Regulations. (d) System to ensure the efficient performance of Directors’ duties 1) The Company shall establish the Group Management Committee, and shall thoroughly discuss matters to be resolved at the Board of Directors meetings, and other significant matters relating to the management of the Company. 2) Prior to the decision-making by the Board of Directors, sufficient and appropriate information shall be provided to each of the Directors. 3) The Company shall develop a system in which the duties to be performed by, and the authorities and responsibilities of, each Director are specified by internal rules, resolutions of the Board of Directors, or by other similar decisions, and to ensure that all Directors smoothly and effectively perform their duties. (e) System to ensure the appropriateness of the Citizen Group’s business 1) The Company shall conclude the Business Management Agreement or other similar agreements with the Business Controlling Companies, and shall manage or instruct the Business Controlling Companies concerning the development of the management and internal control systems pursuant to the Affiliates Management Rules or other similar rules. 2) Regarding individual business activities of the Citizen Group, the Company shall familiarize the Business Controlling Companies with the management policies and the management plan established by the Company, and shall clearly define the authorities and responsibilities of the Business Controlling Companies. Each of the Business Controlling Companies shall independently carry out their management of business in consideration of the features of the industry in which each Business Controlling Company engages.

- 46 - 3) The Company shall regularly hold meetings of the Group Management Strategy Committee, which consists of major companies of the Citizen Group, to share information and enhance the partnerships concerning the group strategy of personnel affairs, financial affairs, research and development, intellectual properties, brands, and other similar matters. 4) The Company shall request that the Business Controlling Companies regularly report to the Company regarding whether the business of the Business Controlling Company is properly performed, in the Business Control and Management Committee meetings or at other similar opportunities, and in addition, shall monitor the same by an audit implemented by the Internal Audit Department, etc. (f) Matters relating to employees who assist the Audit & Supervisory Board Members in their duties 1) At the request of the Audit & Supervisory Board Members for arranging employees who assist the Audit & Supervisory Board Members in their duties, the Company shall arrange auditing personnel with sufficient ability to assist the Audit & Supervisory Board Members in their duties. 2) If the Company arranges for auditing personnel for a request mentioned in 1) above, the relevant auditing personnel shall exclusively engage in assistance with the duties of the Audit & Supervisory Board Members under the direction of the Audit & Supervisory Board Members in order to ensure the independence of such auditing personnel, and the appointment, dismissal or other personnel changes and personnel evaluations and disciplinary dispositions shall be subject to the prior consent of the Audit & Supervisory Board. (g) System relating to reporting to the Audit & Supervisory Board Members 1) Directors shall report any decisions that could seriously affect the business or the organization, and the results of internal audits of the Group, to the Audit & Supervisory Board without delay. 2) The Directors shall immediately report to the Audit & Supervisory Board if they become aware of any material breach of relevant laws and regulations, the Articles of Incorporation, the Citizen Code of Conduct, or other internal rules, or any wrongdoing, any possible occurrence of such a breach or wrongdoing in connection with the Group’s business, or any other fact which could cause material damage to the Company. 3) If any of the employees of the Company and directors, audit & supervisory board members, and employees of a subsidiary of the Company comes to know the fact referred to in 2) above, such an employee of the Company or an audit & supervisory board member of a subsidiary of the Company may directly report that fact to an Audit & Supervisory Board Member of the Company and such a director or an employee of a subsidiary of the Company may, directly or through an audit & supervisory board member of the subsidiary, report that fact to an Audit & Supervisory Board Member of the Company. 4) In addition to 1), 2) and 3) above, Directors and employees of the Company and directors, audit & supervisory board members and employees of its subsidiaries shall timely and appropriately make a business report at the request of the Audit & Supervisory Board Members. 5) The Company shall ensure that a person who made a report referred to in 1) through 4) above to the Audit & Supervisory Board or an Audit &

- 47 - Supervisory Board Member will not be treated in an disadvantageous manner on the ground that he or she made such a report and take any necessary measures including the development of relevant internal rules. (h) Other systems to ensure the effectiveness of audits by the Audit & Supervisory Board Members 1) The Company shall have the Audit & Supervisory Board Members attend the Board of Directors meetings, Group Management Committee meetings, and other important meetings. 2) In addition to 1) above, the Company shall maintain communication between the Audit & Supervisory Board Members and directors, audit & supervisory board members and employees of the Group companies by holding talks between the Representative Director and the Audit & Supervisory Board Members on a regular basis, while maintaining the fair attitude and independent position of the Audit & Supervisory Board Members, or by other means, and shall assist the Audit & Supervisory Board Members in collecting information necessary for the Audit & Supervisory Board Members to perform their duties and in improving the audit environment. 3) Any expenses or obligations arising in the course of performance of duties by Audit & Supervisory Board Members shall be treated appropriately in accordance with the relevant laws and regulations and internal rules.

(2) Summary of the operation status of the system to ensure the appropriateness of the Company’s business (a) Compliance system The Company issues CSR Reports and distributes it to directors and employees of the Group. The Company also conducts Citizen Group CSR attitude surveys to monitor the actual status of awareness about the Citizen Code of Conduct and whistleblower reporting channels, etc. and the survey results are reported to the President and CEO, the Director in charge, and Audit & Supervisory Board Members. In the fiscal year under review, the Company established rules concerning the prevention of harassment and strived to enforce them thoroughly by arranging a seminar given by attorney-at-laws. To properly implement security export and import control, the Citizen Group Security Control Management Committee held meetings at which results of self-audit by the Group companies were reported and issues and information about security export and import control were shared. The Company also conducted training and internal audits targeting Group companies. To ensure that subcontracting transactions are properly carried out, the Subcontract Transaction Optimizing Committee held seminars to introduce the newly established guidelines for proper transactions. The Company also conducted internal audits targeting Group companies. (b) Risk management system In the fiscal year under review, the Company promoted the improvement, operation, and monitoring of the group-wide risk management system by revising rules and management systems related to risk management and establishing the Group Risk Management Committee based on the newly established Basic Risk Management Regulations. The Company also started the establishment and improvement of various systems corresponding to each major risk theme faced by

- 48 - the Group. In preparation for cases of suspension or disruption of business operations due to, for example, a large-scale disaster, the Company has established the Business Continuity Plan (BCP) to enable business continuity and early recovery from such a situation. In the fiscal year under review, the Company conducted training concerning the business continuity plan (BCP training) at production facilities of the watches and clocks business group in China and Thailand, for the first time overseas. (c) Audit & Supervisory Board Members’ audit system Audit & Supervisory Board Members attended the Board of Directors meetings, Group Management Committee meetings, and other important meetings to monitor, among other things, the status of performance of duties and important decision-making processes by Directors and to state their opinions as necessary. Audit & Supervisory Board Members are putting effort into the coordination of management supervision by holding regular meetings for exchange of opinions with the Representative Director and Independent Auditors, respectively, in addition to holding meetings with Outside Directors. In addition, Audit & Supervisory Board Members confirmed the improvement and the operation status of the internal control system of the Group by receiving reports on the improvement and the operation of the risk management system, the operation status of the whistleblower program, results of monitoring by the Internal Audit Department, etc., from the CSR Department, the Internal Audit Department, etc., and conducting on-site audits and demanding explanation as necessary. Audit & Supervisory Board Members have also put in place a system for communication with audit & supervisory board members of the Group companies, and collect information about, among others, the status of performance of duties by directors of Group companies.

- 49 - 2. Corporate Governance (1) Our corporate governance vision The Company’s corporate philosophy is “Citizen contributes to and strives to be respected by the citizens of the world,” and it derives its name from this. The Company works to contribute to society and increase its corporate value through sustainable corporate activities, in harmony with the local community and the global environment. To continue to promote its aims, the Company believes that it is important to secure transparency in management and monitor many fields of management. Accordingly, the Company is striving to expand and improve its corporate governance. (2) The Company’s organization (a) Summary of the Company’s organization The Company has a Board of Directors, which is comprised of five (5) Directors who are familiar with the Company’s business lines, and two (2) Outside Directors who are independent from the Company’s management. The Company also employs an Audit & Supervisory Board system and has an Audit & Supervisory Board comprised of three (3) Audit & Supervisory Board Members, two (2) of whom are Outside Audit & Supervisory Board Members. (b) Details of the Company’s organization and status of development of internal control system At least once a month, the Company holds Group Management Committee meetings that are attended by the full-time Directors, full-time Audit & Supervisory Board Members, and Presidents of the Business Controlling Companies to maintain prompt business judgment and management transparency. Matters to be resolved at the Board of Directors meetings and other important managerial issues are fully discussed and deliberated in advance at these meetings. The Board of Directors makes decisions about the performance of business and supervises these performances. Management of business operations is carried out by the Representative Director and the Directors in charge of respective operations. The Board of Directors meetings were held seventeen (17) times during the fiscal year under review, and all Directors and all Audit & Supervisory Board Members attended all of the Board of Directors meetings held during the fiscal year under review during the term of their office. (c) Nominating Committee and Compensation Committee The Company has established the Nominating Committee and the Compensation Committee as voluntary institutions to improve the transparency of the management of the Company. The main duties of the Nominating Committee include discussions on matters concerning the appointment of the Representative Director, the President and CEO, and the Chairman of the Board of Directors, and proposals of such matters to the Board of Directors. The main duties of the Compensation Committee include discussions on matters concerning the policies and standards of the compensation to be received by Directors, and the provision of advice concerning the same to the Board of Directors. Each of the above-mentioned Committees is composed of three (3) or more Directors who are appointed by a resolution of the Board of Directors, the majority of which are Outside Directors and which shall include at least one (1) Representative Director. The Chairperson of each of the Committees shall be an

- 50 - Outside Director, and shall be elected by mutual election of the members of the Committees. (d) Status of audits by Audit & Supervisory Board Members, audits by Independent Auditors and internal audits Each Audit & Supervisory Board Member conducts strict audits on the Directors’ performance of their duties, in accordance with the audit policy and audit program stipulated by the Audit & Supervisory Board, by attending the Board of Directors meetings, the Group Management Committee meetings, division meetings, or other such meetings; receiving from the Directors and other officers reports on the status of the performance of their duties; reviewing important written decisions and other documents; and investigating the business and financial status of the Company. The Company also receives a financial audit report from Nihombashi Corporation, which is an Independent Auditor. The Company conducts effective audits on itself and its subsidiaries in collaboration with the Independent Auditor, and is working on the further expansion and improvement of corporate governance. Audit & Supervisory Board meetings were held thirteen (13) times during the fiscal year under review, and all Audit & Supervisory Board Members attended all of the Audit & Supervisory Board meetings held during the fiscal year under review. With respect to the financial audits, the certified public accountants who independently audited the Company are Mr. Masahiko Kinoshita and Mr. Kenichi Yajima, associates of Nihombashi Corporation. In addition, eight (8) certified public accountants, five (5) successful candidates who have passed the Certified Public Accountants Examination, etc. assisted in the audit of the Company. The Company ensures fairness and independence while it is audited by the Independent Auditors. Whether to reappoint the Independent Auditors is deliberated and decided by the Audit & Supervisory Board. If the Board of Directors does not approve the reappointment of the Independent Auditors, such proposal will be deliberated on at the Ordinary General Meeting of Shareholders pursuant to the Companies Act. For details of the decision-making policy for the dismissal or non-reappointment of the Independent Auditors, see page 44 “IV. INDEPENDENT AUDITORS, 4. Decision Making Policy for Dismissal or Non-reappointment of Independent Auditors.” Further, the Company has established the Internal Audit Department as an internal audit division and conducts audits in accordance with an annual audit program to confirm that the business execution of the Company and its subsidiaries is appropriate and reasonable. The auditing organizations, the internal audit division, and the internal control division closely communicate with each other. (e) Relationship with outside officers The Citizen Group has no special interest with Outside Directors, Mr. Kenji Ito and Mr. Masaaki Komatsu, and Outside Audit & Supervisory Board Members, Mr. Haruhisa Shiraishi and Mr. Masaomi Suizu.

- 51 - 3. CSR Efforts Each Citizen Group company, under the group-wide corporate philosophy “Citizen contributes to and strives to be respected by the citizens of the world,” conducts CSR activities at its own responsibility with due respect for the business characteristics, regional characteristics, history, corporate culture, etc. We became a signatory to the UN Global Compact in April 2005 and are working to uphold, respect, and implement its 10 principles. In conjunction with the Citizen Group’s adoption of a pure holding company structure in April 2007, we created the “Citizen Group Code of Conduct.” The Citizen Group makes efforts to fulfill the corporate social responsibility (CSR) and contribute to the development of a sustainable society through working on business activities in accordance with the “Citizen Group Code of Conduct.” The Citizen Group devotes significant efforts to strengthening compliance and corporate governance, designing, implementing, and evaluating internal control systems, advancing risk management, promoting Creating Shared Value (CSV) and actively addressing environmental issues, and continually endeavors to increase corporate values. In regard to social contribution activities, we enthusiastically pursue “Citizen of the Year,” etc. that recognize ordinary citizens who have inspired others, and helped to develop communities, making them more positive and attractive places to live. Moreover, the Group has been supporting the “Because I am a Girl” campaign, which has been promoted by Plan Japan to support girls and women in developing countries, since 2013 and is helping its activities. The Group also continues to support recovery from the Great East Japan Earthquake and is providing music lessons after donating musical instruments to improve the quality of the community life of children who will play important roles in the future. Furthermore, in regard to the earthquakes in Kumamoto prefecture and throughout the Kyushu region, which occurred in April 2016, the Citizen Group donated 10 million yen as support money to contribute to the relief efforts for those affected and reconstruction of the affected areas. Also, the Citizen Group sent needed emergency relief supplies etc. to the affected areas. Moving forward, we will continue to provide such aids from the perspective of “contribute to the citizens of the world.”

4. Basic Policy Relating to Persons who Control Decision-making over the Financial and Business Policies of the Company (1) Basic Policy The mission of the Citizen Group is to provide the best products and services to all citizens around the world, as its name implies. Under its corporate philosophy “Contributes to and strives to be respected by the citizens of the world,” the Company has been making its utmost efforts to protect and enhance the corporate value and the common interest of its shareholders, by contributing to the better lives of citizens all over the world through “manufacturing of products that are loved and supported by them.” The Company believes that persons who control decision-making over its financial and business policies should appropriately and consistently implement the Group’s management strategies with medium- to long-term perspectives, with a good understanding of its corporate philosophy and unique business profiles, thereby achieving the further creation and enhancement of the corporate value and the common interest of its shareholders. Nonetheless, the Company holds a view that if a large-scale purchase of the Company’s shares occurs, the Company will give consideration as long as such large-scale purchase is beneficial to its corporate value and the shareholders’

- 52 - common interest, and a decision of acceptance or rejection of the said issue should be made ultimately by its shareholders. In light of the current legal framework and financial environment, however, it is difficult to deny the possibility of a large-scale purchase that would not be beneficial to the corporate value of the Company or the common interest of its shareholders. Examples of such a large-scale purchase would include those that, judging from the objectives and the manner in which large-scale purchases are conducted, do not seek rationalization of the management in good faith and could cause irreparable damage to the Company; those that may in effect force the shareholders to sell their shares of the Company; those that do not provide sufficient time and information for the shareholders and the Board of Directors of the targeted company to examine the purchase conditions, or for the Board of Directors of the targeted company to make alternative proposals; and those that necessitate further negotiation between the targeted company and the large-scale purchaser for the chance of a better bargain than that which has been offered by the purchaser. The Company considers persons who carry out such large-scale purchases are not suitable for controlling decision-making over the financial and business policies of the Company; therefore, a certain framework is deemed necessary in order to prevent purchases that may impair the corporate value of the Company and the common interest of its shareholders. (2) Special efforts to implement the Basic Policy The Company has implemented various measures for the purpose of having many shareholders hold shares in the long run upon understanding the corporate value of the Company. For example, under the “Aiming to Be a Solid Global Company - business group with speed and dynamics -” slogan prescribed in the “Citizen Global Plan 2018” medium-term management plan, which was established in February 2013 and covers years until the fiscal year ending March 31, 2019 (hereinafter, the “Management Plan”), the Company implemented the following measures during the first three (3) years (FY2013 – FY2015):  In the watches and clocks business, which is the core business of the Group, the Company, as part of efforts to strengthen the manufacturing capability, established Citizen Watch Manufacturing Co., Ltd. and implemented the restructuring of major domestic manufacturing functions to reinforce the domestic manufacturing capability by integrating technologies that had been held separately by watches and clocks business subsidiaries.  Aiming to achieve further growth and development in the devices and components business, the Company completed a merger between Citizen Fintech Miyota Co., Ltd. and Citizen Seimitsu Co., Ltd., which had unique core technologies and business domains (Currently Citizen Finedevice Co., Ltd.)  To stabilize profit in the devices and components business, the Company reviewed its business portfolio so as to focus more on business domains in which it can secure profit by withdrawing from certain quartz crystals and quartz oscillator domains in which profitability had declined due to increased competition. In February 2016, the Company also revised part of the original management policy in response to a significant change in the external environment during the first three years (FY2013 – FY2015) of the Management Plan. The details are described in “I. MATTERS RELATING TO THE CURRENT SITUATION OF THE GROUP, 6.

- 53 - Challenges Going Forward” (see pages 36-37). (3) Details of efforts to prevent inappropriate persons from controlling the Company according to the Basic Policy Upon expiration of the term of the Policy for a Large-Scale Purchase of Citizen Shares which was introduced at the Board of Directors meeting held on May 14, 2007, and approved by its shareholders at the 122nd Ordinary General Meeting of Shareholders held on June 26, 2007, the Company resolved to renew the policy with partial modifications at the Board of Directors meeting held on May 11, 2010 (hereinafter the “Old Plan”) and obtained approval from its shareholders at the 125th Ordinary General Meeting of Shareholders held on June 25, 2010. Given the expiration of the Old Plan at the conclusion of the 128th Ordinary General Meeting of Shareholders held on June 27, 2013, the Board of Directors, in a meeting held on May 23, 2013, adopted new resolutions on the Basic Policy stipulated in (1) above. In addition, shareholders voted to approve renewal of the Old Plan, with some revisions, at the 128th Ordinary General Meeting of Shareholders held on June 27, 2013 (hereinafter, the revised version shall be referred to as the “Plan”). The following are the details of the Plan: (a) Type of purchases subject to the Plan The type of purchases subject to the Plan are the purchase of the Company’s stocks, etc. which will increase the voting rights ratio of a group of shareholders up to twenty percent (20%) or more. (b) Procedures It is prescribed that a large-scale purchaser must provide necessary and sufficient information to the Board of Directors beforehand, and that a large-scale purchase must be conducted only after the expiration of the review period during which the Board of Directors make necessary assessments. (c) Summary of countermeasures When a large-scale purchaser does not observe the prescribed procedures, or in other similar cases, the Board of Directors will implement the allotment of stock acquisition rights without contribution to all of the then-current shareholders of the Company based on the recommendation made by the Independent Committee. Furthermore, when the Company implements the allotment of stock acquisition rights without contribution, the Company may determine the exercise period, exercise conditions, and rights of the Company to acquire the stock acquisition rights from the holders, taking into account the effects as a countermeasure against the large-scale purchase. (d) Requirements of implementation of countermeasures The Company may implement the allotment of stock acquisition rights without contribution as countermeasures, in the event of the following: 1) Where a large-scale purchaser does not follow the prescribed procedures; 2) Where a large-scale purchaser intends to raise the share price of the Company and make the Company or the related parties of the Company purchase shares back from the purchaser at a higher price, while having no intention of taking part in the management of the Company; 3) Where a large-scale purchaser intends to temporarily control the management of the Company and transfer to the large-scale purchaser or

- 54 - its group companies the assets and others of the Company or the Group companies; 4) Where a large-scale purchaser intends to control the management of the Company and appropriate those assets of the Company or the Group companies by posting those assets as collateral of debts or tendering those assets for the payment of debts owed by the large-scale purchaser or its group companies; 5) Where the large-scale purchaser intends to temporarily control the management of the Company and sell or otherwise dispose of the assets, make a large payment of dividends using the proceeds of the disposition and/or raise the price of the Company’s shares by a large payment of dividends using the proceeds of the disposition with a view to selling its shares of the Company at a price raised as a result of the payment of the large dividends; or 6) Where the large-scale purchaser employs a strategy that may in effect force the shareholders of the Company to sell the Company’s shares to the large-scale purchaser, including implementation of a TOB where the large-scale purchaser does not solicit all of the shares of the Company and the terms of the second TOB after the completion of the first TOB will be made less favorable to the remaining shareholders or the terms of the second TOB are not clearly disclosed at the time of the first TOB. (e) Process prior to the implementation of countermeasures If a large-scale purchaser submits a confirmation letter of its intention concerning a large-scale purchase, the Independent Committee will deliver to the large-scale purchaser, within ten (10) business days, a list of information which is required to be provided by the large-scale purchaser at the first stage. If the Independent Committee determines that the information provided at the first stage is insufficient, the Independent Committee may request submission of additional information until satisfactory information is provided. The Independent Committee may also request the Board of Directors to submit its opinion regarding the large-scale purchase, setting the deadline date for the Board’s response to sixty (60) days maximum. After the completion of the provision of information from the large-scale purchaser and the Board of Directors, the Independent Committee will assess, examine, negotiate and form opinions concerning the large-scale purchase within sixty (60) days. Based on the above-mentioned information provided, the Independent Committee will make recommendations to the Board of Directors on whether or not to implement the countermeasures, and the Board of Directors will make a resolution on such matter, as an organization under the Companies Act, based on the recommendations made by the Independent Committee. Additionally, the Independent Committee may make a recommendation to assure the Board of Directors that the proposal of the implementation of the countermeasures to the General Meeting of Shareholders is appropriate, and in that case, the Board of Directors shall convocate a General Meeting of Shareholders and propose the implementation of the countermeasures. (f) Effective term of the Plan The Plan remains effective until the conclusion of the Ordinary General Meeting of Shareholders to be held in the last fiscal year ending within three (3) years from the 128th Ordinary General Meeting of Shareholders held on June 27, 2013.

- 55 - (4) Opinion of the Board of Directors on the efforts mentioned in (2) and (3) above and reasons thereof (a) Special efforts to implement the Basic Policy The purpose of the efforts mentioned in (2) above is to protect and enhance the corporate value and common interest of the shareholders of the Company, which, as a result, will help the Company to implement the Basic Policy. Therefore, the Company believes that such efforts are implemented not for the sake of the Company’s officers maintaining their position, but to comply with the Basic Policy and meet the shareholders’ common interest. (b) Efforts to prevent inappropriate persons from controlling the Company according to the Basic Policy The Company believes, after factoring in the following items, that the efforts to prevent inappropriate persons from controlling the Company according to the Basic Policy are implemented not for the sake of the Company’s officers maintaining their position, but to comply with the Basic Policy and meet the shareholders’ common interest. 1) Full satisfaction of the requirements under the guidelines for anti-takeover measures, etc. The Plan fully satisfies the requirements of the three principles stipulated in the “Guidelines Regarding Takeover Defense for the Purposes of Protection and Enhancement of Corporate Value and Shareholders’ Common Interest” jointly released by the Ministry of Economy, Trade and Industry and the Ministry of Justice on May 27, 2005, and is also based upon “Takeover Defense Measures in Light of Recent Environmental Changes” released by the Corporate Value Study Group of the Ministry of Economy, Trade and Industry on June 30, 2008, and Principle 1.5 and Supplementary Principle 1.5.1 of Japan’s Corporate Governance Code. 2) Respect of shareholders’ intentions The Company obtained the approval of shareholders concerning the Plan at the 128th Ordinary General Meeting of Shareholders held on June 27, 2013. In addition, since the Plan is attached with the Sunset Provision which makes its effective term about three (3) years and the term of office of the Directors of the Company is limited to one (1) year, the shareholders will be able to express their intention for the Plan through the election of Directors, even during the effective period of the Plan. 3) Respect of judgment of independent outside personnel and disclosure of information For the purposes of prevention of arbitrary judgments of the Directors, the Company has the Independent Committee as an organization to make substantive decisions in an objective manner as to the issues of the Plan, including decisions to implement or not to implement the Plan. The Board of Directors will appoint the members of this Independent Committee from among the Outside Directors of the Company and/or outside professionals, all of whom are independent from the Company’s management responsibility for the business of the Company. When a large-scale purchase is actually proposed for the Company’s shares, the Independent Committee will make recommendations to the Board of Directors pursuant to Independent Committee Rules based upon its judgments as to, among other things, whether or not the large-scale

- 56 - purchase damages the Company’s corporate value or the shareholders’ common interest. The Board of Directors, respecting such recommendations to the fullest extent, will make resolutions as an organization under the Companies Act on whether or not to implement the allotment of stock acquisition rights without contribution. In this way, the Independent Committee will closely see to it that the Directors should not arbitrarily implement the countermeasures, and the gist of the judgment of the Independent Committee will be disclosed to the shareholders. Thus the Company believes that the Company has established a structure to ensure that the Plan is applied in a transparent manner and serves for the benefit of the corporate value of the Company and the common interest of its shareholders. As of March 31, 2016, the members of the Independent Committee are: Mr. Kenji Ito and Mr. Masaaki Komatsu, who are Outside Directors of the Company, and Mr. Shigekazu Torikai, an attorney-at-law. 4) Rational and objective conditions that are prerequisites for the countermeasures As discussed in (3) (d) above, the Company has set in the Plan rational and objective conditions which need to be satisfied before the countermeasures can be implemented. This will prevent the Board of Directors from making arbitrary decisions to implement the countermeasures. 5) Third-party professional opinion available to the Independent Committee When a large-scale purchaser or other similar person comes about, the Independent Committee is entitled to obtain advice from independent third parties (including financial advisers, certified public accountants, attorneys-at-law, consultants, and other professionals) at the expense of the Company. Thus, the fairness and objectivity of the Independent Committee’s judgment will be further secured. 6) The Plan does not have an anti-takeover provision similar to a “dead-hand” or “slow-hand” provision The Plan can be abolished at any time based on the judgment of the Board of Directors, of which members are elected at the General Meeting of Shareholders of the Company. It is entirely possible for a large-scale purchaser to elect its nominees as Directors and have them abolish the Plan by way of the resolutions of the Board of Directors. Therefore, the Plan is not a dead-hand anti-takeover measure (which means that countermeasures cannot be prevented by changing a majority of the Directors on the Board). In addition, the term of office of the Company’s Directors is one (1) year, and the Company has not adopted a system to appoint Directors at different times. Therefore, the Plan is not a slow-hand anti-takeover measure (which means that prevention of countermeasures takes time because the Directors cannot be replaced all at one time) either.

Note: In this Business Report, all monetary amounts and numbers of shares are rounded down to the specified unit; provided, however, that ratios, basic earnings per share and net assets per share are rounded off to the specified unit.

- 57 - Consolidated Balance Sheet (As of March 31, 2016) (Millions of yen) Account title Amount Account title Amount ASSETS LIABILITIES Current assets 270,551 Current liabilities 91,901 Cash and deposits 99,371 Notes and accounts payable - trade 19,589 Electronically recorded obligations Notes and accounts receivable - 13,564 63,061 - operating trade Notes payable - facilities 376 Electronically recorded Electronically recorded 885 855 obligations - non-operating monetary claims - operating Short-term loans payable 17,444 Merchandise and finished goods 53,328 Income taxes payable 3,679 Work in process 18,736 Deferred tax liabilities 120 Raw materials and supplies 17,099 Accrued expenses 14,655 Consumption taxes receivable 2,755 Provision for bonuses 6,335 Deferred tax assets 8,609 Provision for directors’ bonuses 162 Other 8,034 Provision for product warranties 1,011 Allowance for doubtful accounts (1,301) Provision for environmental 11 measures Non-current assets 135,911 Provision for loss on business 4,369 Property, plant and equipment 78,443 restructuring and liquidation Buildings and structures 34,113 Other 9,697 Machinery, equipment and 21,023 Non-current liabilities 77,091 vehicles Tools, furniture and fixtures 5,657 Bonds payable 20,000 Land 10,904 Long-term loans payable 30,000 Leased assets 1,175 Deferred tax liabilities 2,067 Construction in progress 5,570 Provision for loss on guarantees 28 Provision for environmental 65 measures Intangible assets 6,529 Provision for loss on business 1,663 Goodwill 2,097 restructuring and liquidation Software 2,462 Net defined benefit liability 21,139 Other 1,968 Asset retirement obligations 97 Other 2,031 Total liabilities 168,993 NET ASSETS Investments and other assets 50,938 Shareholders’ equity 215,903 Investment securities 40,366 Capital stock 32,648 Long-term loans receivable 1,130 Capital surplus 33,969 Deferred tax assets 5,886 Retained earnings 159,684 Other 5,594 Treasury shares (10,400) Allowance for doubtful accounts (1,901) Accumulated other comprehensive 11,797 income Allowance for investment loss (138) Valuation difference on 7,413 available-for-sale securities Foreign currency translation 5,756 adjustment Remeasurements of defined (1,372) benefit plans Non-controlling interests 9,768 Total net assets 237,469 Total assets 406,462 Total liabilities and net assets 406,462 Note: Figures are rounded down to the nearest millions of yen.

- 58 - Consolidated Statement of Income (Year ended March 31, 2016) (Millions of yen) Account title Amount Net sales 348,267 Cost of sales 213,508 Gross profit 134,759 Selling, general and administrative expenses 104,291 Operating income 30,467 Non-operating income 3,268 Interest and dividend income 1,811 Rent income 283 Share of profit of entities accounted for using equity method 603 Other 569 Non-operating expenses 3,115 Interest expenses 482 Loss on sales of notes payable 66 Depreciation of assets for rent 57 Foreign exchange losses 2,013 Other 495 Ordinary income 30,619 Extraordinary income 1,236 Gain on sales of investment securities 194 Gain on sales of non-current assets 1,028 Other 12 Extraordinary losses 9,304 Loss on sales of non-current assets 19 Loss on retirement of non-current assets 303 Impairment loss 3,051 Loss on business restructuring and liquidation 4,936 Provision of allowance for doubtful accounts 313 Other 679 Profit before income taxes 22,550 Income taxes - current 7,938 Income taxes - deferred 581 Profit 14,031 Profit attributable to non-controlling interests 829 Profit attributable to owners of parent 13,201 Note: Figures are rounded down to the nearest millions of yen.

- 59 - Consolidated Statement of Changes in Equity (Year ended March 31, 2016) (Millions of yen) Shareholders’ equity Total Capital stock Capital surplus Retained Treasury shares shareholders’ earnings equity Balance as of April 1, 2015 32,648 33,890 151,689 (5,394) 212,834 Changes of items during period Purchase of shares of 79 79 consolidated subsidiaries Increase by merger 7 7 Increase by corporate 5 5 division Change of scope of consolidation 79 79 Dividends of surplus (5,297) (5,297) Profit attributable to owners 13,201 13,201 of parent Purchase of treasury shares (5,006) (5,006) Disposal of treasury shares (0) 0 0 Transfer of loss on disposal 0(0) – of treasury shares Net changes of items other than shareholders’ equity Total changes of items during 79 7,995 (5,006) 3,069 period – Balance as of March 31, 2016 32,648 33,969 159,684 (10,400) 215,903

Accumulated other comprehensive income Valuation Remeasure Total difference Foreign -ments of accumulated Non-controlling Total net on currency defined other interests assets available- translation benefit comprehen- for-sale adjustment plans sive income securities Balance as of April 1, 2015 11,190 14,843 (362) 25,671 9,466 247,972 Changes of items during period Purchase of shares of consolidated subsidiaries 79 Increase by merger 7 Increase by corporate 5 division Change of scope of 79 consolidation Dividends of surplus (5,297) Profit attributable to 13,201 owners of parent Purchase of treasury shares (5,006) Disposal of treasury shares 0 Transfer of loss on – disposal of treasury shares Net changes of items other (3,777) (9,087) (1,009) (13,873) 302 (13,571) than shareholders’ equity Total changes of items (3,777) (9,087) (1,009) (13,873) 302 (10,502) during period Balance as of March 31, 7,413 5,756 (1,372) 11,797 9,768 237,469 2016 Note: Figures are rounded down to the nearest millions of yen.

- 60 - Notes to Consolidated Financial Statements 1. Premise of going concern Not applicable 2. Basis of presenting the consolidated financial statements (1) Scope of consolidation (a) Number of consolidated subsidiaries 99 The names of main consolidated subsidiaries are Citizen Watch Co., Ltd., Citizen Machinery Co., Ltd., Citizen Electronics Co., Ltd., Citizen Finedevice Co., Ltd. and Citizen Systems Japan Co., Ltd. Beginning with the consolidated fiscal year under review, Kunohe Seimitsu Co., Ltd. in consideration of its importance, has been included in the scope of consolidation. Meanwhile, during the consolidated fiscal year under review, Citizen Precision Hachinohe Co., Ltd. and Cincom Miyano Korea Co., Ltd. were excluded from consolidation due to liquidation. In addition, Citizen Finetech Miyota Co., Ltd. has merged with Citizen Seimitsu Co., Ltd., and Citizen Sakae Trading Co., Ltd. has merged with Citizen New Flag Co., Ltd. Following these mergers, the new trading names for the respective companies are Citizen Finedevice Co., Ltd. and Citizen Retail Planning Co., Ltd. Citizen Machinery Miyano Co., Ltd. meanwhile has changed its name to Citizen Machinery Co., Ltd., while Sirma Macchine s.r.l., has changed its name to Citizen Macchine Italia s.r.l., and Eplamo S.A. has changed its name to Angelus S.A. (b) Status of non-consolidated subsidiaries The name of a main non-consolidated subsidiary is HESTIKA FRANCE S.A.S. The reason for exclusion is because the total assets, net sales, profit/loss (equivalent portion for equity holdings), and retained earnings (equivalent portion for equity holdings) of each non-consolidated subsidiary excluded from the scope of consolidation were individually immaterial in comparison to net assets, net sales, profit/loss and retained earnings, as reported on the consolidated financial statements, and also would not materially impact the consolidated financial statements taken together. (2) Application of the equity method (a) Number of non-consolidated subsidiaries under the equity method – (b) Number of affiliates under the equity method 2 The names of affiliates under the equity method are Marubeni Citizen-Cincom Inc. and First Cainta Resources Corporation. (c) Status of non-consolidated subsidiaries and affiliates to which the equity method is not applied The major non-consolidated subsidiary to which the equity method is not applied is HESTIKA FRANCE S.A.S., and the main affiliate to which the equity method is not applied is AIKAWASEIMITU CO., LTD. The reason for non-application is based on the immateriality of the individual impacts of their profit/loss (equivalent portions for equity holdings), retained earnings (equivalent portions for equity holdings), and other financial measures on the consolidated financial statements, and based on the overall lack of importance

- 61 - of each of these companies to the consolidated group. (3) Fiscal year of consolidated subsidiaries 73 consolidated subsidiaries have a closing date that is different from the closing date for the consolidated financial statements. These consolidated subsidiaries close their books on December 31. When preparing consolidated financial statements, the necessary calculations are made to prepare the balance sheet and statement of income which form the basis for the consolidated financial statements prepared on the consolidated closing date. (4) Accounting policies (a) Valuation standards and method for major assets 1) Securities •Available-for-sale securities Those with determinable market values are stated at market value method based on market price as of the consolidated closing date (valuation differences are reported as components of net assets and the cost of securities sold is primarily calculated based on the moving average method). Those without determinable market values are stated at cost based on the moving average method. 2) Derivatives Derivatives are stated at market value method. 3) Inventories Inventories are primarily stated at cost on the gross average method (with balance sheet values reflecting write downs for decreased profitability). (b) Depreciation and amortization methods used for important depreciable assets 1) Depreciation of property, plant and equipment (excluding leased assets) is primarily calculated using the declining balance method. Primary useful lives are as follows: Buildings and structures 2 to 60 years Machinery, equipment and vehicles 2 to 10 years 2) Amortization of intangible assets (excluding leased assets) is calculated using the straight-line method. 3) Leased assets related to finance lease transactions that do not transfer ownership of the leased assets to the lessee are depreciated using the straight-line method with useful lives equal to lease terms and zero residual values. For finance lease transactions that do not transfer ownership of the leased assets to the lessee and commenced before March 31, 2008, accounting treatment complying with the method applied for ordinary lease transactions is being continued. (c) Method of accounting for significant deferred assets Bond issuance cost Amortized in lump sum in the fiscal year in which they occur.

- 62 - (d) Basis of accounting for major reserves 1) Allowance for doubtful accounts In setting aside an allowance for possible losses related to accounts receivable, loans receivable, etc. for the Company and its domestic consolidated subsidiaries, an amount equivalent to the portion judged to be uncollectible is recorded; ordinary receivables are based on the lone loss ratio, and receivables regarded as doubtful are based on individual evaluation for collectability. For overseas consolidated subsidiaries, individual receivables are evaluated for collectability and required loss estimates are recorded. 2) Allowance for investment loss To provide for possible losses due to extreme devaluation in shares of non-consolidated subsidiaries (excluding shares subject to impairment accounting), an allowance for investment loss is provided for an amount considering the actual share prices as of the end of the consolidated fiscal year. 3) Provision for bonuses In the Company and some consolidated subsidiaries, the reserve for bonuses to employees is stated at an amount based on the estimated forthcoming payments. 4) Provision for directors’ bonuses In the Company and some consolidated subsidiaries, the reserve for bonuses to directors is stated at an amount based on the estimated forthcoming payments. 5) Provision for product warranties At some consolidated subsidiaries, certain rates of net sales are provided as an allowance for the possible expenses required for after-sales service of products. 6) Provision for loss on business restructuring and liquidation An estimated amount is recorded in preparation for expenses or losses associated with business restructuring. 7) Provision for environmental measures To provide for expenses related to future environmental measures, an allowance is set aside in an amount based on a reasonable estimate. 8) Provision for loss on guarantees Provision for loss on guarantees is provided to cover the estimated amount of payments for such loss in consideration of the financial position and other factors of guarantees.

(e) Translation standards of major foreign currency assets or liabilities Foreign currency amounts are translated into Japanese yen at the spot rate on the consolidated closing date for accounts receivables and accounts payable. The translation adjustments are stated as gains/losses. In addition, assets and liabilities of overseas consolidated subsidiaries are translated into Japanese yen using the spot rate on the consolidated closing date, whereas revenues and expenses are translated into Japanese yen using the weighted-average rate. The translation adjustments are included in foreign currency translation adjustment and non-controlling interests in net assets section.

- 63 - (f) Method of hedge accounting 1) Method of hedge accounting Hedging activities are accounted for under the deferred hedge method. The exceptional treatments are applied to interest rate swaps if the requirements for applying the method are met.

2) Hedging instruments and hedged items Hedging instruments and hedged items to which hedge accounting is applied are as follows: Hedging instrument: Interest rate swap Hedged item: Interest on loans payable

3) Hedging policy The company enters into hedging transactions for the purpose of avoiding interest-rate risk on certain loans payable.

4) Method of assessing hedge effectiveness, etc. As the exceptional treatments are applied to interest rate swaps, assessment of hedging effectiveness is omitted.

(g) Method and period of amortization of goodwill Goodwill is amortized in equal amounts over an estimated period during which its effects are manifested (within twenty (20) years after recording). However, when the difference to be deleted is negligible, it is accounted for gains/losses for the consolidated fiscal year in which it occurred.

(h) Other important matters for presenting the consolidated financial statements 1) Accounting treatment regarding retirement benefits i) The method of attributing expected retirement benefit to periods With respect to the method of attributing expected retirement benefit to periods up to the end of this fiscal year under review, we adopt benefit formula basis for the calculation of retirement benefit liabilities. ii) Actuarial difference and past service costs Past service costs are recognized as expense and amortized over on an average remaining service period of employees at the time of accrual (five years with the declining-balance method in principle). Actuarial difference is recognized as expense starting from the consolidated fiscal year following the year in which it occurs and amortized over an average remaining service period of employees at the time of accrual (five years with the declining-balance method in principle).

- 64 - 2) Accounting method for consumption tax Consumption tax is calculated using a tax exclusion method. 3) Application of consolidated taxation system Consolidated taxation system is applied. (5) Changes in accounting policies (Application of Accounting Standard for Business Combinations, etc.) Effective from the consolidated fiscal year under review, the Company has applied the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, September 13, 2013), the “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, September 13, 2013), the “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7, September 13, 2013), etc. As a result, the method of recording the amount of difference caused by changes in the Company’s ownership interests in subsidiaries in the case of subsidiaries under ongoing control of the Company was changed to one in which it is recorded as capital surplus, and the method of recording acquisition-related costs was changed to one in which they are recognized as expenses for the consolidated fiscal year in which they are incurred. Furthermore, for business combinations carried out on or after the beginning of the consolidated fiscal year under review, the accounting method was changed to one in which the reviewed acquisition cost allocation resulting from the finalization of the provisional accounting treatment is reflected in the consolidated financial statements for the consolidated fiscal year to which the date of business combination belongs. In addition, the presentation method for “net income” and other related items was changed, and the presentation of “minority interests” was changed to “non-controlling interests.” Application of the Accounting Standard for Business Combinations, etc. is in line with the transitional measures provided for in Paragraph 58-2 (4) of the Accounting Standard for Business Combinations, Paragraph 44-5 (4) of the Accounting Standard for Consolidated Financial Statements and Paragraph 57-4 (4) of the Accounting Standard for Business Divestitures. The Company is applying the said standard, etc. prospectively from the beginning of the consolidated fiscal year under review. As a result, profit before income taxes for the consolidated fiscal year under review decreased by 79 million yen. Capital surplus at the end of the consolidated fiscal year under review on the other hand increased by 79 million yen. The end-of-year balance for capital surplus in the consolidated statement of changes in equity for the consolidated fiscal year under review showed an increase of 79 million yen. The impact on net assets per share and basic earnings per share for the consolidated fiscal year under review was immaterial. (6) Changes in presentation method “Electronically recorded monetary claims - operating,” which was included in “notes and accounts receivable - trade” under current assets for the previous consolidated fiscal year (243 million yen for that consolidated fiscal year), is presented separately because the monetary significance of the item increased.

- 65 - 3. Notes to Consolidated Balance Sheet (1) Accumulated depreciation of property, plant and equipment 215,565 million yen (2) Assets pledged as collateral Deposits 105 million yen Total 105 million yen Secured debt Accounts payable - trade 39 million yen Total 39 million yen (3) Guarantee obligation Guarantees of lease obligations of non-consolidated subsidiaries 75 million yen

4. Notes to Consolidated Statement of Changes in Equity (1) Total number of issued shares

No. of shares at the Increase during Decrease during No. of shares at the end Type of shares beginning of current the fiscal year the fiscal year of current fiscal year fiscal year Common shares 330,353,809 - - 330,353,809

(2) Cash dividends (a) Cash dividend payment (i) Dividends approved at the 130th Ordinary General Meeting of Shareholders held on June 25, 2015  Total amount of dividends 2,591 million yen  Dividends per share 8.00 yen  Record date March 31, 2015  Effective date June 26, 2015 (ii) Dividends approved at the meeting of the Board of Directors held on November 10, 2015  Total amount of dividends 2,705 million yen  Dividends per share 8.50 yen  Record date September 30, 2015  Effective date December 4, 2015 (b) Of the cash dividends with record date during this consolidated fiscal year, those with effective date in the next consolidated fiscal year The following matters will be placed on the agenda at the 131st Ordinary General Meeting of Shareholders, which is scheduled to be held on June 28, 2016.  Total amount of dividends 2,705 million yen  Dividend resource Retained earnings  Dividends per share 8.50 yen  Record date March 31, 2016  Effective date June 29, 2016

- 66 - 5. Notes on financial instruments (1) Status on financial instruments As a Group policy, the Company and consolidated subsidiaries restrict their investments only in short term deposits or the like and obtain funds mainly by borrowing from financial institutions including banks and bond issuance. The customer credit risk associated with notes and accounts receivable is mitigated in accordance with the internal rules on receivables management procedures of each subsidiary of the Group. The foreign exchange fluctuation risk associated with operating receivables denominated in foreign currencies, arisen from the overseas operations, is partially hedged by employing foreign exchange futures, except for such receivables of which the amounts are below the operating debt denominated in the same foreign currencies. Investment securities mainly consist of equity securities, and their market prices and the financial conditions of the issuers are periodically monitored. Loans payable and bonds payable are made for the purpose of re-financing of long-term liabilities and funds for strategic investments. Interest rate swaps are employed to fix the interest expenses of long-term loans payables that are exposed to the fluctuation risk of interest rates. Derivatives are utilized solely to avoid the fluctuation risks of foreign exchanges and interest rates, in accordance with the internal management rules of the Company and each subsidiary.

- 67 - (2) Fair Values of Financial Instruments The table below shows the amounts of financial instruments recorded in the consolidated balance sheet and their fair values as of March 31, 2016, as well as their differences.

(Millions of yen) Consolidated balance sheet Fair value Differences amount (1) Cash and deposits 99,371 99,371 – (2) Notes and accounts receivable - trade 63,061 63,061 – (3) Electronically recorded monetary claims - 855 855 – operating (4) Investment securities Available-for-sale securities 24,370 24,370 – (5) Long-term loans receivable (*1) 1,131 Allowance for doubtful accounts (*2) (49) 1,081 1,061 (19) (6) Claims provable in bankruptcy, claims 1,751 provable in rehabilitation (*3) Allowance for doubtful accounts (*2) (1,723) 28 28 – Assets, total 188,769 188,750 (19) (1) Notes and accounts payable - trade 19,589 19,589 – (2) Electronically recorded obligations - 13,564 13,564 – operating (3) Short-term loans payable 2,444 2,444 – (4) Bonds payable (*1) 20,000 20,120 120 (5) Long-term loans payable (*1) 45,000 45,531 531 Liabilities, total 100,597 101,249 651 Derivatives 1) Hedge accounting is not applied (*4) 126 126 – 2) Hedge accounting is applied – – – (*1) The amount includes the current portion of long-term loans receivable and long-term loans payable. (*2) Long-term loans receivable and claims provable in bankruptcy, claims provable in rehabilitation are stated net of relevant allowance for doubtful accounts. (*3) On the consolidated balance sheet, claims provable in bankruptcy, claims provable in rehabilitation is recorded in “Other” under investments and other assets. (*4) Derivatives are stated net of assets and liabilities.

Note 1: Method of fair value measurement of financial instruments and matters regarding securities and derivatives Assets: (1) Cash and deposits The fair value of these accounts approximates their book value because these accounts are settled in a short period of

- 68 - time. Thus, the book value is deemed as their fair value. (2) Notes and accounts receivable - trade The fair value of certain accounts receivable - trade, that take time to collect, is measured as present value obtained by discounting the amounts classified by aging at a rate reasonably calculated with corresponding terms to maturities. For other notes and accounts receivables - trade, that are settled in a short period of time, the fair value of these accounts approximates their book value, therefore, the book value is used as their fair value. (3) Electronically recorded monetary claims - operating The fair value of electronically recorded monetary claims - operating approximates their book value because they are settled in a short period of time. Thus, the book value is used as their fair value. (4) Investment securities The fair values of investment securities are based on the prices at exchange market. (5) Long-term loans receivable The fair value of long-term loans receivable is measured as present value obtained by discounting the future cash flows classified by certain period at an adequate rate such as market rate with credit-spread taken into account. However, as the interest rates of long-term loans receivable with floating rate are to be revised by certain prescribed period, their fair values approximate their book value. Thus, the book value is used as the fair value. (6) Claims provable in bankruptcy, claims provable in rehabilitation As allowance for doubtful accounts is recorded at the amount equivalent to the portion judged to be uncollectible individually based on evaluation for collectability, their fair values approximate amounts obtained by subtracting allowance for doubtful accounts from their book values, and these values are used as their fair values. Liabilities: (1) Notes and accounts payable - trade, (2) Electronically recorded obligations - operating and (3) Short-term loans payable The fair value of these accounts approximates their book value because these accounts are settled or repaid in a short period of time. Thus, the book value is used as their fair value. (4) Bonds payable For bonds payable, the fair value of those with determinable market values is measured based on market price, and the fair value of those without determinable market values is measured as present value obtained by discounting amounts of principles, interests and guarantee fees at a rate with term to maturity and credit risk taken into account. (5) Long-term loans payable The fair value of long-term loans payable is measured as present value obtained by discounting total amount of principles and interests at an assumed rate for similar new borrowings. However, as the interest rates of long-term loans payable with floating rate are to be revised by certain prescribed period, their fair values approximate their book value. Thus, the book value is used as the fair value. Derivatives: (1) Derivatives to which hedge accounting is not applied  Currency (Millions of yen)

Contract amount Type, etc. of Fair value Valuation Classification Over 1 derivatives (*) gain (loss) year Transactions Foreign exchange other than at the forward contract 10,112 – 126 126 exchange * The fair value of foreign exchange forward contract is obtained from the counterparty financial institutions. (2) Derivatives to which hedge accounting is applied All derivatives to which hedge accounting is applied are interest rate swaps to which exceptional treatment is applied. Since these swaps are accounted for as an integral part of long-term loans payable, which are hedged items, their fair value is included in the fair value of associated long-term loans payable.

- 69 - Note 2: Unlisted equity securities (Consolidated balance sheet amount: 12,522 million yen) are not included in “(4) Investment securities, Available-for-sale securities” since their market prices are not available and it is not possible to estimate their future cash flows, and therefore it is deemed extremely difficult to assume their fair value.

6. Notes to per share information Net assets per share 715.38 yen Basic earnings per share 41.32 yen

7. Significant Subsequent Events The Company announced that its Board of Directors meeting held on April 27, 2016 resolved to conduct an absorption-type merger (“the Merger”) between the Company and its wholly owned subsidiaries Citizen Watch Co., Ltd. and Citizen Business Expert Co., Ltd. effective October 1, 2016, and concluded a merger agreement. The Merger (1) Purpose of the Merger The Company has been making efforts to strengthen the competitiveness of the Group and promote its growth under a pure holding company structure since April 2007. In the “Citizen Global Plan 2018,” a medium-term management plan that commenced in April 2013, the Company succeeded in reaping certain benefits such as the expansion and reinforcement of its businesses, particularly the watches and clocks business, as a result of working on structural reforms with the aim of thoroughly strengthening its business structure and manufacturing capabilities and concentrating its management resources in business areas where the Company is able to make a strong showing by clarifying the business portfolio, with the slogan of “Aiming to Be a Solid Global Company.” Meanwhile, the Company has also been taking a variety of approaches since April 2014, including the operation of the indirect functions of the three companies involved in the Merger in an integrated manner, with the aim of “accelerating growth strategies for the watches and clocks business” and “increasing management efficiency.” However, given significant changes in the domestic and international business environments following the establishment of the pure holding company structure, the Company has reached the conclusion that it is most appropriate for the Group to shift to an operating holding company structure in which the Company will directly operate the watches and clocks business in order to proceed further with the “Citizen Global Plan 2018” and promote the further growth of the overall Group with the watches and clocks business at the core and the reinforcement of the head office function. After shifting to the operating holding company structure, we will strive to enhance the corporate value of the Group and the shareholder value by further strengthening the Group’s competitiveness under the new structure, while maintaining the strengths in the Group operation that we have built under the pure holding company structure.

(2) Summary of the Merger (i) Method of the Merger The Merger will be conducted as an absorption-type merger, with the

- 70 - Company as the surviving company, and Citizen Watch Co., Ltd. and Citizen Business Expert Co., Ltd. will be dissolved. (ii) Schedule of the Merger Board of Directors meeting to approve the merger agreement April 27, 2016 Date of the merger agreement April 27, 2016 Effective date of the merger agreement October 1, 2016 (Planned) As the Merger is a simplified merger as provided for in Article 796, Paragraph 2 of the Companies Act for the Company and a short-form merger provided for in Article 784, Paragraph 1 of the Companies Act for Citizen Watch Co., Ltd. and Citizen Business Expert Co., Ltd., it will be implemented without obtaining approval by resolutions of the three companies’ general meetings of shareholders. (iii) Details of allotment pertaining to the Merger There is no allotment of shares or money, etc. due to the Merger. (iv) Handling of subscription rights to shares and bonds with subscription rights to shares associated with the Merger Not applicable (3) Overview of the merged companies

(1) Name Citizen Watch Co., Ltd. (2) Head Office 6-1-12 Tanashi-cho, Nishi-Tokyo-shi, Tokyo (3) Title and Name of Toshio Tokura, President and CEO Representative (4) Business Manufacture, sale, export and import, etc. of watches and clocks and their parts (5) Capital 5,000 million yen (6) Established April 2, 2007 (7) Number of Shares 200 shares Outstanding (8) Fiscal Year March 31 (9) Major Shareholder and Citizen Holdings Co., Ltd. 100.00% Shareholding Ratio (as of March 31, 2016)

- 71 - (10) Financial Position and Fiscal year FY2015 (Non-consolidated) Operating Results for the Most Recent Fiscal Net assets 72,085 million yen Year Total assets 98,715 million yen Net assets per 360,428 thousand yen share Net sales 117,775 million yen Operating 7,593 million yen income Ordinary income 12,540 million yen Profit 6,050 million yen Basic earnings 30,252 thousand yen per share

(1) Name Citizen Business Expert Co., Ltd. (2) Head Office 6-1-12 Tanashi-cho, Nishi-Tokyo-shi, Tokyo (3) Title and Name of Shigeru Kabata, President and CEO Representative (4) Business Management and rent of real estate, maintenance and management of production equipment, acceptance of entrustment, agency services and consulting of services such as the development, operation and maintenance of computer systems (5) Capital 100 million yen (6) Established April 2, 2007 (7) Number of Shares 100 shares Outstanding (8) Fiscal Year March 31 (9) Major Shareholder and Citizen Holdings Co., Ltd. 100.00% Shareholding Ratio (as of March 31, 2016)

- 72 - (10) Financial Position and Fiscal year FY2015 (Non-consolidated) Operating Results for the Most Recent Fiscal Net assets 825 million yen Year Total assets 1,414 million yen Net assets per 8,257 thousand yen share Net sales 2,681 million yen Operating 183 million yen income Ordinary income 186 million yen Profit 151 million yen Basic earnings 1,510 thousand yen per share

(4) Status after the Merger (1) Name Citizen Watch Co., Ltd. (effective as of October 1, 2016) (2) Head Office 6-1-12 Tanashi-cho, Nishi-Tokyo-shi, Tokyo (3) Title and Name of Toshio Tokura, President and CEO Representative (4) Business Manufacture and sale of watches and clocks and their parts and the formulation and promotion of management strategies of the Group, the audit of the Group management, the technical development of the Group and the management of its intellectual property and other business management, etc. as a holding company (5) Capital 32,648 million yen (6) Fiscal Year March 31

(5) Future outlook As the Merger is being conducted between the Company and its wholly owned subsidiaries, its impact on future consolidated operating results will be minor. 8. Other notes (1) Figures are rounded down to the nearest millions of yen. However, as for ratios, net assets per share and basic earnings per share, fractional amounts are rounded off.

- 73 - Non-Consolidated Balance Sheet (As of March 31, 2016) (Millions of yen) Account title Amount Account title Amount ASSETS LIABILITIES Current assets 45,412 Current liabilities 22,467 Cash and deposits 33,423 Accounts payable - trade 27 Operating accounts receivable 649 Notes payable - facilities 24 Electronically recorded Deposits paid 3,934 752 obligations - non-operating Accounts receivable - other 3,530 Short-term loans payable 15,000 Deferred tax assets 1,412 Accounts payable - other 1,228 Income taxes receivable 1,687 Accrued expenses 330 Other current assets 774 Deposits received 15 Provision for bonuses 123 Provision for directors’ 18 bonuses Non-current assets 148,199 Provision for loss on guarantees 2,839 Provision for loss on business 1,750 Property, plant and equipment 12,120 restructuring and liquidation Buildings and structures 8,129 Other current liabilities 355 Machinery and equipment 16 Non-current liabilities 53,273 Tools, furniture and fixtures 27 Bonds payable Land 3,298 20,000 Construction in progress 648 Long-term loans payable 30,000 Provision for retirement benefits 1,850 Provision for loss on 348 guarantees Provision for environmental 38 measures Provision for loss on business 689 restructuring and liquidation Asset retirement obligations 73 Other non-current liabilities 273 Intangible assets 130 Total Liabilities 75,740 Software 126 NET ASSETS Other intangible assets 4 Shareholders’ Equity 111,170 Investments and other assets 135,949 Capital stock 32,648 Shares of subsidiaries and Capital surplus 36,029 99,332 associates Legal capital surplus 36,029 Investment securities 32,528 Retained earnings 52,892 Long-term prepaid expenses 118 Other retained earnings 52,892 Deferred tax assets 2,944 Reserve for reduction entry 229 Other investments 1,026 Retained earnings brought 52,662 forward Treasury shares (10,400) Valuation and translation 6,701 adjustments Valuation difference on 6,701 available-for-sale securities Total net assets 117,871 Total assets 193,612 Total liabilities and net assets 193,612 Note: Figures are rounded down to the nearest millions of yen.

- 74 - Non-Consolidated Statement of Income (Year ended March 31, 2016)

(Millions of yen) Account title Amount Operating revenue 15,622 Operating expenses 6,259 Operating income 9,362 Non-operating income 1,144 Interest income 63 Dividend income 1,073 Rent income 0 Other 7 Non-operating expenses 550 Interest expenses 456 Foreign exchange losses 1 Other 92 Ordinary income 9,956 Extraordinary income 254 Gain on sales of non-current assets 66 Gain on sales of investment securities 187 Extraordinary losses 4,325 Loss on retirement of non-current assets 57 Loss on sales of non-current assets 328 Loss on business restructuring and liquidation 733 Provision for loss on guarantees 2,843 Loss on valuation of shares of subsidiaries 362 Profit before income taxes 5,884 Income taxes - current (238) Income taxes - deferred (359) Profit 6,482 Note: Figures are rounded down to the nearest millions of yen.

- 75 - Non-Consolidated Statement of Changes in Equity (Year ended March 31, 2016) (Millions of yen) Shareholders’ equity Capital surplus Retained earnings

Other retained earnings Capital Legal Other Total Total stock capital capital capital retained surplus surplus surplus Reserve for Retained earnings reduction earnings brought entry forward Balance as of April 1, 2015 32,648 36,029 – 36,029 228 51,479 51,707 Changes of items during period Dividends of surplus (5,297) (5,297) Profit 6,482 6,482 Changes in reserve for reduction entry due to change in 5(5) – tax rate Reversal of reserve for (4) 4 – reduction entry Purchase of treasury shares – Disposal of treasury shares (0) (0) – Transfer of loss on disposal of 0 0 (0) (0) treasury shares Net changes of items other than – shareholders’ equity Total changes of items during – – – – 1 1,183 1,184 period Balance as of March 31, 2016 32,648 36,029 – 36,029 229 52,662 52,892

Shareholders’ equity Valuation and translation adjustments Valuation Total Total valuation difference on Total net assets Treasury shares shareholders’ and translation available-for-sale equity adjustments securities Balance as of April 1, 2015 (5,394) 114,991 10,376 10,376 125,368 Changes of items during period Dividends of surplus (5,297) (5,297) Profit 6,482 6,482 Changes in reserve for reduction entry due to change in – – tax rate Reversal of reserve for – – reduction entry Purchase of treasury shares (5,006) (5,006) (5,006) Disposal of treasury shares 0 0 0 Transfer of loss on disposal of – – treasury shares Net changes of items other than – (3,675) (3,675) (3,675) shareholders’ equity Total changes of items during (5,006) (3,821) (3,675) (3,675) (7,496) period Balance as of March 31, 2016 (10,400) 111,170 6,701 6,701 117,871 Note: Figures are rounded down to the nearest millions of yen.

- 76 - Notes to Non-Consolidated Financial Statements 1. Premise of going concern Not applicable 2. Major accounting policies (1) Valuation standards and method for marketable securities (a) Shares of subsidiaries and affiliates are stated at cost based on the moving average method. (b) Available-for-sale securities Those with determinable market values are stated at market value method based on market price as of the end of the fiscal year under review. (valuation differences are reported as components of net assets and the cost of securities sold is calculated based on the moving average method). Those without determinable market values are stated at cost based on the moving average method. (2) Depreciation methods used for non-current assets (a) Depreciation of property, plant and equipment Calculated using the declining balance method. Primary useful lives are as follows: Buildings and structures 3 to 50 years Machinery and equipment 7 to 10 years (b) Amortization of intangible assets Calculated using the straight-line method. (3) Basis of accounting for reserves (a) Provision for bonuses The provision for bonuses is stated at an amount based on the estimated forthcoming payments. (b) Provision for directors’ bonuses The provision for directors’ bonuses is stated at an amount based on the estimated forthcoming payments. (c) Provision for defined retirement benefits The provision for defined retirement benefits is stated at the amount deemed to be correct as of the end of the fiscal year under review. The amount is based on estimated accounts of defined retirement benefit liabilities and pension assets as of the end of the fiscal year under review. 1) The method of attributing expected retirement benefit to periods With respect to the method of attributing expected retirement benefit to periods up to the end of the fiscal year under review, we adopt benefit formula basis for the calculation of retirement benefit liabilities.

- 77 - 2) Actuarial difference and past service costs Past service costs are recognized as expense and amortized over on an average remaining service period of employees at the time of accrual (five years with the declining-balance method in principle). Actuarial difference is recognized as expense starting from the consolidated fiscal year following the year in which it occurs and amortized over an average remaining service period of employees at the time of accrual (five years with the declining-balance method in principle). (d) Provision for environmental measures Provision for environmental measures is provided to cover the future payments for environmental measures based upon the reasonable estimates. (e) Provision for loss on guarantees Provision for loss on guarantees is provided to cover the estimated amount of payments for such loss in consideration of the financial position and other factors of guarantees. (f) Provision for loss on business restructuring and liquidation An estimated amount is recorded in preparation for expenses or losses associated with business restructuring. (4) Method of hedge accounting (a) Method of hedge accounting Exceptional treatment is applied for interest rate swaps. (b) Hedging instruments and hedged items Interest rate swaps are used with respect to the interest on some loans. (c) Hedging policy Hedging is effected with respect to interest rate risk for some loans. (d) Method of assessing hedge effectiveness, etc. The assessment of hedge effectiveness is omitted because exceptional treatment is applied for interest rate swaps. (5) Method of accounting for deferred assets Bond issuance cost Amortized in lump sum in the fiscal year in which they occur. (6) Method of accounting for retirement benefits The accounting treatment for the balance of unrecognized actuarial differences and unrecognized past service costs for retirement benefits is different to the treatment for these items in the consolidated financial statements. (7) Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. (8) Consolidated taxation system is applied

- 78 - 3. Notes to Non-Consolidated Balance Sheet (1) Short-term monetary claims from subsidiaries and associates 8,278 million yen Short-term monetary liabilities to subsidiaries and associates 1,434 million yen Long-term monetary liabilities to subsidiaries and associates 7 million yen (2) Accumulated depreciation of property, plant and equipment 26,543 million yen (3) Guarantee obligation Guarantees for loans of subsidiaries and associates from financial institutions 182 million yen Guarantees for loans of subsidiaries and associates from in-group financial subsidiaries, etc. 12,580 million yen Concurrent obligations for payments for factoring transactions of subsidiaries and associates 4,211 million yen Concurrent obligations for payments for electronic monetary claims transactions of subsidiaries and associates 4,556 million yen 4. Notes to Non-Consolidated Statement of Income (1) Operating revenue concerning subsidiaries and associates 15,312 million yen (2) Operating expenses concerning subsidiaries and associates 1,795 million yen (3) Non-operating transaction with subsidiaries and associates 3,269 million yen

- 79 - 5. Notes to Non-Consolidated Statement of Changes in Equity Type and total number of treasury shares at the fiscal year-end

No. of shares at the Increase during Decrease during No. of shares at the end Type of shares beginning of current the fiscal year the fiscal year of current fiscal year fiscal year Common 6,371,070 5,689,911 91 12,060,890 shares

Notes: 1. The 5,689,911 share increase in treasury shares resulted from the purchase of 5,682,800 shares on the market and the purchase of 7,111 shares, which were less than one unit, from shareholders. 2. The 91 share decrease in treasury shares resulted from the sale of shares to shareholders originally acquired as shares less than one unit. 6. Tax effect accounting Breakdown of deferred tax assets and deferred tax liabilities by the cause of its occurrence Deferred tax assets Depreciable assets 658 million yen Provision for retirement benefits 566 million yen Shares of subsidiaries and associates and investment securities 9,577 million yen Other 2,012 million yen Subtotal 12,815 million yen Valuation provision (6,356) million yen Total 6,459 million yen

Deferred tax liabilities Valuation difference on available-for-sale securities 1,908 million yen Other 194 million yen Total 2,103 million yen Net deferred tax assets 4,356 million yen

7. Fixed assets used under lease contracts In addition to the non-current assets on the balance sheet, tools, furniture and fixtures are under finance lease contracts that do not transfer ownership of the leased assets to the lessee.

- 80 - 8. Transactions with related parties

Relationship Balance at Transaction Voting the No. of amount Attribute Name rights or Business Transactions Item year-end interlocking (Millions of ownership relations (Millions of directors yen) yen) Acceptance of Receipt of Operating entrustment of management fee 3,367 accounts 294 Ownership management, Citizen Watch Co., (Note) 1 receivable Subsidiary (direct) 4 leasing of Ltd. 100% real-estate, etc. Dividends received 5,074 – – (Note) 2 Acceptance of Debt guarantee 9,489 Ownership entrustment of (Note) 3 Citizen Machinery Subsidiary (direct) 2 management, Dividends – – Co., Ltd. 100% leasing of received 2,070 real-estate, etc. (Note) 2

Acceptance of Ownership entrustment of Citizen Electronics Debt guarantee Subsidiary (direct) 2 management, 3,520 – – Co., Ltd. (Note) 3 79.3% leasing of real-estate, etc.

Acceptance of Ownership entrustment of Citizen Finedevice Debt guarantee Subsidiary (direct) 2 management, 4,291 – – Co., Ltd (Note) 3 100% leasing of real-estate, etc. Acceptance of Ownership entrustment of Debt guarantee SILVER DENKEN Subsidiary (direct) 2 management, (Note) 3 2,839 – – CO., LTD. 100% leasing of (Note) 5 real-estate, etc. Acceptance of Ownership entrustment of Debt guarantee Citizen Jewelry Subsidiary (direct) 2 management, (Note) 3 2,462 – – Co., Ltd. 100% leasing of (Note) 5 real-estate, etc. Acceptance of entrustment of management, Ownership Collection of Citizen Financial In-group Deposits Subsidiary (direct) 2 money 4,159 3,934 Service Co., Ltd. financial paid 100% (Note) 4 subsidiary, leasing of real-estate, etc. The above transaction amount does not include consumption tax. Notes: Business terms and decision-making policy of business terms, etc. 1. The amount of the management fee shall be reasonably agreed upon with subsidiaries that have concluded the Business Management Agreement. 2. The amount of the dividend is reasonably determined based on certain criteria including profits. 3. Debt guarantees shall be provided for loans of each subsidiary. 4. The Collection of money shall be made under the CMS (cash management system), and the interest rate shall be determined in view of the market interest rate. 5. With regard to the debt guarantee provided to SILVER DENKEN CO., LTD., the Company recorded a provision for loss on guarantees of 2,839 million yen. With regard to the debt guarantee provided to Citizen Jewelry Co., Ltd., the Company recorded a provision for loss on guarantees of 348 million yen.

- 81 - 9. Per share information Net assets per share 370.33 yen Basic earnings per share 20.29 yen 10. Significant Subsequent Events The Company announced that its Board of Directors meeting held on April 27, 2016 resolved to conduct an absorption-type merger (“the Merger”) between the Company and its wholly owned subsidiaries Citizen Watch Co., Ltd. and Citizen Business Expert Co., Ltd. effective October 1, 2016, and concluded a merger agreement. The Merger (1) Purpose of the Merger The Company has been making efforts to strengthen the competitiveness of the Group and promote its growth under a pure holding company structure since April 2007. In the “Citizen Global Plan 2018,” a medium-term management plan that commenced in April 2013, the Company succeeded in reaping certain benefits such as the expansion and reinforcement of its businesses, particularly the watches and clocks business, as a result of working on structural reforms with the aim of thoroughly strengthening its business structure and manufacturing capabilities and concentrating its management resources in business areas where the Company is able to make a strong showing by clarifying the business portfolio, with the slogan of “Aiming to Be a Solid Global Company.” Meanwhile, the Company has also been taking a variety of approaches since April 2014, including the operation of the indirect functions of the three companies involved in the Merger in an integrated manner, with the aim of “accelerating growth strategies for the watches and clocks business” and “increasing management efficiency.” However, given significant changes in the domestic and international business environments following the establishment of the pure holding company structure, the Company has reached the conclusion that it is most appropriate for the Group to shift to an operating holding company structure in which the Company will directly operate the watches and clocks business in order to proceed further with the “Citizen Global Plan 2018” and promote the further growth of the overall Group with the watches and clocks business at the core and the reinforcement of the head office function. After shifting to the operating holding company structure, we will strive to enhance the corporate value of the Group and the shareholder value by further strengthening the Group’s competitiveness under the new structure, while maintaining the strengths in the Group operation that we have built under the pure holding company structure. (2) Summary of the Merger (i) Method of the Merger The Merger will be conducted as an absorption-type merger, with the Company as the surviving company, and Citizen Watch Co., Ltd. and Citizen Business Expert Co., Ltd. will be dissolved.

- 82 - (ii) Schedule of the Merger Board of Directors meeting to approve the merger agreement April 27, 2016 Date of the merger agreement April 27, 2016 Effective date of the merger agreement October 1, 2016 (Planned) As the Merger is a simplified merger as provided for in Article 796, Paragraph 2 of the Companies Act for the Company and a short-form merger provided for in Article 784, Paragraph 1 of the Companies Act for Citizen Watch Co., Ltd. and Citizen Business Expert Co., Ltd., it will be implemented without obtaining approval by resolutions of the three companies’ general meetings of shareholders. (iii) Details of allotment pertaining to the Merger There is no allotment of shares or money, etc. due to the Merger. (iv) Handling of subscription rights to shares and bonds with subscription rights to shares associated with the Merger Not applicable (3) Overview of the merged companies

(1) Name Citizen Watch Co., Ltd. (2) Head Office 6-1-12 Tanashi-cho, Nishi-Tokyo-shi, Tokyo (3) Title and Name of Toshio Tokura, President and CEO Representative (4) Business Manufacture, sale, export and import, etc. of watches and clocks and their parts (5) Capital 5,000 million yen (6) Established April 2, 2007 (7) Number of Shares 200 shares Outstanding (8) Fiscal Year March 31 (9) Major Shareholder and Citizen Holdings Co., Ltd. 100.00% Shareholding Ratio (as of March 31, 2016)

- 83 - (10) Financial Position and Fiscal year FY2015 (Non-consolidated) Operating Results for the Most Recent Fiscal Net assets 72,085 million yen Year Total assets 98,715 million yen Net assets per 360,428 thousand yen share Net sales 117,775 million yen Operating 7,593 million yen income Ordinary income 12,540 million yen Profit 6,050 million yen attributable to owners of parent Basic earnings 30,252 thousand yen per share

(1) Name Citizen Business Expert Co., Ltd. (2) Head Office 6-1-12 Tanashi-cho, Nishi-Tokyo-shi, Tokyo (3) Title and Name of Shigeru Kabata, President and CEO Representative (4) Business Management and rent of real estate, maintenance and management of production equipment, acceptance of entrustment, agency services and consulting of services such as the development, operation and maintenance of computer systems (5) Capital 100 million yen (6) Established April 2, 2007 (7) Number of Shares 100 shares Outstanding (8) Fiscal Year March 31 (9) Major Shareholder and Citizen Holdings Co., Ltd. 100.00% Shareholding Ratio (as of March 31, 2016)

- 84 - (10) Financial Position and Fiscal year FY2015 (Non-consolidated) Operating Results for the Most Recent Fiscal Net assets 825 million yen Year Total assets 1,414 million yen Net assets per 8,257 thousand yen share Net sales 2,681 million yen Operating 183 million yen income Ordinary income 186 million yen Profit 151 million yen attributable to owners of parent Basic earnings 1,510 thousand yen per share

(4) Status after the Merger

(1) Name Citizen Watch Co., Ltd. (effective as of October 1, 2016) (2) Head Office 6-1-12 Tanashi-cho, Nishi-Tokyo-shi, Tokyo (3) Title and Name of Toshio Tokura, President and CEO Representative (4) Business Manufacture and sale of watches and clocks and their parts and the formulation and promotion of management strategies of the Group, the audit of the Group management, the technical development of the Group and the management of its intellectual property and other business management, etc. as a holding company (5) Capital 32,648 million yen (6) Fiscal Year March 31

- 85 - 11. Other notes (1) Adjustment of amounts of deferred tax assets and deferred tax liabilities due to the change in the rate of income taxes Following the passing into law at the Diet of the “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 15 of 2016) and the “Act for Partial Revision of the Local Tax Act, etc.” (Act No. 13 of 2016) on March 29, 2016, the income tax rate, etc. are to be lowered from the fiscal year beginning on or after April 1, 2016. Accordingly, the statutory effective tax rate used in the calculation of deferred tax assets and deferred tax liabilities has been changed from 32.3%, which was used in the calculation for the previous fiscal year, to 30.9% with regard to the temporary differences expected to be reversed in the fiscal years beginning on April 1, 2016 and on April 1, 2017 and to 30.6% with regard to the temporary differences expected to be reversed in the fiscal years beginning on or after April 1, 2018. Due to this change in the tax rate, the amount of deferred tax assets (less the amount of deferred tax liabilities) decreased by 216 million yen, income taxes - deferred increased by 323 million yen, valuation difference on available-for-sale securities increased by 102 million yen and reserve for reduction entry increased by 5 million yen. (2) Figures are rounded down to the nearest millions of yen. However, as for ratios, net assets per share and basic earnings per share, fractional amounts are rounded off.

- 86 - Financial Audit Report on Consolidated Financial Statements

Independent Auditors’ Report on Consolidated Financial Statements May 19, 2016 To the Board of Directors of Citizen Holdings Co., Ltd.

Nihombashi Corporation Masahiko Kinoshita [seal] Designated Partner and Engagement Partner, C.P.A. Kenichi Yajima [seal] Designated Partner and Engagement Partner, C.P.A.

Pursuant to the provisions of Article 444, Paragraph 4 of the Companies Act, we have audited the consolidated financial statements of Citizen Holdings Co., Ltd. for the fiscal year from April 1, 2015 to March 31, 2016. These statements consisted of the consolidated balance sheet, consolidated statement of income, consolidated statement of changes in equity, and notes to consolidated financial statements.

Responsibility of management for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Japanese generally accepted accounting principles. The responsibility includes designing, implementing and maintaining internal control, judged by the management as necessary for the preparation and fair presentation of consolidated financial statements that are free from material misstatement due to fraud or error.

Responsibility of the auditor Our responsibility is to express an opinion on the consolidated financial statements based on our audit from an independent point of view. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedure selected depends on the auditors’ judgment including the assessment of the risks of material misstatement of the consolidated financial statements due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

- 87 - Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Corporate Group comprised of Citizen Holdings Co., Ltd. and its consolidated subsidiaries as of March 31, 2016, and the consolidated results of its operations for the fiscal year then ended in accordance with Japanese generally accepted accounting principles.

Emphasis of matters As described in notes on Significant Subsequent Events, the Company has resolved at its Board of Directors’ meeting held on April 27, 2016 the matter regarding an absorption-type merger (“the Merger”) between the Company and its wholly owned subsidiaries Citizen Watch Co., Ltd. and Citizen Business Expert Co., Ltd. effective October 1, 2016, and concluded an agreement for a merger. Our opinion is not qualified in respect of this matter.

Interest We have no interest in the Company which should be disclosed pursuant to the provisions of the Certified Public Accountant Act of Japan.

- 88 - Financial Audit Report on Non-Consolidated Financial Statements

Independent Auditors’ Report on Non-Consolidated Financial Statements May 19, 2016 To the Board of Directors of Citizen Holdings Co., Ltd.

Nihombashi Corporation Masahiko Kinoshita [seal] Designated Partner and Engagement Partner, C.P.A. Kenichi Yajima [seal] Designated Partner and Engagement Partner, C.P.A.

Pursuant to the provisions of Article 436, Paragraph 2, Item 1 of the Companies Act, we have audited the non-consolidated financial statements and the supplementary schedules of Citizen Holdings Co., Ltd. for the 131st business term from April 1, 2015 to March 31, 2016. The non-consolidated financial statements consisted of the non-consolidated balance sheet, non-consolidated statement of income, non-consolidated statement of changes in equity, and notes to non-consolidated financial statements.

Responsibility of management for the non-consolidated financial statements and the supplementary schedules Management is responsible for the preparation and fair presentation of the non-consolidated financial statements and the supplementary schedules in accordance with Japanese generally accepted accounting principles. The responsibility includes designing, implementing and maintaining internal control, judged by the management as necessary for the preparation and fair presentation of non-consolidated financial statements and the supplementary schedules that are free from material misstatement due to fraud or error.

Responsibility of the auditor Our responsibility is to express an opinion on the non-consolidated financial statements and the supplementary schedules based on our audit from an independent point of view. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the non-consolidated financial statements and the supplementary schedules are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the non-consolidated financial statements and the supplementary schedules. The procedure selected depends on the auditors’ judgment including the assessment of the risks of material misstatement of the non-consolidated financial statements and the supplementary schedules due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the non-consolidated financial statements and the supplementary schedules in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the non-consolidated financial statements and the supplementary schedules. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

- 89 - Opinion In our opinion, the non-consolidated financial statements and the supplementary schedules referred to above present fairly, in all material respects, the financial position of Citizen Holdings Co., Ltd. as of March 31, 2016, and the results of its operations for the fiscal year then ended in accordance with Japanese generally accepted accounting principles.

Emphasis of matters As described in notes on Significant Subsequent Events, the Company has resolved at its Board of Directors’ meeting held on April 27, 2016 the matter regarding an absorption-type merger (“the Merger”) between the Company and its wholly owned subsidiaries Citizen Watch Co., Ltd. and Citizen Business Expert Co., Ltd. effective October 1, 2016, and concluded an agreement for a merger. Our opinion is not qualified in respect of this matter.

Interest We have no interest in the Company which should be disclosed pursuant to the provisions of the Certified Public Accountant Act of Japan.

- 90 - Audit Report of the Audit & Supervisory Board

Audit Report With regard to the performance of the Directors’ duties for the 131st business term from April 1, 2015 to March 31, 2016, we have prepared this Audit Report, with the uniformed opinion of all Audit & Supervisory Board Members, after examining the audit reports prepared by each Audit & Supervisory Board Member and hereby report as follows:

1. Auditing Methods of the Audit & Supervisory Board Members and Audit & Supervisory Board, and Details of Such Audits (1) We established the audit policy, allocation of duties, and other relevant matters, and we received reports from each Audit & Supervisory Board Member regarding the status of their audits and the results thereof. We also received reports from the Directors and others, and the Independent Auditors regarding the performance of their duties, and asked them to provide explanations when needed. (2) According to the audit standards, each Audit & Supervisory Board Member conformed to the audit policy and allocation of duties and other relevant matters prescribed by the Audit & Supervisory Board; maintained communications with the Directors, the internal audit division, employees, and others; made efforts to establish an environment for collecting information and auditing; and implemented auditing in the following manner. (a) We attended the Board of Directors meetings and other important meetings; received reports from the Directors, employees and others on the performance of their duties; asked the Directors, employees and others to provide explanations when needed; reviewed important written decisions and other items; and studied the business and financial conditions of the Company. (b) We have periodically received reports from Directors and employees, among others, required explanation when necessary, and provided opinions with respect to matters mentioned in the business report. Such matters consist of the details of the resolution of the Board of Directors regarding the development of a system established to ensure that the Directors perform their duties in conformance with relevant laws and regulations and the Articles of Incorporation and other systems stipulated in Article 100 of the Enforcement Regulations of the Companies Act, which are necessary to ensure the appropriateness of the operations of the Corporate Group comprised of the Company and its subsidiaries, as well as the status of operations regarding the system developed under such resolution (the “internal control system”). With respect to internal control over financial reporting, we received reports from Directors and Nihombashi Corporation regarding the evaluation and status of audit of the internal control, and asked them to provide explanations when needed. (c) Regarding the Basic Policy Relating to Persons who Control Decision-making over the Financial and Business Policies of the Company mentioned in the Business Report, we also considered the contents in light of the circumstances, etc. of deliberations by the Board of Directors and other bodies.

- 91 - (d) With respect to subsidiaries, the Full-Time Audit & Supervisory Board Member concurrently served as audit & supervisory board member of the important subsidiaries, and in addition to attending meeting of the important subsidiaries including meetings of the board of directors, maintained communications and exchanged information with directors, audit & supervisory board members, and others of subsidiaries, and received business reports from subsidiaries when needed. From the standpoint of group auditing, the Full-Time Audit & Supervisory Board Member held regular meetings with the audit & supervisory board members of the group companies, maintained communications, shared information, and exchanged opinions. (e) We monitored and examined whether the Independent Auditors performed proper audits while retaining their independence, and received reports from the Independent Auditors on the performance of their duties and asked them to provide explanations when needed. In addition, we were notified by the Independent Auditors that the “system to ensure proper performance of its duties” stipulated in Article 131 of the Company Accounting Regulations has been developed in accordance with the “Quality Control Standards for Audits” issued by the Business Accounting Council, and other relevant standards, and we asked the Independent Auditors to provide explanations when needed. Based on the above methods, we reviewed and the business report and its supplementary schedules, the consolidated financial statements (consolidated balance sheet, consolidated statement of income, consolidated statement of changes in equity, and notes to consolidated financial statements), as well as the non-consolidated financial statements (non-consolidated balance sheet, non-consolidated statement of income, non-consolidated statement of changes in equity, and notes to non-consolidated financial statements) and their supplementary schedules for this business term.

2. Audit Results (1) Audit Results of Business Report and Other Documents (a) We are of the opinion that the Business Report and the supplementary schedules fairly present the situation of the Company in accordance with relevant laws and regulations and the Articles of Incorporation. (b) We have found no significant evidence of wrongful acts or violations of relevant laws and regulations or the Articles of Incorporation with regard to the Directors’ performance of their duties. (c) We are of the opinion that the resolutions of the Board of Directors regarding the internal control system are proper and correct. Furthermore, with respect to the internal control system in question, we have confirmed that its architecture and operations are being continually improved. We have found no matters which we need to point out regarding the details described in the Business Report and the Directors’ performance of their duties in connection with the relevant internal control system and the internal control over financial reporting. (d) We have found no matters which we need to point out regarding the Basic Policy Relating to Persons who Control Decision-making over the Financial and Business Policies of the Company mentioned in the Business Report. We are of the opinion that the Company’s efforts based on such Basic Policy do not impair the common interests of the Company’s shareholders, and do not aim to protect the officers’ positions in the Company.

- 92 - (2) Audit Results of Consolidated Financial Statements We are of the opinion that the methods and results of the audit made by the Independent Auditors, Nihombashi Corporation, are appropriate. (3) Audit Results of Non-Consolidated Financial Statements and Supplementary Schedules We are of the opinion that the methods and results of the audit made by the Independent Auditors, Nihombashi Corporation, are appropriate.

May 26, 2016 The Audit & Supervisory Board Citizen Holdings Co., Ltd.

Haruhisa Shiraishi [seal] Full-time Audit & Supervisory Board Member (Outside Audit & Supervisory Board Member)

Kenichiro Hanyu [seal] Full-time Audit & Supervisory Board Member

Masaomi Suizu [seal] Audit & Supervisory Board Member (Outside Audit & Supervisory Board Member)

- 93 -