Epson Annual Report 2017

FY2017 Annual Report · Epson

Loading PDF…

ANNUAL REPORT 2017

SEIKO EPSON CORPORATION
April 2016 - March 2017

Cautionary Statement

This report includes forward-looking statements that are based on management’s view from the information
available at the time of the announcement. These statements are subject to various risks and uncertainties. Actual
results may be materially different from those discussed in the forward-looking statements. The factors that may
affect Epson include, but are not limited to, general economic conditions, the ability of Epson to continue to
quickly introduce new products and services, consumption trends, competition, technology trends, and exchange
rate fluctuations.

In this annual report, “Epson” or the “Group” refers to the Epson Group, while “the Company” may refer to the
Group or the parent company, Seiko Epson Corporation.

Table of Contents

Consolidated Financial Highlights ............................................................................................................... 3

Information on the Company ....................................................................................................................... 7

1. Overview of the business group............................................................................................................ 7
2. Major equipment and facilities .......................................................................................................... 11
3. Overview of capital expenditures ....................................................................................................... 13
4. Plans for new additions or disposals .................................................................................................. 14
5. Major management contracts ............................................................................................................ 15

Risks Related to Epson’s Business Operations ......................................................................................... 16

Business Conditions ..................................................................................................................................... 22

1. Overview of business results ............................................................................................................... 22
2. Manufacturing, orders received and sales......................................................................................... 25
3. Analysis of financial condition, results of operations and cash flows ............................................. 26
4. Research and development activities ................................................................................................. 29
5. Mangement policy, business environment and issues to be addressed, etc. ................................... 31
6. Dividend policy .................................................................................................................................... 35

Corporate Governance ................................................................................................................................ 36

1. Approach to corporate governance .................................................................................................... 36
2. Details of audit remuneration ............................................................................................................. 51
3. Basic policy regarding company control ........................................................................................... 52

Management ................................................................................................................................................ 54

Index to Consolidated Financial Statements ............................................................................................. 57

Consolidated Statement of Financial Position ...................................................................................... 58
Consolidated Statement of Comprehensive Income ............................................................................. 60
Consolidated Statement of Changes in Equity ...................................................................................... 62
Consolidated Statement of Cash Flows .................................................................................................. 64
Notes to Consolidated Financial Statements ......................................................................................... 65
Report of Independent Auditors .......................................................................................................... 125

Additional Information ............................................................................................................................. 126

1. Principal subsidiaries and affiliates ................................................................................................. 126
2. Distribution of ownership among shareholders .............................................................................. 130
3. Major shareholders ........................................................................................................................... 131
4. Employee stock ownership plans ..................................................................................................... 133
5. Epson stock price ............................................................................................................................... 135
6. Corporate data and investor information ....................................................................................... 136

Consolidated Financial Highlights
Seiko Epson Corporation and Subsidiaries

For the years ended March 31

Statement of Comprehensive
Income
Revenue

Information-related equipment

business segment

Devices and precision products
business segment

Sensing and industrial solutions
business segment

Other

Adjustments

Printing Solutions
business segment
Visual Communications business
segment
Wearable & Industrial Products
business segment

Other
Adjustments

Gross profit
Selling, general and administrative
expenses
Profit from operating activities

Profit before tax
Profit for the period attributable to
owners of the parent company
Total comprehensive income for
the period

Statement of Cash Flows
Net cash provided by (used in)
operating activities
Net cash provided by (used in)
investing activities
Free cash flows
Net cash provided by (used in)
financing activities

Statement of Financial Position
Current assets

Non-current assets
Total assets

Current liabilities
Non-current liabilities
Equity attributable to owners of
the parent company

IFRS

Millions of yen

2014

2015

2016

2017

Thousands of
U.S. dollars
2017

1,008,407

1,086,341

1,092,481

1,024,856

9,135,003

841,228

907,296

148,779

156,297

16,174

23,396

1,333

891

1,390

(2,038)

730,867

736,369

686,619

6,120,154

177,186

184,033

179,682

1,601,586

173,478

170,415

158,548

1,413,209

1,390

3,418

1,404

257

1,509

(1,502)

13,450

(13,396)

362,589

395,924

397,660

365,974

3,262,091

(272,501)

(294,648)

(312,708)

(300,167)

(2,675,523)

79,549

77,977

84,203

131,380

132,536

112,560

94,026

91,530

45,772

67,892

67,470

48,320

605,151

601,390

430,698

120,480

145,483

(1,469)

55,982

498,992

114,859

108,828

113,054

96,873

863,472

(41,244)

(32,735)

(51,558)

(75,759)

(675,274)

73,615

76,093

61,495

21,114

188,198

(56,567)

(55,392)

(67,171)

(26,691)

(237,908)

560,645

348,245

908,890

336,087

208,045

362,371

650,383

355,898

1,006,282

355,442

153,531

494,325

601,451

339,888

941,340

325,019

145,644

467,818

602,446

371,940

974,387

351,389

128,275

5,369,872

3,315,278

8,685,150

3,132,088

1,143,382

492,196

4,387,164

IFRS

Millions of yen

2014

2015

2016

2017

Thousands of
U.S. dollars
2017

235.35

50.00

314.61

115.00

127.94

60.00

136.82

60.00

1,012.83

1,381.66

1,307.58

1,397.40

1.22

0.52

12.46

39.9

49.1

49.7

50.5

27.7

26.3

9.2

7.9

13.7

12.1

55,104

52,010

13,723

12,787

1,197

1,246

252

2,895

73,171

306

3,529

69,878

9.5

9.7

8.6

10.1

7.1

6.6

41,051

44,789

10,041

10,973

13,312

340

2,861

67,605

13,092

337

3,229

72,420

Per Share Data (yen and U.S. dollars)

Basic earnings per share (Note2)

Diluted earnings per share (Note2)

Cash dividends per share (Note4)
Equity attributable to owners of the
parent company, per share (Note2)

Financial Ratios (%)
Equity attributable to owners of the
parent company, ratio
ROE (Profit for the period attributable to
owners of the parent company /
Beginning and ending balance average
equity attributable to owners of the parent
company)
ROA (Profit from operating activities /
Beginning and ending balance average
total assets)
ROS (Profit from operating activities /
Revenue)

Number of Employees

Information-related equipment
business segment
Devices and precision products
business segment

Sensing and industrial solutions
business segment
Printing Solutions
business segment
Visual Communications
business segment
Wearable & Industrial Products
business segment
Other
Corporate
Total

Notes
1. The Consolidated Financial Statements have been prepared on the basis of International Financial Reporting Standards (IFRS) from

the year ended March 31, 2014.

2. Seiko Epson Corporation (the “Company”) completed the Company’s ordinary shares split with an effective date of April 1, 2015. As a
result, each share of the Company’s ordinary shares was split into two shares. Basic earnings per share, diluted earnings per share and
equity attributable to owners of the parent company, per share were calculated under the assumption that the shares split took effect at
the beginning of the year ended March 31, 2014.

3. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥112.19 = U.S. $1 as of March 31, 2017.
4. In this table, cash dividends per share refers to the amount paid for each share in each fiscal year.
5. Equity attributable to owners of the parent company is equity excluding non-controlling interest in subsidiaries.

For the years ended March 31

Statements of Income
Net sales

Information-related equipment

business segment

Devices and precision products
business segment

Other
Eliminations and corporate

Information-related equipment

business segment

Devices and precision products
business segment
Sensing and industrial solutions
business segment

Other

Eliminations and corporate

Gross profit
Selling, general and administrative
expenses
Operating income
Ordinary income
Income (loss) before income taxes
and minority interests
Profit (loss) attributable to
owners of parent

Research and development costs
Capital expenditures

Depreciation and amortization

Net cash provided by (used in)
operating activities
Net cash provided by (used in)
investing activities
Free cash flows
Net cash provided by (used in)
financing activities

JGAAP
Millions of yen

2013

2014

851,297

1,003,606

688,029

156,872

1,273

5,122

685,862

836,436

140,790

148,956

11,413

16,181

1,273

11,957

234,439

213,184

21,255

17,629

(3,479)

(10,091)

49,923

43,155

39,320

1,334

699

322,976

238,007

84,968

78,121

71,916

83,698

50,531

37,825

38,725

42,992

111,253

(39,511)

3,480

21,298

(39,519)

71,733

(56,567)

Balance Sheet
Current assets
Property, plant and equipment (net of
accumulated depreciation)

Total assets

Current liabilities

Non-current liabilities

Net assets

Number of Employees

Information-related equipment
business segment
Devices and precision products
business segment

Sensing and industrial solutions
business segment
Other
Corporate
Total

Per Share Data (Yen)

Earnings per share (Note1)

Cash dividends per share (Note3)

Net assets per share (Note1)

Financial Ratios (%)

Shareholders’ equity ratio
ROE (net income (loss) / average
shareholders’ equity at beginning and end
of year)
ROA (ordinary income / average total
assets at beginning and end of year)
ROS (operating income / net sales)

JGAAP
Millions of yen

2013

2014

519,457

217,388

778,547

326,688

193,052

258,806

602,452

216,170

865,872

313,636

200,505

351,730

50,823

55,104

13,859

13,723

241

3,838

68,761

(56.41)
20.00

1,435.20

33.0

(4.0)

2.3

2.5

1,197

252

2,895

73,171

233.94

50.00

976.41

40.3

27.6

9.5

8.5

Notes
1. Seiko Epson Corporation (the “Company”) completed the Company’s ordinary shares split with an effective date of April 1, 2015. As a

result, each share of the Company’s ordinary shares was split into two shares. Earnings per share and net assets per share were
calculated under the assumption that the shares split took effect at the beginning of the year ended March 31, 2014.

2. Ordinary income is a common item on financial statements in Japan, which is calculated by adding to or subtracting from operating

income items such as interest income, rent income, interest expenses and foreign exchange gains or losses.

3. In this table, cash dividends per share refers to the amount paid for each share in each fiscal year.
4. Shareholders’ equity is net assets excluding minority interests.

Information on the Company
1. Overview of the business group

Epson is primarily engaged in developing, manufacturing, selling, and providing services for products in the
printing solutions, visual communications, wearable and industrial products, and the other business.

Epson is organized into operations divisions that come under global consolidated management. The majority of
advanced R&D and product development is conducted in Japan (by Corporate R&D and R&D organizations in the
various operations divisions), while manufacturing and sales activities are conducted around the world by Epson
Group manufacturing and sales companies, both in Japan and abroad.

A brief description of Epson’s various businesses is provided below along with a list of the main Epson Group
companies involved in each segment.

Printing Solutions Business Segment
This segment comprises the printer business, professional printing business, and others. The businesses in this
segment leverage Epson’s original Micro Piezo and other technologies to develop, manufacture, and sell products.
The main activities of these businesses are described below.

Printer business
This business is primarily responsible for home and office inkjet printers, serial impact dot matrix (SIDM) printers,
page printers, color image scanners, and related consumables, as well as office papermaking systems.

Professional printing business
This business is primarily responsible for large-format inkjet printers, industrial inkjet printing systems, printers for
use in POS systems, label printers, and related consumables.

Others
This business sells PCs in the Japanese market through a domestic subsidiary.

The major Epson Group companies involved in this segment are listed in the table below.

Business area

Main products

Main Epson Group companies

Manufacturing companies

Sales companies

Printers

Inkjet printers, serial impact
dot matrix printers, page
printers, color image
scanners, and related
consumables, office
papermaking systems

Professional printing

Large-format inkjet printers,
industrial inkjet printing
systems, printers for use in
POS systems, label printers,
and related consumables, and
others

Tohoku Epson Corporation
Akita Epson Corporation
Epson Portland Inc.
Epson Telford Ltd.
Fratelli Robustelli S.r.l.
Tianjin Epson Co., Ltd.
Epson Engineering (Shenzhen) Ltd.
P.T. Epson Batam
P.T. Indonesia Epson Industry
Epson Precision (Philippines), Inc.

Others

PCs and other equipment

—

Epson Sales Japan Corporation
Epson America, Inc.
Epson Europe B.V.
Epson (U.K.) Ltd.
Epson Deutschland GmbH
Epson France S.A.
Epson Italia S.p.A.
For.Tex S.r.l.
Epson Iberica, S.A.
Epson (China) Co., Ltd.
Epson Korea Co., Ltd.
Epson Hong Kong Ltd.
Epson Taiwan Technology &
Trading Ltd.
Epson Singapore Pte. Ltd.
P.T. Epson Indonesia
Epson (Thailand) Co., Ltd.
Epson Philippines Corporation
Epson Australia Pty. Ltd.
Epson India Pvt. Ltd.

Epson Sales Japan Corporation
Epson Direct Corporation

Visual Communications Business Segment
The businesses in this segment leverage Epson’s original microdisplay and projection technologies to develop,
manufacture, and sell 3LCD projectors for business, education, and the home; high-temperature polysilicon TFT
LCD panels for 3LCD projectors; and smart eyewear.

The major Epson Group companies involved in this segment are listed in the table below.

Business area

Main products

Main Epson Group companies

Manufacturing companies

Sales companies

Visual
communications

3LCD projectors,
high-temperature polysilicon
TFT LCD panels for 3LCD
projectors, smart eyewear,
and others

Epson Engineering (Shenzhen) Ltd.
Epson Precision (Philippines), Inc.

Epson Sales Japan Corporation
Epson America, Inc.
Epson Europe B.V.
Epson (U.K.) Ltd.
Epson Deutschland GmbH
Epson France S.A.
Epson Italia S.p.A.
Epson Iberica, S.A.
Epson (China) Co., Ltd.
Epson Korea Co., Ltd.
Epson Hong Kong Ltd.
Epson Taiwan Technology &
Trading Ltd.
Epson Singapore Pte. Ltd.
P.T. Epson Indonesia
Epson (Thailand) Co., Ltd.
Epson Philippines Corporation
Epson Australia Pty. Ltd.
Epson India Pvt. Ltd.

Wearable & Industrial Products Business Segment
This segment comprises the wearable products business, robotics solutions business, and the microdevices
business.
The main activities of these businesses are described below.

Wearable products business
This business leverages its ultrafine and ultraprecision machining and processing technologies and its high-density
mounting and assembly technologies to develop, manufacture and sell watches, as well as to develop, manufacture
and sell useful products that use high-accuracy sensors to connect people and information.

Watch business
This business primarily develops, manufactures, and sells watches and watch movements. Effective April 1,
2017, Seiko Epson succeeded to the watch sales operations (excluding domestic sales operations in Japan) of
Orient Watch Co., Ltd. via an absorption-type company split. Epson Sales Japan Corporation, a consolidated
subsidiary of Seiko Epson, succeeded to the domestic sales operations of Orient Watch Co., Ltd.

Sensing equipment business
This business is primarily engaged in developing, manufacturing, and selling sensing equipment that have
extremely accurate built-in sensors and that are used in the personal health and sports fields etc.

Robotics solutions business
This business uses advanced precision mechatronics and other technologies to develop, manufacture, and sell
industrial robots, IC handlers and other production systems that dramatically increase productivity.

Micro-devices and others business
This business designs, manufactures, and sells small, accurate, energy-efficient electronic devices for external
customers as well as for other businesses in the Epson Group. It also provides metal powders and surface finishing
services.

Quartz device business
This business provides crystal units, crystal oscillators, and quartz sensors for consumer, automotive, and
industrial equipment applications.

Semiconductor business
This business provides CMOS LSIs and other chips mainly for consumer electronics and automotive
applications.

Others
This business develops, manufacturers, and sells a variety of high-performance metal powders for use as raw
materials in the production of electronic components, etc. This business also provides high-value-added surface
finishing in a wide variety of industrial fields.

The major Epson Group companies involved in this segment are listed in the table below.

Business area

Main products

Main Epson Group companies

Manufacturing companies

Sales companies

Wearable products

Watches
Wristwatches, watch
movements, and others

Akita Epson Corporation
Epson Precision (Shenzhen) Ltd.
Orient Watch (Shenzhen) Ltd.
Epson Precision (Johor) Sdn. Bhd.

Orient Watch Co., Ltd.
Epson Hong Kong Ltd.

Sensing equipment

Akita Epson Corporation

Epson Sales Japan Corporation

Robotics solutions

Industrial robots, IC handlers,
and others

Epson Engineering (Shenzhen) Ltd.

Microdevices and
others

Quartz devices
Crystal units, crystal
oscillators, quartz sensors,
and others

Miyazaki Epson Corporation
Epson Precision Malaysia Sdn. Bhd.

Semiconductors
CMOS LSIs, and others

Tohoku Epson Corporation
Singapore Epson Industrial Pte. Ltd.

Others
Metal powders,
surface finishing

Epson Atmix Corporation
Singapore Epson Industrial Pte. Ltd.

Epson Sales Japan Corporation
Epson America, Inc.
Epson Deutschland GmbH
Epson (China) Co., Ltd.
Epson Hong Kong Ltd.
Epson Taiwan Technology &
Trading Ltd.

Epson Electronics America, Inc.
Epson Europe Electronics GmbH
Epson Hong Kong Ltd.
Epson Taiwan Technology &
Trading Ltd.
Epson Singapore Pte. Ltd.

Other Business Segment
This segment comprises the businesses of Epson Group companies that offer services for and within the Epson
Group.

2. Major equipment and facilities

Epson’s major equipment and facilities are as follows.

(1) Seiko Epson Corporation

Name of plant
(location)

Business segment

Type of facilities

As of March 31, 2017

Book value (Millions of yen)

Buildings and
structures

Machinery,
equipment
and
vehicles

Land
(Area: m2)

Other

Total

Number of
employees
(Persons)

1,201
(42,383)
[2,136]

–
(–)

6,098
(198,152)
[32,746]

3,764
(179,759)
[1,758]

749
(75,912)
[32,092]

1,443
(113,082)
[28,909]

1,375
(160,528)

129
(39,943)
[1,502]

1,996
(247,143)

2,177
(538,828)

7,627
(36,245)
1,047
(41,836)
[5,764]

2,876

509

795

3,688 44,017

5,415

5,165

653

1,760

6,291

1,436

1,216 23,080

1,068

1,027

6,506

208

260

4,197

444

855 11,748

1,070

650 14,282

60 10,543

331

6,083

216

689

Head Office
(Suwa-shi, Nagano)

Tokyo Office
(Shinjuku-ku,
Tokyo)

Hirooka Office
(Shiojiri-shi,
Nagano)

Matsumoto Minami
Plant
(Matsumoto-shi,
Nagano)

Toyoshina Plant
(Azumino-shi,
Nagano)

Suwa Minami Plant
(Fujimi-machi,
Suwa-gun, Nagano)

Chitose Plant
(Chitose-shi,
Hokkaido)
Ina Plant
(Minowa-machi,
Kamiina-gun,
Nagano)

Overall
administration and
other
Overall
administration and
other

Printing solutions
Other

Other facilities

1,450

151

Other facilities

708

–

Printer development and
design and component
manufacturing facilities
Research and development
facilities

16,297

17,933

Other

Other facilities

1,308

Visual
communications
Wearable &
Industrial products

Printing solutions
Visual
communications
Other

3LCD projector, smart
eyewear and factory
automation development and
design facilities
Printer component and liquid
crystal panel manufacturing
facilities
Research and development
facilities

2,619

1,162

6,070

14,349

Visual
communications

Liquid crystal panel
manufacturing facilities

2,030

2,072

Wearable &
Industrial products

Crystal device development
and design facilities

1,849

1,958

Fujimi Plant
(Fujimi-machi,
Suwa-gun, Nagano)

Wearable &
Industrial products
Other

Wearable &
Industrial products

Sakata Plant
(Sakata-shi,
Yamagata)
Hino Office
(Hino-shi, Tokyo)
Shiojiri Plant
(Shiojiri-shi,
Nagano)

Sensing equipment and
semiconductor development
and design facilities
Research and development
facilities
Semiconductor
manufacturing facilities
Other

6,948

1,948

7,256

4,197

Sales facilities

2,854

Wearable &
Industrial products

Watch development, design
and manufacturing facilities

1,693

3,010

(2) Domestic subsidiaries

Company name
(location)

Business segment

Type of facilities

As of March 31, 2017

Book value (Millions of yen)

Buildings and
structures

Machinery,
equipment
and
vehicles

Land
(Area: m2)

Other

Total

Number of
employees
(Persons)

Tohoku Epson
Corporation
(Sakata-shi,
Yamagata)

Printing solutions
Wearable &
Industrial products

Printer component and
semiconductor
manufacturing facilities

Akita Epson
Corporation
(Yuzawa-shi, Akita)

Printing solutions
Wearable &
Industrial products

Printer component, watch
movements and sensing
equipment manufacturing
facilities

5,289

139

Epson Atmix
Corporation
(Hachinohe-shi,
Aomori)

Wearable &
Industrial products

Manufacturing facilities for
metal powders, etc.

2,911

2,070

–
(–)

650
(65,436)

409
(30,653)
[34,208]

905

924

1,986

708

6,787

953

159

5,550

262

(3) Overseas subsidiaries

Company name
(location)

Business segment

Type of facilities

As of March 31, 2017

Book value (Millions of yen)

Buildings and
structures

Machinery,
equipment
and
vehicles

Land
(Area: m2)

Other

Total

Number of
employees
(Persons)

Epson Engineering
(Shenzhen) Ltd.
(Shenzhen, China)

Printing solutions
Visual
communications
Wearable & Industrial
products

Singapore Epson
Industrial Pte. Ltd.
(Singapore)

Printing solutions
Wearable & Industrial
products

Printer, 3LCD projector and
factory automation
manufacturing facilities

Printer consumables, watch
component and semiconductor
manufacturing facilities and
surface finishing facilities

3,078

3,556

3,839

7,601

–
(–)
[64,104]

52
(41,065)
[54,094]

3,710 10,345

9,329

1,086 12,580

5,716

6,021

4,935

Printing solutions

Printer manufacturing facilities

Printing solutions
Visual
communications

P.T. Indonesia Epson
Industry
(Bekasi, Indonesia)
Epson Precision
(Philippines), Inc.
(Lipa, Philippines)
Epson Precision
Malaysia Sdn. Bhd.
(Kuala Lumpur,
Malaysia)
Notes
1. The above figures do not include consumption tax.
2. “Other” under the book value column includes tools, furniture and fixtures and other property, plant and

–
(–)
[254,871]
513
(100,000)
[130,000]

Crystal device manufacturing
facilities

Printer and 3LCD projector
manufacturing facilities

Wearable & Industrial
products

297
(32,437)

7,646 18,602

3,385 15,719

3,529

2,634

3,354

8,290

397

11,167

10,861

1,686

equipment, but does not include construction in progress.

3. Portions of land are leased from companies not included in consolidated accounts. The size of each area of

leased land is indicated in brackets [ ].

4. Tohoku Epson Corporation uses a portion of the facilities of the Sakata Plant.
5. Figures for Singapore Epson Industrial Pte. Ltd. and Epson Precision (Philippines), Inc., are included in

consolidated business results.

6. The above book value amounts are after adjustments for consolidated accounts.

3. Overview of capital expenditures

Capital expenditures for the fiscal year under review were concentrated in key strategic areas, primarily new
products, increasing of production capacity, rationalizing, upgrading and maintaining equipment and facilities to
help foster the development of new businesses and prepare for future growth. In addition, Epson continued to
carefully select investments and efficiently utilize existing facilities in an effort to generate stable cash flow.

As a result of these efforts, total capital expenditures (including property, plant and equipment, software and lease
rights) amounted to ¥75.3 billion.
No equipment with significant impact on production capacity was sold or removed.
Capital expenditures in each business segment are discussed below.

Printing solutions segment
Investment used for commercializing new products such as printers, and for increasing of production capacity,
rationalizing, upgrading and maintaining equipment and facilities amounted to ¥43.9 billion in the fiscal year under
review.

Visual communications segment
Investment used for commercializing new products such as 3LCD projectors, and for rationalizing, upgrading and
maintaining equipment and facilities amounted to ¥10.2 billion in the fiscal year under review.

Wearable & Industrial products segment
Investment used for commercializing new products such as watches, sensing equipment, factory automation
products, crystal devices and semiconductors, and for rationalizing, upgrading and maintaining equipment and
facilities amounted to ¥9.1 billion in the fiscal year under review.

Other and overall
Investment in R&D and other activities amounted to ¥11.9 billion in the fiscal year under review.

4. Plans for new additions or disposals

Epson plans to allocate ¥76.0 billion to capital expenditures for the fiscal year ending March 31, 2018.

Business segment

Planned amount of
capital expenditures
(100 million yen)

Main type and purpose of equipment and facilities

Printing solutions

Visual
communications

Wearable &
Industrial products

Other and overall

430

130

100

Commercializing new products; increasing of production capacity,
rationalizing, upgrading and maintaining equipment and facilities,
etc.
Commercializing new products; increasing of production capacity,
rationalizing, upgrading and maintaining equipment and facilities,
etc.
Commercializing new products; rationalizing, upgrading and
maintaining equipment and facilities, etc.

100 Investment in research and development, etc.

Total

760

–

Notes
1. The above amounts do not include consumption tax.
2. Required funds will be covered by current funds in hand.
3. There are no plans to dispose of or sell major equipment and facilities with the exception of disposals and sales

associated with regular and ongoing upkeep of equipment and facilities.

5. Major management contracts

(1) Reciprocal technical assistance agreements

Name of contracting
company

Name of other party

Country

Type of contract

Contract period

Seiko Epson
Corporation

Hewlett-Packard
Company

Seiko Epson
Corporation

International Business
Machines Corporation

U.S.A.

Seiko Epson
Corporation

Microsoft Corporation

U.S.A.

Eastman Kodak Company U.S.A.

Xerox Corporation

U.S.A.

Seiko Epson
Corporation

Texas Instruments
Incorporated

U.S.A.

Canon Incorporated

Japan

Seiko Epson
Corporation

(2) Others

License to use patents relating
to information-related
equipment
License to use patents relating
to information-related
equipment
License to use patents relating
to information-related
equipment and software used
by such equipment
License to use patents relating
to information-related
equipment
License to use patents relating
to electrophotography and
inkjet printers
License to use patents relating
to semiconductors and
information-related equipment
License to use patents relating
to information-related
equipment

May 1, 2012 until the
expiry of the patents

April 1, 2006 until
the expiry of the
patents

September 29, 2006
until the expiry of the
patents

October 1, 2006 until
the expiry of the
patents
March 31, 2008 until
the expiry of the
patents

April 1, 2008 until
March 31, 2018

August 22, 2008 until
the expiry of the
patents

No major management contracts were decided or concluded during the fiscal year under review other than those
stated in (1) above.
On November 30, 2016, the Company and its consolidated subsidiary Epson Imaging Devices Corporation (EID)
agreed on the absorption-type merger of EID and concluded a merger contract with the effective date of
February 1, 2017.
On January 31, 2017, the Company and its consolidated subsidiary Orient Watch Co., Ltd. (“Orient Watch”)
agreed that the Company would succeed the watch sales business (excluding the Japan domestic sales business,
etc.) of Orient Watch by an absorption-type split and concluded a company split contract with the effective date
of April 1, 2017. The domestic sales business of Orient Watch was succeeded by Epson Sales Japan Corporation,
another consolidated subsidiary of the Company.

Risks Related to Epson’s Business Operations

At present, we have identified the following significant factors as risks that could have a materially adverse effect
on our future business, financial condition or operating results and that should thus be taken into account by
investors.
We strive to recognize, prevent, and control potential risks and to address risks that materialize.
Also, all forward-looking statements hereunder were made at Epson’s discretion as of the date this Annual Report
was submitted.

1. Our financial performance could be adversely affected by fluctuations in printer sales.
The ¥ 686.6 billion in revenue in the printing solutions segment in the year ended March 2017 accounted for
slightly less than 70% of Epson’s ¥ 1,024.8 billion in consolidated revenue. Inkjet printers (including printer
consumables) for the home, office, and for commercial and industrial applications accounted for a large majority
of our revenue and profit. Consequently, a decrease in revenue from printers and printer consumables could have a
materially adverse effect on our operating results.

2. Our financial performance could be adversely affected by competition.
Adverse effects of competition on sales
All of our products, including our core printer and projector products, are subject to the effects of vigorous
competition, which could cause, among other things, prices to fall, demand to shift toward lower-priced products,
and unit shipments to decline.
We are taking strategic action to address the risk of declines in prices, a shift of demand toward lower-priced
products, and unit shipments. On one hand, we must provide products tailored to customer needs in each market
along with high-value products and services. On the other hand, we must reduce manufacturing costs by increasing
design and development efficiency and by reducing fixed costs.
However, there is no assurance we will succeed in these efforts, and if we are unable to effectively counteract
downward pressure on prices, our operating results could be adversely affected.

Adverse effects of competition on technology
Some of the products that we sell contain technology that places Epson in competition against other companies. For
example:
- The Micro Piezo technology1 that we use in our inkjet printers competes with the thermal inkjet technologies2

of other companies;

- The 3LCD technology3 that we use in our projectors competes with other companies’ DLP technologies4, and

Epson’s projectors also compete against flat panel displays (FPDs)5 of other companies.

We believe that the technologies we use in these products have competitive advantage over the alternative
technologies of other companies. However, if consumer opinion with respect to our technologies changes, or if
other revolutionary technologies appear on the market and compete with our technologies, we could lose our
competitive advantage in technology and our operating results could be adversely affected.

1 Micro Piezo technology is an inkjet technology created by Epson that manipulates piezoelectric elements to fire small droplets

of ink from nozzles.

2 Thermal inkjet technology (also known as bubble-jet technology) is a printer technology in which the ink is heated to create

bubbles and the pressure from the bubbles is used to fire the ink.

3 3LCD technology uses high-temperature polysilicon TFT liquid-crystal panels as light valves. The light from the light source
is divided into the three primary colors (red, green and blue) using special mirrors, the picture is created on separate LCDs for
each color, and then the picture is recombined without loss and projected on the screen.

4 DLP technology uses a digital micro-mirror device (DMD) as a display device. A DMD is a semiconductor on which a large
number of micro mirrors are arranged, each mirror directing light onto its own individual pixel. An image is formed by the
light from the light source being reflected from the mirrors onto the screen. DLP and DMD are registered trademarks of Texas
Instruments Incorporated.

5 FPD encompasses a variety of thin electronic display technologies.

The emergence of new competitors
We presently face competition from powerful companies that have advanced technological capabilities, abundant
financial resources, or strong financial compositions. We also face competition from companies around the world
that have market recognition, strong supply capacities, or the ability to compete on price. There is, therefore, a

possibility that other companies could use their brand power, technological strength, ability to procure funds,
marketing power, sales skills, low-cost production ability, or other advantages to enter business areas where we are
active.

3. Sudden changes in the business environment could affect Epson.
Epson seeks to drive inkjet innovation, visual innovation, wearables innovation, and robotics innovation. We are
looking to achieve our vision for each business by providing value to customers in the form of smart technologies,
environmental benefits, and functional performance. Epson is executing plans and strategies based on a long-range
corporate vision and a mid-range business plan that we believe will enable us to establish a competitive advantage
in technology, which we believe will be crucial for increasing our competitiveness. We are driving further
advances in our original core technologies, including Micro Piezo inkjet technology, microdisplays, sensing, and
robotics, all of which arose from the efficient, compact, and precision technologies that have become a source of
Epson’s strength over many decades. By combining these technologies to create platforms, we are developing,
manufacturing, and selling products and providing services that match customer needs.
However, in the product markets and businesses where Epson is concentrating its management resources the pace
of technological innovation is typically rapid, and product life cycles are short. In addition, demand and investment
trends in Epson’s major markets could change along with global economic conditions and could affect sales of
Epson products. Moreover, there is no guarantee that Epson’s current mid-range business plan, business strategies,
and actions specified therein will succeed or be realized.
Epson will also strive to make rapid and smooth transition from existing products to new products by
understanding market and customer needs, investing and conducting research and development from a medium-
and long-range view based on product market forecasts, and creating development and design platforms.
However, if Epson cannot suitably respond to technological innovations in its main markets, or if competition with
other companies intensifies, or if economic downturns or other factors prevent a recovery in demand, or if Epson is
unable to adequately meet sudden fluctuations in demand in a major market, its operating results could be
adversely affected.

4. Our revenue and earnings could be adversely impacted by sales of third-party inkjet printer

consumables.

Ink cartridges etc., which comprise the bulk of consumables sold for inkjet printers, are an important source of
revenue and profit for Epson. However, third parties also supply ink cartridges and other inkjet printer consumables
that can be used in Epson printers. These alternative products are typically sold for less than genuine Epson brand
consumables and are more prevalent in emerging markets compared to the markets of developed countries.
To counter sales of third-party consumables for inkjet printers, we must emphasize the quality of genuine Epson
products and must look to continuously realize customer value by further enhancing customer convenience with
inkjet printers tailored to the needs of customers in each market. Printer models equipped with high-capacity ink
tanks are an example of such products. We also take legal measures if any of the patent rights or trademark rights
we hold over our ink cartridges are infringed upon.
However, there is no assurance that any of these efforts will be effective, and if our ink cartridge revenue and profit
declines because unit shipments of Epson brand ink cartridges shrink as sales of third-party alternative products
expand and as we lose market share, or if we must lower the prices of Epson brand products to stay competitive,
our operating results could be adversely affected.

5. Expanding businesses overseas entails risks for Epson.
We continue to expand our businesses overseas, and overseas revenue accounted for approximately 75% of our
consolidated revenue for the business year ended March 2017. We have production sites all over Asia, including
China, Indonesia, Singapore, Malaysia and the Philippines, as well as in the United States, the United Kingdom,
and other countries. We have also established many sales companies all over the world. As of the end of March 31,
2017, our overseas employees accounted for more than 70% of our total workforce.
We believe that our global presence provides many advantages. For example, it enables us to undertake marketing
activities aligned with the market needs of individual regions. It also makes us cost-competitive by reducing
manufacturing costs and lead times. There are, however, unavoidable risks associated with overseas manufacturing
and sales operations. There are, however, unavoidable risks associated with overseas manufacturing and sales
operations. These include but are not limited to changes in national laws, ordinances, or regulations related to
manufacturing and sales; social, political or economic changes; transport delays; damage to infrastructure such as
electrical power and communications; currency exchange restrictions; insufficient skilled labor; changes in regional

labor environments; changes in tax systems overseas and uncertainty with regard to tax administration by tax
authorities; protectionist trade regulations; geopolitical risks; and laws, ordinances, regulations or the like that
could affect the import and export of Epson products.

6. Procuring products from certain suppliers entails risks for Epson.
We procure some parts and materials from third parties, but we generally conduct ongoing transactions without
entering into long-term purchase agreements. We try to have multi-source relating to parts and materials. However,
certain parts and materials are procured from a single source because procuring them from an alternative supplier is
not possible. We must have procurement operations that are stable and efficient, so we work with our suppliers to
maintain product quality, improve products, and reduce costs. However, if our manufacturing and sales activities
were to be disrupted due to things such as supplier’s parts shortages or supplier’s quality problems, our operating
results could adversely be affected.

7. Problems could arise relating to quality issues.
The existence of quality guarantees on Epson products and the details of those guarantees differ from one customer
account to another, depending on the agreement we have entered into with them. If an Epson product is defective or
does not conform to the required standard, it may have to be replaced or repaired or otherwise reworked at Epson’s
expense. Or, if the product causes personal injury or property damage, we could bear product liability or hold other
liability.
We could also be liable to a customer and could incur expenses for repairs or corrections on the grounds that we did
not adequately display or explain an Epson product’s features or performance. Furthermore, product quality
problems could cause loss of trust in Epson products, and we could lose major accounts or see a drop in demand for
our products, any of which might adversely affect our operating results.

8. Epson’s intellectual property rights activities expose Epson to certain risks.
Patent rights and other intellectual property rights are extremely important for maintaining our competitiveness. We
have independently developed many of the technologies we need, and we acquire patent rights, trademark rights,
and other forms of intellectual property rights for them both in Japan and overseas. We also license the intellectual
property rights for products and technologies by entering into agreements with other companies. We must
strengthen our intellectual property portfolio by placing personnel in key positions to manage our intellectual
property.
If any of the situations envisioned below relating to intellectual property were to occur, our operating results could
adversely be affected.
- An objection might be raised to, or an application to invalidate might be filed with respect to, an intellectual

property right of Epson, and as a result, that right might be recognized as invalid.

- A third party to whom we originally had not granted a license could come to possess a license as a result of a

merger with or acquisition by another party, potentially causing us to lose the competitive advantage conferred
by that intellectual property.

- New restrictions could be imposed on an Epson business as a result of a buyout or a merger with a third party,

and we could be forced to spend money to find a solution to those restrictions.
Intellectual property rights that we hold might not give us a competitive advantage, or we might not be able to
use them effectively.

- We or any of our customers could be accused by a third party of infringing on intellectual property rights, which
could force us to spend a large amount of time and money to resolve this and associated issues, or which could
interfere with our efforts to focus our management resources.
If a third-party’s claim of intellectual property right infringement were to be upheld, we could incur material
damage if required to pay large amounts in compensation or royalties or if forced to stop using the applicable
technology.

- A suit could be brought against Epson by an employee or other person seeking remuneration for an invention or
the like, potentially forcing us to spend significant time and money to resolve the issue and, depending on the
outcome, potentially requiring us to pay a large sum as remuneration.

9. Epson is vulnerable to environmental risks.
Epson is subject, both in Japan and overseas, to various environmental regulations concerning industrial waste and
emissions into the atmosphere that arise from manufacturing processes. In addition, with heightened concern about
the response to global climate change accompanying the Paris Agreement, which was adopted at the 21st

Conference of the Parties to the United Nations Framework Convention on Climate Change, companies
increasingly need to set more ambitious goals for emissions reductions and strive to accomplish these goals.
Given this situation, Epson is proactively engage in environmental conservation efforts on multiple fronts in line
with a mid-range action plan and “Environmental Vision 2050,” a document that states our long-term goals for
reducing our CO2 emissions and other environmental impacts. For example, we have programs to develop and
manufacture products that have a small environmental footprint. We also have programs to reduce energy use,
promote the recovery and recycling of end-of-life products, ensure compliance with international substance
regulations (primarily the RoHS Directive and REACH regulations in the EU), and improve environmental
management systems.
As a result of these efforts, Epson has reduced its CO2 emissions for the 2016 fiscal year to 590,000 tons. This
represents an approximately 38% reduction since the 2006 fiscal year, which is the baseline year in “Environmental
Vision 2050.”
We have not had any serious environmental issues to date. In the future, however, it is possible that an
environmental problem could arise that would require us to pay damages and/or fines, bear costs for cleanup, or
force a halt of production. Moreover, new regulations could be enacted that would require major expenditures, and,
if such a situation should occur, Epson’s operating results could be adversely affected.

10. Epson faces risks concerning the hiring and retention of personnel.
We must hire and retain talented personnel both in Japan and overseas to develop advanced new technologies and
manufacture advanced new products, but the competition for such personnel is becoming increasingly intense. We
must hire and retain talented personnel by, for example, introducing compensation and benefit packages that are
commensurate with roles and by proactively promoting people with the right skills overseas. If we are unable to
continue to hire and keep enough of such employees, or if we are unable to pass along technologies and skills, we
could find it difficult or impossible to execute our business plans.

11. Fluctuations in foreign currency exchanges create risks for Epson.
A significant portion of our revenue is denominated in U.S. dollars or the euro. We expanded our overseas
procurement and moved our production sites overseas, so our dollar-denominated expenses currently exceed our
dollar-denominated revenue. On the other hand, our euro-denominated revenue is still significantly greater than our
euro-denominated expenses. On the whole, our revenues in other foreign currencies also significantly exceed our
expenses in those currencies. Also, although we use currency forwards and other means to hedge against the risks
inherent in foreign currency exchanges, unfavorable movements in the exchange rates of foreign currencies such as
the U.S. dollar, euro, or other foreign currencies against the yen could adversely affect our financial situation and
financial results.

12. There are risks inherent in pension systems.
We have a defined-benefit pension plan and a lump-sum payment on retirement as defined-benefit plans.
We revised the defined-benefit retirement pension plan in April 2014 in response to a drop in the rate of return on
pension assets and an increase in the number of beneficiaries. The revisions are designed to enable us to adapt to
future market changes and maintain stable operations into the future. However, if there is a change in the operating
results of the pension assets or in the ratio used as the basis for calculating retirement allowance liabilities, our
financial position and operating results could be adversely affected.

13. Epson is vulnerable to proceedings relating to antitrust laws and regulations.
With business operations that span the globe, Epson is subject in Japan and overseas to proceedings relating to
antitrust laws and regulations, such as those prohibiting private monopolies and those protecting fair trade.
Overseas authorities sometimes investigate or gather information on certain industries and, in conjunction with this,
Epson’s market conditions and sales methods may come under investigation. Such investigations and proceedings,
or violations of applicable statutes, could interfere with our sales activities. They could also potentially damage
Epson’s credibility or result in a large civil fine. Any of these could adversely affect our operating results.
Seiko Epson is currently under investigation by some competition authorities regarding allegations of involvement
in a liquid crystal display price-fixing cartel. It is difficult at this time to predict the outcome of this investigation
and when it may be settled.

14. Epson is at risk of material legal actions being brought against it.
Epson conducts businesses internationally. We are engaged primarily in the development, manufacture and sales of

printing solutions, visual communications equipment, and wearable and industrial products, as well as the
provision of services related thereto. Given the nature of these businesses, there is a possibility that an action could
be brought or legal proceedings could be started against Epson regarding, for example, intellectual property rights,
product liability, antitrust laws or environmental regulations.
As of the date we submitted our Annual Securities Report, Epson was contending with the following material
actions.
In June 2010, Epson Europe B.V. (“EEB”), a consolidated subsidiary of Seiko Epson, brought a civil suit against
La SCRL Reprobel (“Reprobel”), a Belgium-based group that collects copyright royalties, seeking restitution for
copyright royalties for multifunction printers. With Reprobel subsequently filing a suit against EEB, the two
lawsuits were adjoined. EEB’s claims were rejected at the first trial, but EEB, dissatisfied with the decision, intends
to appeal.
It is difficult at this time to predict the outcome of these civil actions and when they may be settled, but our
operating results and future business could be affected, depending on the outcomes of suits and legal proceedings.

15. Epson is vulnerable to certain risks in internal control over financial reporting.
We are building and using internal controls to ensure the reliability of financial reporting. With the establishment
and operation of internal controls for financial reporting high on our list of important management issues, we have
been pursuing a Group-wide effort to audit and improve corporate oversight of our Group companies. However,
since there is no assurance that we will be able to establish and operate an effective internal control system on a
continuous basis, and since there are inherent limitations to internal control systems, if the internal controls that
Epson implements fail to function effectively, or if there are deficiencies in internal control over financial reporting
or material weaknesses in the internal controls, it might adversely affect the reliability of our financial reporting.

16. Epson is vulnerable to risks inherent in its tie-ups with other companies.
One of our business strategy options is to enter into business tie-ups with other companies. However, the parties
may review the arrangements of tie-ups, and there is a possibility that tie-ups could be dissolved or be subject to
changes. There is also no assurance that the business strategy of tie-ups will succeed or contribute to our operating
results exactly as expected.

17. Epson could be severely affected in the event of a natural or other disaster.
We have research and development, procurement, manufacturing, logistics, sales and service sites around the globe,
and our operating results could be adversely affected by any number of unpredictable events, including but not
limited to natural disasters, pandemics involving new strains of the influenza virus, infection by computer viruses,
leaks or theft of customer data, reputational damage on social networking services (SNS), failures of
mission-critical internal IT systems, supply chain disruptions, and acts of terrorism or war.
The central region of Nagano Prefecture, home to some of our key plants and offices, is an area that is at
comparatively high risk of earthquakes due to the presence of an active fault zone along the Itoigawa-Shizuoka
geotectonic line. Accordingly, in addition to earthquake-proofing its equipment and facilities, Epson conducts
disaster drills, has prepared earthquake disaster management and response plans, and has established business
continuity plans to mitigate the effects of disasters to the extent possible.
However, if a major earthquake occurs in the central region of Nagano Prefecture, it is possible that, despite these
countermeasures, the effect on Epson could be extreme.
Although Epson is insured against losses arising from earthquakes, the scope of indemnification is limited.

18. Laws, regulations, or licenses and the like pose risks for Epson.
Epson is a multinational corporation with a variety of business operations around the globe. We ensure compliance
with the laws and regulations of the countries in which we operate by building a robust compliance framework in
each country and each business and by communicating the nature and importance of compliance requirements
internally. To expand our businesses in the future, we must strengthen our sales and marketing activities that target
new customers, including public institutions, and we plan to develop new areas, such as the health market, where
greater adherence to all forms of relevant laws, regulations, and compliance (compliance with laws and
regulations) is demanded.
Compliance remains high on our list of important management issues, and we are developing measures to prevent
and control potential issues as appropriate. However, if we were to violate or potentially violate laws and
regulations relating to, among others, corruption, advertising and labeling, personal data and privacy protection, or
export control, or if the authorities were to introduce stricter laws and regulations or impose more stringent laws,

we could see our credibility damaged, could become subject to the imposition of a large civil fine, or could see
constraints placed on our business activities. We could also see the costs of complying with such laws and
regulations increase, and any of the foregoing could adversely affect our financial performance and future business
development.

Business Conditions
1. Overview of business results

(1) Operating results
On the whole, the global economy continued its gradual recovery during the year under review. Regionally, the
U.S. economy continued to recover, fueled by an increase in consumer spending and an improved employment
situation. The economic slowdown in Latin America, however, continued. In Europe the economy also
gradually recovered, with a drop in the unemployment rate. Meanwhile, the Chinese economy showed signs of
picking up. In Japan improved corporate earnings, an uptick in consumer spending, and an improvement in the
employment situation signaled a continuation of a gradual economic recovery.

The situation in the main markets of Epson was as follows.
Total demand for inkjet printers was stagnant due to the continuing contraction of the Japanese consumer
market and a shrinking of the North American and Western European markets. On the other hand, there was
solid demand for high-capacity ink tank printers, as the entry of other companies had the effect of boosting
recognition. Large-format inkjet printer demand was subdued in China and Latin America due to economic
deceleration but remained firm in North America and Japan. Serial-impact dot-matrix (SIDM) printer demand in
China in the first half of the year was driven by that country’s change from a business tax to a value added tax
(B2V tax reform). However, demand continued to contract in the Americas and Europe.
Projector demand increased in Europe ahead of major sporting events, but overall demand was subdued due to
the effects of the economic slowdown in Latin America, a sluggish North American retail market, and weak
demand for education projectors in some major European countries. However, signs of a slight recovery were
seen throughout the second half of the year.
Demand was mixed in the main markets for Epson’s electronic devices. In the mobile phone market, demand
for feature phones continued to decline while demand for smart phones remained firm, owing primarily to
growth of emerging market manufacturers in China and elsewhere. Demand in the digital camera market was
subdued. Demand for watches fell sharply overall due to softening demand from tourists to Japan, declines in
demand in China and North America, and a soft market for watch movements. Demand for industrial robots
remained firm in the Americas and China, as well as in Japan, where sales to the automotive industry were firm.

Against this backdrop, Epson began the 2016 fiscal year under the Epson 25 Phase 1 Mid-Range Business Plan
(FY2016-18). The Phase 1 Plan delineates the first phase of work toward achieving the Epson 25 Corporate
Vision, which sets forth a goal of “Creating a new connected age of people, things and information with
efficient, compact and precision technologies.” During the three years of the Phase 1 Plan Epson will sustain the
momentum it gained by strategically adopting new business models and developing new market segments under
the previous corporate vision. At the same time, it will move forward on product development while
aggressively investing as needed to provide a solid business foundation.

The average exchange rates of the yen against the U.S. dollar and of the yen against the euro during the year
were ¥108.38 and ¥118.79, respectively. This represents a 10% appreciation in the value of the yen against both
the dollar and the euro compared to the previous fiscal year. The yen also continued to ride high against
currencies other than the U.S. dollar and euro. The yen gained more against the Chinese yuan, British pound,
and some Latin American currencies than it did against the U.S. dollar and euro due to the effects of an
economic slowdown and other factors.
Epson’s consolidated full-year financial results reflect the foregoing factors. Revenue was ¥1,024.8 billion,
down 6.2% year on year. Business profit (Note) was ¥65.8 billion, down 22.5% year on year. Profit from
operating activities was ¥67.8 billion, down 27.8% year on year. Profit before tax was ¥67.4 billion, down
26.3% year on year. Profit for the period was ¥48.4 billion, up 5.1% year on year.

(Note) Business profit is calculated by subtracting cost of sales and selling, general and administrative expenses
from revenue.

A breakdown of the financial results in each reporting segment is provided below.

Printing Solutions Segment
Printer business revenue decreased.
Total inkjet printer revenue declined. High-capacity ink tank printer revenue continued to expand, as the entry
of other companies into the high-capacity ink tank printer market boosted market recognition and helped to fuel
a sharp increase in unit shipments. However, given the contracting market, unit shipments of ink cartridge
models declined mainly in the home market. Revenue was dragged down also by foreign exchange effects.
Although consumables unit volume decreased, the product mix is improving, with consumables for office
printers, which have a higher unit price, accounting for a greater percentage of total consumables sales.
However, revenue from consumables decreased due to foreign exchange effects.
Page printer sales decreased due to a slump in consumables sales in addition to a decline in unit shipments, the
result of Epson’s focus on selling high added value models.
In SIDM printers, foreign exchange effects caused revenue to decline despite extra first-half demand in the
Chinese tax collection system market.
Revenue in the professional printing business decreased.
Large-format inkjet printer total revenue decreased, partly due to foreign exchange effects. Sales of Epson’s
new products in the growing signage market were strong, and sales expanded in the textile printing segment on
heightened demand. However, a decrease in unit shipments in the existing photo and graphics markets resulted
in a decline in total revenue in this category. Consumables sales also decreased on lower revenue, a result of a
decline in printer unit sales and foreign exchange effects.
POS system product revenue decreased. Although demand for low-end models was firm in Europe, total unit
shipments declined due to a lack of large orders such as those received in the previous fiscal year in Japan and
North America. Unit volume also decreased in China. Revenue was also hurt by foreign exchange effects.

Segment profit in the printing solutions segment decreased even though profit rose on increased sales of
high-capacity ink tank inkjet printers. The decrease in segment profit was due to a combination of factors,
including a decrease in large-format inkjet printer sales, strategic investment and spending on medium-term
growth, and foreign exchange effects.

As a result of the foregoing factors, revenue in the printing solutions segment was ¥686.6 billion, down
6.8% year on year. Segment profit was ¥84.1 billion, down 19.7% year on year.

Visual Communications Segment
Visual communications revenue decreased.
Total 3LCD projector revenue decreased. The education market contracted in some of the main countries of
Europe. The North American and Latin American markets also continued to shrink. However, unit shipments
and sales increased owing to the release of new projectors in the high-brightness category, expanded sales in
Asia, and an increase in demand for models in the volume zone in Europe in advance of major sporting events.
Nevertheless, revenue was hurt by foreign exchange effects.

Segment profit in the visual communications segment increased. Although hurt by foreign exchange effects,
segment profit increased thanks to unit shipment growth and the expansion of the high-brightness projector
segment, which improved product mix.

As a result of the foregoing factors, revenue in the visual communications segment was ¥179.6 billion, down
2.4% year on year. Segment profit was ¥16.1 billion, up 3.5% year on year.

Wearable and Industrial Products Segment
Revenue in the wearable products business as a whole decreased. Average selling prices for watches in the
Japanese market rose due to the release of new watch products, but unit volume fell because purchases by
foreign visitors to Japan decelerated and demand in overseas markets was subdued. Revenue was also hurt by a
weak watch movements market and foreign exchange effects.
Revenue in the robotics solutions business increased. Although hurt by foreign exchange effects, revenue
increased primarily due to industrial robot unit shipment growth in China and because of a rise in IC handler
revenue as a result of firm demand for smart phones in China.
Revenue in the microdevices business decreased. Revenue from crystal devices decreased due to a decline in unit

shipments to manufacturers of cell phones and other personal electronics and because of foreign exchange
effects. Semiconductor revenue increased despite a decline in volume to a major automotive account and foreign
exchange effects. The increase was due to a rise in sales volume linked to growth in silicon foundry demand.
The surface finishing business, which developed new customers, and the metal powders business, which reported
firm sales of high-performance material powders for mobile equipment, both saw revenue decline due to foreign
exchange effects.

Segment profit in the wearable and industrial products segment decreased due to lower sales in the microdevices
business and wearable products business.

As a result of the foregoing factors, revenue in the wearable and industrial products segment was ¥158.5 billion,
down 7.0% year on year. Segment profit was ¥7.8 billion, down 20.4% year on year.

Other
Other revenue amounted to ¥1.5 billion, up 7.4% year on year. Segment loss was ¥0.4 billion, compared to a
segment loss of ¥0.5 billion in the previous fiscal year.

Adjustments
Adjustments to the total profit of reporting segments amounted to negative ¥41.7 billion. (Adjustments in the
previous fiscal year were negative ¥44.6 billion.) The main components of the adjustment were basic technology
research and development expenses that do not correspond to the reporting segments and expenses associated
with things such as new businesses and corporate functions.

(2) Cash Flow Performance
Net cash provided by operating activities during the year totaled ¥96.8 billion (compared to ¥113.0 billion in the
previous fiscal year). This was due to factors including an increase in depreciation and amortization totaled
¥ 43.6 billion, in addition to profit for the year of ¥ 48.4 billion.
Net cash used in investing activities totaled ¥75.7 billion (compared to ¥51.5 billion in the previous fiscal year),
mainly because Epson used ¥77.5 billion in the acquisition of property, plant, equipment and purchase of
intangible assets.
Net cash used in financing activities totaled ¥26.6 billion (compared to ¥67.1 billion in the previous fiscal year).
While it had ¥49.7 billion in proceeds from issuance of bond issued, Epson also recorded net decrease in current
borrowings of ¥14.3 billion, redemption of bonds issued of ¥30.0 billion, dividends paid of ¥21.2 billion, and
purchase of treasury shares of ¥10.3 billion.
As a result, cash and cash equivalents at the end of the fiscal year totaled ¥221.7 billion (compared to ¥230.4
billion at the end of the previous fiscal year).

(3) Parallel disclosure
Differences between the main items on IFRS consolidated financial statements and those on consolidated
financial statements prepared based on Japanese accounting standards
(Expenses associated with post-employment benefits)
Under Japanese accounting standards, Epson wrote off actuarial gains and losses and past service costs over a
certain period of time. Under IFRS, remeasurements of net defined benefit liabilities (assets) are recognized in
full as other comprehensive income in the period in which they are incurred and transferred to retained earnings
immediately. Past service costs are recognized in profit and loss either in the period when the plan is amended
or curtailed, or in the period when associated restructuring costs or termination benefits are recognized,
whichever is earlier.
Due to these effects, the cost of sales and selling, general and administrative expenses, and finance costs in the
previous fiscal year increased by ¥3.8 billion when calculated based on IFRS rather than Japanese standards.
The cost of sales, selling, general and administrative expenses, and finance costs in the fiscal year increased by
¥0.4 billion.

*Please refer to the following for Epson’s financial results for previous fiscal years:
http://global.epson.com/IR/

2. Manufacturing, orders received and sales

(1) Actual manufacturing
The following table shows actual manufacturing information by segment in the fiscal year under review.

Business segment

Year ended March 31, 2017
(From April 1, 2016, to March 31, 2017)
(Millions of yen)

Change
compared to
previous fiscal
year (%)

Printing solutions

Visual communications

Wearable & Industrial products

Total for the reporting segments

Other

Total

679,644

175,504

147,542

1,002,692

595

1,003,287

96.4

105.3

90.0

96.8

117.8

96.8

Notes
1. The above figures are based on sales prices. Intersegment transactions are offset and therefore eliminated.
2. The above figures do not include consumption tax.
3. The above figures include outsourced manufacturing.

(2) Orders received
Epson’s policy is to manufacture products based on sales forecasts. Accordingly, this section does not apply.

(3) Actual sales
The following table shows actual sales information by segment in the fiscal year under review.

Business segment

Year ended March 31, 2017
(From April 1, 2016, to March 31, 2017)
(Millions of yen)

Change
compared to
previous fiscal
year (%)

Printing solutions

Visual communications

Wearable & Industrial products

Total for the reporting segments

Other

Total

Notes
1. Intersegment transactions are offset and therefore eliminated.
2. The above figures do not include consumption tax.
3. No customer accounts for more than 10% of the actual total sales.

686,353

179,642

150,674

1,016,671

787

1,017,458

93.3

97.6

91.7

93.8

104.5

93.8

3. Analysis of financial condition, results of operations and cash flows
(1) Analysis of operating results
Revenue
Consolidated revenue was ¥1,024.8 billion, a year-over-year decrease of ¥67.6 billion (6.2%).
Revenue for each reporting segment is discussed below.

Revenue in the printing solutions segment was ¥686.6 billion, a year-over-year decrease of ¥49.7 billion (6.8%).
The most significant factors that contributed to this change are as follows.
Total inkjet printer revenue declined. High-capacity ink tank printer revenue continued to expand, as the entry
of other companies into the high-capacity ink tank printer market boosted market recognition and helped to fuel
a sharp increase in unit shipments. However, unit shipments in the contracting ink cartridge printer market
declined mainly in the home segment. Revenue was also dragged down by foreign exchange effects. Although
consumables unit volume decreased, the product mix is improving, with consumables for office printers, which
have a higher unit price, accounting for a greater percentage of total consumables sales. However, revenue from
consumables decreased due to the negative effects of foreign exchange. Page printer sales decreased due to a
slump in consumables sales in addition to a decline in unit shipments, the result of Epson's focus on selling high
added value models. In SIDM printers, foreign exchange effects caused revenue to decline despite extra
first-half demand in the Chinese tax collection system market. Large-format inkjet printer total revenue
decreased, partly due to foreign exchange effects. Sales of Epson’s new products in the growing signage market
were strong, and sales expanded in the textile printing segment on heightened demand. However, a decrease in
unit shipments in the existing photo and graphics markets resulted in a decline in total revenue in this category.
Revenue from consumables also decreased due to a decline in printer unit sales and foreign exchange effects.
POS system product revenue decreased. Although demand for low-end models was firm in Europe, unit
shipments declined in China, as well as in Japan and North America due to a lack of large orders such as those
received in the same period last year. Revenue was also hurt by foreign exchange effects.

Revenue in the visual communications segment was ¥179.6 billion, a year-over-year decrease of ¥4.3 billion
(2.4%). The most significant factors that contributed to this change are as follows.
3LCD projector revenue decreased. The education market contracted in some of the main countries of Europe.
The North American and Latin American markets also continued to shrink. However, unit shipments and sales
increased owing to the release of new projectors in the high-brightness category, expanded sales in Asia, and an
increase in demand for models in the volume zone in Europe in advance of major sporting events. Nevertheless,
revenue was hurt by foreign exchange effects.

Revenue in the wearable and industrial products segment was ¥158.5 billion, a year-over-year decrease of ¥11.8
billion (7.0%). The most significant factors that contributed to this change are as follows.
Watch and watch movement revenue decreased. Average selling prices for watches in the Japanese market rose
due to the release of new watch products, but unit volume fell because purchases by foreign visitors to Japan
decelerated and demand in overseas markets was subdued. Revenue was also hurt by a weak watch movements
market and foreign exchange effects.
Revenue from crystal devices decreased due to a decline in unit shipments to manufacturers of cell phones and
other personal electronics and because of foreign exchange effects.
Semiconductor revenue increased despite a decline in unit shipments to a major automotive account and foreign
exchange effects. The increase was due to a rise in unit shipments linked to growth in silicon foundry demand.
Industrial robot and IC handler revenue increased. Although hurt by foreign exchange effects, revenue increased
primarily due to industrial robot unit shipment growth in China and because of a rise in IC handler revenue as a
result of firm demand for smart phones in China.
The surface finishing business developed new customers, and the metal powders business, which reported firm
sales of high-performance material powders for mobile equipment, both saw revenue decline due to foreign
exchange effects.

Revenue in the “other” segment was ¥1.5 billion, a 7.4% increase compared to the previous fiscal year.

Cost of sales and gross profit
Cost of sales was ¥658.8 billion, a year-over-year decrease of ¥35.9 billion (5.2%). The decrease in cost of sales

is primarily associated with foreign exchange effects.
As a result, gross profit was ¥365.9 billion, a year-over-year decrease of ¥31.6 billion (8.0%).

Selling, general and administrative expenses and business profit
Selling, general and administrative (SG&A) expenses were ¥300.1 billion, a year-over-year decrease of ¥12.5
billion (4.0%). The decrease in SG&A expenses was primarily associated with foreign exchange effects.
As a result, business profit was ¥65.8 billion, a year-over-year decrease of ¥19.1 billion (22.5%).

Segment profit (business profit) in each reporting segment was as follows.
Segment profit in the printing solutions segment was ¥84.1 billion, a year-over-year decrease of ¥20.6 billion
(19.7%). The decrease in segment profit was due to a combination of factors, including but not limited to a
decrease in large-format inkjet printer sales and strategic investment and spending on medium-term growth.
Segment profit in the visual communications segment was ¥16.1 billion, a year-over-year increase of ¥0.5
billion (3.5%). Although hurt by foreign exchange, segment profit increased mainly due to unit shipment growth
and the expansion of the high-brightness projector segment, which improved the product mix.
Segment profit in the wearable and industrial products segment was ¥7.8 billion, a year-over-year decrease of
¥2.0 billion (20.4%). The decrease was primarily associated with foreign exchange effects.
Segment loss in the “other” segment was ¥0.4 billion, compared to a ¥0.5 billion loss in the previous fiscal year.
As for adjustments, segment loss decreased to ¥41.7 billion compared to the ¥44.6 billion loss incurred in the
previous fiscal year. Adjustments consisted primarily of patent royalties and R&D expenses for basic research
that do not belong to a reporting segment, and SG&A expenses, primarily comprising expenses associated with
new businesses and Head Office functions.

Other operating income, other operating expenses, and profit from operating activities
Other operating income was ¥5.4 billion, a year-over-year decrease of ¥9.3 billion (63.4%). Other operating
income decreased mainly because the figure from the previous fiscal year included income from the sale of
land.
Other operating expenses totaled ¥3.3 billion, a year-over-year decrease of ¥2.3 billion (41.8%).

Finance income and finance costs
Finance income was ¥1.3 billion, a year-over-year decrease of ¥0.2 billion (16.3%). The decrease in finance
income was primarily due to a decrease in interest income. Finance costs were ¥1.8 billion, a year-over-year
decrease of ¥2.3 billion (56.3%). The decrease in finance costs was primarily due to a decrease in foreign
exchange loss.

Profit before tax
The foregoing resulted in profit before tax of ¥67.4 billion, a year-over-year decrease of ¥24.0 billion (26.3%).

Income taxes
Income taxes were ¥18.4 billion, a year-over-year decrease of ¥26.9 billion (59.4%). The decrease is primarily
because income taxes were higher in the previous fiscal year due to an increase in tax expenses resulting from
the partial reversal of deferred tax assets arising from the carryforward of unused tax losses.

Profit for the period
Profit for the period was ¥48.4 billion, a year-over-year increase of ¥2.3 billion (5.1%).

(2) Liquidity and capital resources
Cash flow
Net cash provided by operating activities was ¥96.8 billion, a year-over-year decrease of ¥16.1 billion. Although
the increase in profit for the period and trade payables had a ¥2.3 billion and ¥19.8 billion positive impact,
respectively, net cash provided by operating activities decreased mainly because of a ¥26.9 billion effect owing
to lower income taxes, and a ¥17.3 billion effect resulting from an increase in inventories.
Net cash used in investing activities totaled ¥75.7 billion, a year-over-year increase of ¥24.2 billion. This was
primarily due to an ¥11.0 billion increase in cash used to acquire property, plant and equipment and a ¥12.8

billion decrease in income due to the sale of investment properties.
Net cash used in financing activities totaled ¥26.6 billion, a year-over-year decrease of ¥40.4 billion. Although
there was a ¥12.5 billion net decrease in short-term loans payable and a ¥10.3 billion increase in expenditure to
purchase treasury shares, net cash used in financing activities decreased chiefly due to the effects of a ¥3.7
billion decrease in dividends paid, a ¥49.7 billion increase in proceeds from a bond issue, and a ¥10.0 billion
decrease in payments due to redemption.
As a result of the foregoing factors, cash and cash equivalents at the end of the fiscal year stood at ¥221.7
billion, a decrease of ¥8.7 billion compared to the end of the previous fiscal year, giving Epson sufficient
liquidity.
Interest-bearing liabilities totaled ¥146.5 billion, a year-over-year increase of ¥4.8 billion. Although the
Company repaid short-term loans payable and redeemed bonds payable, interest-bearing liabilities increased
because the Company issued bonds payable.
Long-term loans payable (excluding the current portion) at the end of the period totaled ¥0.4 billion, at a
weighted average interest rate of 0.28% due in 2022. These borrowings were obtained as unsecured bank loans.

Financial condition
Total assets were ¥974.3 billion, an increase of ¥33.0 billion compared to the end of the previous fiscal year.
This increase was mainly due to a ¥34.1 billion increase in property, plant and equipment and intangible assets.
Total liabilities were ¥479.6 billion, up ¥9.0 billion compared to the end of the last fiscal year. Although
liabilities decreased due to a ¥30.0 billion redemption of bonds payable, a ¥14.9 billion reduction in short-term
loans payable, and a ¥9.5 billion decrease in net defined benefit liabilities, total liabilities increased mainly
because of an issue of ¥50.0 billion in bonds payable and an ¥11.0 billion increase in trade and other payables.
The equity attributable to owners of the parent company totaled ¥492.1 billion, a ¥24.3 billion increase
compared to the previous fiscal year end. The Company paid ¥21.2 billion in dividends and ¥10.3 billion to
purchase treasury shares, but the equity attributable to owners of the parent company increased because retained
earnings increased due to the recognition of ¥48.3 billion in profit for the year attributable to owners of the
parent company.
Working capital, defined as current assets less current liabilities, was ¥251.0 billion, a decrease of ¥25.3 billion
compared to the end of the previous fiscal year.
The ratio of interest-bearing liabilities to total assets was 15.0%, remaining essentially the same as at the end of
the previous fiscal year, when the ratio was 15.1%.

4. Research and development activities

Epson conducts research and development to create products and services that offer value that exceeds customer
expectations. We seek to create value by driving advances in Micro Piezo printheads, microdisplays, sensors,
and robotics, all of which are unique core technologies that evolved from the efficient, compact, and precision
technologies that Epson has developed since its founding. Further value is added by developing technology
platforms that meet the needs of a wide spectrum of customers.
The corporate R&D division and the R&D units of the operations divisions are teaming up to develop core
technologies and devices for the future and to strengthen manufacturing infrastructure. Together, they are laying
a technological foundation to create new businesses, strengthen existing ones, and increase the competitiveness
of all Epson products.
Total R&D spending during the fiscal year was ¥52.7 billion. The printing solutions segment accounted for
¥21.5 billion, the visual communications segment for ¥9.4 billion, and the wearable and industrial products
segment for ¥6.4 billion. The “other” segment and corporate segment accounted for the remaining ¥15.3 billion.
The main R&D accomplishments in each segment are described below.

Printing solutions segment
In the printer business, Epson announced its first corporate color inkjet printers equipped with high-speed
lineheads (launched in Japan in June 2017). These multifunction units offer greater productivity and higher
quality output than ordinary color laser printers while using far less power. Epson’s unique inkjet systems
employ piezoelectric actuators rather than heat to precisely deposit ink. The non-contact printing process and
architecture are elegantly simple. And, since the printing process does not rely on heat, Epson’s inkjet systems
offer outstanding environmental performance. The new products offer all of the traditional advantages of inkjet
systems, and much more. The top-of-the-line model, powered by Epson’s latest PrecisionCore lineheads,
delivers up to 100 A4 horizontal pages per minute.
Epson also announced its smallest multifunction home printers to date. These products are 96 mm narrower and
have a 42% smaller footprint than Epson’s comparable 2011 models. Outfitted with a newly developed six-color
dye ink set that offers a wider green gamut, these printers reproduce scenes with even more lush and gorgeous
greens.
In the professional printing business, Epson released new large-format inkjet printers that feature newly
developed UltraChrome GS3 Ink and UltraChrome GS3 Ink with Red for the signage and display industry. The
new ink delivers superb printing quality, including a wider color gamut, brighter colors, and a glossier finish.
These inks also have improved drying performance, increasing productivity up to winding time after printing
which is important in practice and fully demonstrating the performance of high speed printing.

Visual communications segment
Epson upgraded and expanded its lineup of 3LCD projectors for business by releasing new mobile, meeting
room, and large venue projectors. The nimble mobile models are bright yet lightweight. In fact, weighing just
1.8 kg and measuring a mere 44 mm tall, they are not only the lightest LCD projectors in their class but also the
world’s slimmest projectors1. Despite their compact size and easy portability, they boast sharply higher basic
performance than their predecessors, with every model offering 3,000 lumens of brightness or more and a
10,000:1 contrast ratio. The powerful meeting room models are loaded with features and shine bright even in
large, well lit rooms. The lineup includes models that weigh less than 5 kg yet deliver up to 5,500 lumens of
brightness, as well as models with WUXGA resolution and Full HD support. The new models come with a host
of features. In addition to Epson’s popular automatic picture correction features, some of the new models have
screen mirroring, Screen Fit, and a new feature that enables a presenter to move forward or backward through a
slide presentation with the touch of a hand on the image. The high-lumen large venue models are ideal for
permanent installation in auditoriums and other large spaces. All models offer 5,500 lumens of brightness and a
15,000:1 contrast ratio2, for bright, sharp images. All of these models are equipped with a wide range of lens
shift capabilities in both the vertical and horizontal directions for installation flexibility.
For the home theater market, Epson also released new projectors that feature a laser light source, 4K
Enhancement Technology3, and high dynamic range (HDR) support4. By automatically detecting HDR signals
and adjusting image brightness levels, these projectors render an unprecedented range of gradations, from the
brightest highlights to the deepest shadows. They can deliver dynamic images with exquisite detail and more
vivid color, without clipped whites and crushed blacks.

1 Slimmest among 3LCD projectors per Epson research conducted in November 2016
2 With Auto Iris turned on
3 4K Enhancement Technology shifts each pixel diagonally by 0.5 pixels to double the resolution to 3840 x

2160 and achieve ultra-high definition.

4 HDR technology expands the range of both contrast and color in video and still images.

Wearable and industrial products segment
In the wearable products business, Epson released new products in the WristableGPS (“Runsense” in some
markets) series of sports watches. The new products feature a revamped design and dedicated applications. New
additions to the lineup include models in the WristableGPS for Women series. Epson’s first monitors for female
runners, these products have a clean, sporty design along with improved comfort and usability.
The robotics solutions business released force sensors as optional accessories for Epson robots. Force sensors
endow robots with the ability to sense extremely slight pressure—forces as small as 0.1 newton5. This ability
enables robots to perform tasks that were previously impossible to automate, such as the assembly of delicate
parts and the fitting together or insertion of parts with small tolerances. Epson also developed industrial SCARA
robots that run off AC100V power. These robots save space with a controller that is built into the base of the
robot. Meanwhile, a batteryless motor helps to keep running costs low.
In the microdevices business, Epson developed a new, energy-efficient 32-bit microcontroller (MCU) that has
an ARM® Cortex®-M0+ processor6 and built-in Flash memory. This was the world’s first7 MCU to feature a
memory LCD8 controller and power supply IC integrated onto a single chip. This arrangement eliminates the
need for external components and interface software development, so users are able to save time and effort
while also reducing the size of their products.

5 A force approximately equal to the gravity acting on a 10g object
6 ARM and Cortex are registered trademarks of ARM Limited (or its subsidiaries) in the EU and other

7 World’s first among mass-produced general purpose microcontrollers per Epson research conducted in

August 2016

8 Liquid crystal that can hold a display even after power is turned off

5. Mangement policy, business environment and issues to be addressed, etc.
All forward-looking statements hereunder were made at Epson’s discretion at the end of the fiscal year.

(1) Fundamental management policy
Endowed with “efficient, compact, and precision technologies” that Epson has developed since its founding,
Epson seeks to continuously create game-changing customer value and play a central role in creating a better
world as an indispensable company by forging innovations through challenges that are bold, imaginative, and
exceed our own vision.
Using the Epson Management Philosophy and the global tagline below as guides, we will strive to achieve our
vision with employees who embrace a common set of values, demonstrate teamwork, and exercise initiative to
create value that exceeds customer expectations.

Epson Management Philosophy

Epson aspires to be an indispensable company,
trusted throughout the world for our commitment to openness,
customer satisfaction and sustainability.
We respect individuality while promoting teamwork,
and are committed to delivering unique value
through innovative and creative solutions.

EXCEED YOUR VISION

As Epson employees,
we always strive to exceed our own vision,
and to produce results that bring surprise and delight
to our customers.

(2) Medium- and long-term corporate strategy and issues to be addressed
Epson began the 2016 fiscal year under a new 10-year corporate vision and a new mid-range business plan. The
Epson 25 Corporate Vision describes what Epson would like to achieve by the start of the 2025 fiscal year.
Meanwhile, the Epson 25 Mid-Range Business Plan (FY2016-18) is a three-year plan for the first phase of work
toward achieving the vision.
Regarding the business environment surrounding Epson, although the global economy is on a gradual recovery
trend in general, due to the occurrence of geopolitical risks and foreign exchange fluctuations, the impact on
each country’s economy, consumption and investment trends is expected to continue, so it is necessary to keep
an eye on continued gaze.
Under these circumstances, Epson will look to sustain growth and increase corporate value over the medium- to
long term by steadily executing the strategies described below.

① Epson 25 Corporate Vision
The Epson 25 Corporate Vision (hereafter called “Epson 25”), which was created based on an understanding of
the mega trends, changes, and other forces that will shape Epson’s business in the future, contains the following
vision statement: “Creating a new connected age of people, things and information with efficient, compact and
precision technologies.”
“Efficient, compact and precision technologies” are original technologies that will create the value that Epson
will provide to its customers in three areas: smart technologies, the environment, and performance.

Smart technologies. Use advanced products and software so customers can easily, conveniently, and
securely use our products anywhere and anytime.
Environment. Contribute to the development of a sustainable society by leveraging efficient, compact and
precision technologies to reduce the environmental impact of products and services across their life cycles.
31

Performance. Create new and higher value by providing outstanding products that contribute to customer
productivity, accuracy and creativity.

Advances in information and communication technology will interconnect vast amounts of information on the
Internet, causing cyber space to expand indefinitely. As a manufacturing company that specializes in generating
value in the real world, Epson will play an important role in “creating a new connected age of people, things
and information” by using attractive, advanced products as leverage to collaborate with IT companies and
increase the value of the technologies it provides to customers.
In this “new connected age” Epson aims to free people from repetitive manual labor and from unnecessary
wastes of time and energy. Epson’s goal is to heighten people’s creativity, and to create a sustainable and
affluent society in which people enjoy safe and healthy lifestyles.
In line with this vision, Epson will provide value in the form of smart technologies, the environment, and
performance in four areas of innovation: inkjet innovation, visual innovation, wearables innovation and robotics
innovation. Epson will drive innovations in these areas by achieving the vision in each of its businesses. To
support the realization of Epson 25, Epson will further strengthen its business infrastructure and company-wide
information systems in the areas of human resources, technology, manufacturing, sales, and the environment.
Epson set out financial performance targets in Epson 25. Assuming exchange rates of 115 yen to the U.S. dollar
and 125 yen to the euro, Epson will aim to achieve, by the 2025 fiscal year, ¥1,700 billion in revenue, ¥200
billion in business profit, a 12% return on sales (business profit*/revenue), and a 15% return on equity (profit
for the period/equity attributable to owners of the parent company).

* Business profit is very similar to operating income under Japanese accounting standards (J-GAAP), both conceptually and

numerically. Epson began using business profit as an indicator after adopting International Financial Reporting Standards

(IFRS) in FY2014 to facilitate comparisons with past results.

Vision in Each Business
Printing: inkjet innovation
Refine original Micro Piezo technology, and expand into high-productivity segments. Improve environmental
performance and create a sustainable printing ecosystem.

Visual communications: visual innovation
Refine original microdisplay and projection technologies, and create outstanding visual experiences and a
natural visual communications environment for every aspect of business and lifestyles.

Wearables: wearables innovation
Leverage our watchmaking heritage, refine timekeeping and sensing accuracy, and offer a sense of status and
fashion.

Robotics: robotics innovation
Combine our core technologies with sensing and smart technologies in manufacturing, expand applications, and
create a future in which robots support people in a wide variety of situations.

Microdevices: Support the four innovations
Contribute to Epson’s finished products and to the development of smart communications, power,
transportation and manufacturing systems with advanced Epson quartz timing and sensing solutions and
low-power semiconductor solutions.

② Epson 25 Mid-Range Business Plan (FY2016-2018)
The Epson 25 Mid-Range Business Plan (FY2016-2018) is a roadmap for the first phase of work toward
achieving the Epson 25 vision. During this phase Epson will sustain the momentum it gained by strategically
adopting new business models and developing new market segments under the previous corporate vision. At the
same time, it will move forward on product development while aggressively investing as needed to provide a

solid business foundation.
The basic strategy for achieving this will be to continue to grow by further increasing its competitive edge in
businesses where SE15 strategic initiatives were successful, and to quickly address issues and establish a path to
growth in businesses where Epson was unable to fully advance. Epson will look to ensure growth by creating
products and services that generate customer value in smart technologies, the environment, and performance, as
the Epson 25 aims to achieve. While taking care to grow profit over the short term, Epson will also invest
management resources as appropriate, quickly establish new business models, and strengthen its sales
organizations to achieve the Epson 25 vision. Epson will also position itself for future growth by pursing the
business strategies below and by building up its business infrastructure.
These moves will enable Epson to aim to achieve the following financial performance targets in FY2018, the
final year of the phase 1 plan. Assuming exchange rates of 115 yen to the U.S. dollar and 125 yen to the euro,
Epson will aim to achieve, by the 2018 fiscal year, ¥1,200 billion in revenue, ¥96 billion in business profit, an
8% return on sales, and a 10% or higher return on equity on a continuous basis.

Strategies in Each Business


In the printer business, Epson will aim to establish a competitive advantage in the home printer market by
boosting the attractiveness of its products and to getting office market development on track with linehead
models.
In professional printing, Epson will establish a competitive advantage with hardware, improve support and
other organizational infrastructure, and achieve solid growth in new domains.
In visual communications, Epson will further strengthen its presence in the projection market and use laser
light sources to pave the way to rapid growth in new markets.
In wearable products, Epson will lay the foundation for building wearables into a core business by refining
watch resources and combining them with sensors to create families of differentiated products.
In robotics solutions, Epson will create a framework for growth on top of its technology base.
In microdevices, Epson will create a stable business platform in the quartz business by building
competitive strength. The semiconductor business, meanwhile, will create new core technologies and
devices.






Strengthening Business Infrastructure

Technology. Refine our efficient, compact and precision technologies, advance our actuator, optical
control, and sensor technologies, and bring in data communications technology to continue to create new
customer value.
Manufacturing. Provide timely products that others cannot easily imitate. Offer them at highly
competitive costs and quality.
Sales and support. Strengthen the office and industrial domains, establish optimum area sales
organization, improve products quality with a market-driven (market-in) approach, and transform the brand
image.
Environment. Expand initiatives to reduce environmental impacts across product and service life cycles
and supply chains.

These strategies enabled Epson to launch sales of the PaperLab, the world’s first* office papermaking system to
use a dry process, and announce the development of high-speed linehead inkjet multifunction and
single-function printers during the fiscal year under review. PaperLab is designed to enhance security and
reduce environmental impacts. It uses Epson’s proprietary dry fiber technology to securely destroy confidential
documents and produce new paper from the recycled fibers, all on-site. The new linehead inkjet products will
revolutionize office printing with their high speeds, outstanding image quality, and low power consumption.
Epson also released a new laser projector for the promising high-brightness segment of the market, began a
reorganization to accelerate growth in the wearable products business, and launched new products that will
lower the barriers currently discouraging manufacturers from introducing robots into their production
operations.

In addition, to build the business infrastructure needed to achieve future growth, Epson moved steadily forward
on projects to increase production line efficiency and automation. It also began construction on new factories
and started up operations at others.

* PaperLab is the first office papermaking system to use a dry process, per Epson research conducted in
November 2016.

6. Dividend policy

The Company strives to sustain business growth through the creation of customer value and to generate stable
cash flow by improving profitability and using management resources efficiently. While the top priority is on
strategic investment in growth, the Company also actively returns profits in parallel with its efforts to build a
robust financial structure that is capable of withstanding changes in the business environment.
In line with this policy, the Company has set a consolidated dividend payout ratio in the range of 40% as a
medium-term target, the ratio based on profit after an amount equivalent to the statutory effective tax rate is
deducted from business profit, a profit category that shows profit from the Company’s main operations (and
which is very similar to operating income under Japanese accounting standards, both conceptually and
numerically). The Company intends to be more active in giving back to shareholders by agilely purchasing
treasury shares as warranted by share price, the capital situation, and other factors.

The Company’s dividend policy is to pay cash dividends twice a year. The year-end dividend is determined by
resolution of the general shareholders’ meeting and the interim dividend is determined at a meeting of the board
of directors.

The Company’s full-year financial performance was in line with the outlook primarily as a result of strategic
progress in the Company’s businesses and despite currency volatility. The Company therefore has paid an
annual dividend of ¥60 per share, as forecast at the beginning of the fiscal year. In addition, between May and
June 2016, the Company purchased ¥9.9 billion in treasury shares [the total acquisition price (maximum): ¥10
billion] as a way to optimize capital efficiency and further increase shareholder returns.

The Company’s Articles of Incorporation allow the Company to issue an interim dividend with a record date of
September 30 every year by resolution of the board of directors.

The Company’s distribution of retained earnings for the fiscal year under review is as follows.

Distribution of retained earnings for the fiscal year under review

Date approved

October 27, 2016, by resolution
of the board of directors
June 28, 2017, by resolution of
the general shareholders’ meeting

Cash dividends
(Millions of yen)

Cash dividend per share
(Yen)

10,572

Corporate Governance

1. Approach to corporate governance
(1) Basic corporate governance principles
The general principles of corporate governance at Epson are as follows:
▪ Respect the rights of shareholders, and ensure equality.
▪ Bear in mind the interests of, and cooperate with, stakeholders, including shareholders, customers, local

communities, business partners, and Epson personnel.

▪ Appropriately disclose company information and maintain transparency.
▪ Directors, Executive Officers, and Special Audit & Supervisory Officers shall be aware of their fiduciary

duties and shall fulfill the roles and responsibilities expected of them.

▪ Engage in constructive dialogue with shareholders.
To achieve the goals declared in the Management Philosophy, promote sustainable growth, and increase
corporate value over the medium and long terms, Epson strives to continuously enhance and strengthen
corporate governance so as to realize transparent, fair, fast, and decisive decision-making.
Under a company with an Audit & Supervisory Committee, to further increase the effectiveness of corporate
governance, Epson further improves the supervisory function of the Board of Directors, further enhances
deliberation and speeds up management decision-making.

(2) Corporate governance system
Overview of and reasons for adopting the current system of corporate governance
Epson is structured as a company with an Audit & Supervisory Committee. It has a Board of Directors, an Audit
& Supervisory Committee, and a financial auditor. It has also voluntarily established an advisory committee for
matters such as the Director nomination and compensation.
This governance system was adopted to further increase the effectiveness of corporate governance by
strengthening supervision over management and by enabling the Board of Directors to devote more time to
discussions while speeding up decision-making by management.
The main corporate management bodies and their aims are described below:

Board of Directors
The Board of Directors, with a mandate from shareholders, is responsible for realizing efficient and effective
corporate governance, through which Epson will accomplish its social mission, sustain growth, and maximize
corporate value over the medium and long terms. To fulfill these responsibilities, the Board of Directors will
exercise a supervisory function over general management affairs, maintain management fairness and
transparency, and make important business decisions, including decisions on things such as management plans,
business plans, and investments exceeding a certain amount.
The Board of Directors is composed of 11 Directors, including five Outside Directors. Meetings of the Board of
Directors are, as a rule, held once per month and as needed. The Board of Directors makes decisions on basic
business policies, important business affairs, and other matters that the Board of Directors is responsible for
deciding as provided for in internal regulations. Business affairs that the Board of Directors is not responsible
for deciding are delegated to executive management, and the Board monitors these. To speed up business
decisions and increase business agility as a company with an Audit & Supervisory Committee, Epson expanded
the scope of affairs delegated to executive management from the Board of Directors and limits board
deliberations to only the most important issues. Corporate Governance Policy states that at least one-third of the
board members should be outside directors.

Audit & Supervisory Committee
The Audit & Supervisory Committee, with a mandate from shareholders, is responsible for independently and
objectively auditing and monitoring the execution of director duties and for ensuring the sound and sustained
growth of Epson. The Audit & Supervisory Committee verifies the effectiveness of the internal control system
and conducts audits primarily in cooperation with internal audit departments and the financial auditor. The
Audit & Supervisory Committee has established basic guidelines for selecting outside financial auditors and
criteria for evaluating their independence and expertise. Resolutions concerning financial auditors selected by
the Committee per the guidelines are submitted for approval at a general meeting of shareholders. The Audit &
Supervisory Committee also discusses the selection, dismissal, resignation, and compensation of Directors who

are not Audit & Supervisory Committee members and decides on the opinions to be presented at a general
meeting of shareholders.
The Audit & Supervisory Committee is composed of four Audit & Supervisory Committee members, three of
whom are Outside Directors. It is chaired by a full-time member of the Audit & Supervisory Committee.
Meetings are held once per month and as needed.

Corporate Strategy Council
The Corporate Strategy Council is an advisory body to the president whose purpose is to help ensure that the
right decisions are made based on a range of opinions on the executive management side. Meetings of the
Corporate Strategy Council are where Directors, Executive Officers, and Special Audit & Supervisory Officers
exhaustively examine important business topics that affect the Epson Group as a whole and matters on the
agenda for meetings of the Board of Directors.

Compliance Committee
The Compliance Committee’s function is to discuss the content of reports that it receives concerning important
compliance activities, and report its findings and communicate its opinions to the Board of Directors in order to
see that compliance activities are appropriately executed by line management.
As an advisory body to the Board of Directors, the Compliance Committee is composed of Outside Directors
and Directors who are Audit & Supervisory Committee members. The Compliance Committee is chaired by a
full-time member of the Audit & Supervisory Committee. Meetings are held every half year and as needed.
A Chief Compliance Officer (CCO) is elected by the Board of Directors and supervises and monitors
compliance-related affairs on the whole. The CCO periodically reports the state of compliance affairs to the
Compliance Committee.

Nomination Committee and Compensation Committee
Epson has created a Nomination Committee and a Compensation Committee as advisory bodies to the Board of
Directors. These Committees, which are composed primarily of Outside Directors, are designed to ensure
transparency and objectivity in the screening and nomination of candidates for Director, Executive Officer, and
Special Audit & Supervisory Officer and in matters of Director compensation. Both Committees include
Outside Directors, who comprise the majority of members, the Representative Director/President, and the
Director in charge of human resources. Directors who are full-time members of the Audit & Supervisory
Committee can attend meetings of either Committee as observers.

Epson’s system of corporate governance is schematically represented below.

Internal control system
Epson’s Board of Directors approved a basic policy on the internal control system (a system for ensuring that
business is conducted suitably by the corporate group), and Epson has implemented the approved internal
control system.

The Company considers its Management Philosophy to be its most important business concept, and to realize it
Epson has established “Principles of Corporate Behavior” that are shared across the Group, including at
subsidiaries. The Company will establish the following basic policy regarding the internal control system (a
system for ensuring that business is conducted suitably by the corporate group) and provide an improved
internal control system for the Epson Group as a whole.

Compliance
(1) The Company will establish “Principles of Corporate Behavior” as a guide for putting the Management
Philosophy into practice. The Company will also establish regulations that spell out things such as basic
compliance requirements and the organizational framework.

(2) The Company has created a Compliance Committee to serve as an advisory body to the Board of Directors.

The Compliance Committee is chaired by a full-time member of the Audit & Supervisory Committee and
is composed of Outside Directors and members of the Audit & Supervisory Committee. The Compliance
Committee meets regularly and as needed to hear and discuss important matters concerning the Company’s
compliance program. It reports its findings and offers opinions to the Board of Directors. Financial auditors
can attend meetings of the Compliance Committee as observers.

(3) A Chief Compliance Officer (CCO) is elected and supervises and monitors the execution of all compliance
operations. The CCO periodically reports the state of compliance affairs to the Compliance Committee.

(4) Compliance promotion and enforcement will be supervised by the president of Seiko Epson. Group-wide
compliance programs will be carried out by Head Office supervisory departments with the cooperation of
departments in the various operations divisions and subsidiaries. Compliance programs of the divisions and
their related subsidiaries will be promoted by the respective chief operating officers of the divisions. The
compliance management department helps to ensure the completeness and effectiveness of compliance
programs by monitoring compliance across the Epson Group and by taking corrective action or making
adjustments where needed.

(5) The Corporate Strategy Council, an advisory body to the president comprised of members of the Board of
Directors, etc. of the Company, will address important matters with respect to compliance promotion and
enforcement in the Epson Group as a whole, including subsidiaries. The Council will strive to ensure the
effectiveness of compliance by exhaustively discussing and analyzing the implementation of programs for
assuring observance of statutes, internal regulations, business ethics, and initiatives in high-risk and other
key areas.

(6) The Company, including its subsidiaries, will strive to provide an effective whistleblowing system.

Employees are encouraged and are able to easily and immediately report compliance violations using
internal and external hotlines and e-mail addresses. Controls are in place to protect whistleblowers from
reprisal, and allegations are reported to the Company’s Audit & Supervisory Committee, the Compliance
Committee, and the Corporate Strategy Council in a way that whistleblowers cannot be identified.
(7) The Company strives to enhance legal awareness by providing Epson Group employees with web-based

training and other educational opportunities.

(8) The president of Seiko Epson periodically reports important compliance-related matters to the Board of

Directors and take measures as needed to respond to issues.

(9) The Company’s “Principles of Corporate Behavior” states that the Company will have no association
whatsoever with antisocial forces (i.e., organized crime groups). The Company takes a firm stance in
rejecting any and all contact with antisocial forces that threaten social order and security.

Business execution system
(1) The Company formulates long-term corporate visions and mid-range business plans, and it sets clear

medium-and long-range goals for the Epson Group as a whole.

(2) The Company has instituted a system to ensure the appropriate and efficient execution of business. To that

end, the Company has established regulations governing organizational management, levels of authority,
the division of responsibilities, and the management of affiliated companies, thus distributing power and

authority across the entire Group.

(3) Personnel responsible for business operations report the matters below to the Board of Directors at least

once every three months.
• Current business performance and performance outlook
• Risk management responses
• Status of key business operations

Risk management
(1) The Company has established a basic risk management regulation that stipulates the risk management
system of the Company, including its subsidiaries, and that defines the organization, risk management
methods and procedures, and other basic elements of this system.

(2) Overall responsibility for risk management in the Epson Group, including subsidiaries, belongs to the
president of Seiko Epson. Group-wide risk management is carried out by Head Office supervisory
departments with the cooperation of the operations divisions and subsidiaries. Risks unique to an
individual business are managed by the chief operating officer of that business, including at subsidiaries
consolidated under them. The Company has also set up the risk management department, monitors overall
risk management Group-wide, makes corrections and adjustments thereto, and ensures the effectiveness of
risk management programs.

(3) The Corporate Strategy Council strives to ensure effective management of serious risks that could have an
egregious effect on society by dynamically and exhaustively discussing and analyzing ways to identify and
control risks. Also, when major risks become apparent, the president leads the entire company in mounting
a swift initial response in line with the Company’s prescribed crisis management program.

(4) The president of Seiko Epson periodically reports critical risk management issues to the Board of Directors

and formulates appropriate measures to respond to these issues, as needed.

Ensuring the appropriateness of operations in the corporate group
(1) The Group’s management structure helps to ensure that operations in the corporate group, including
subsidiaries, are conducted appropriately. Essentially, the Company is organized into product-based
divisions. Each division is headed by a chief operating officer who owns global consolidated responsibility
for that business. Meanwhile, supervisory functions within the Head Office own global responsibility.
Responsibility for providing the framework for business operations at subsidiaries is owned by the head of
each business. Group-wide corporate functions are the responsibility of the heads of Head Office
supervisory departments.

(2) The Company has business processes that enable business to be controlled on a Group level. This is

accomplished by regulations governing the management of affiliated companies that require subsidiaries to
report or acquire pre-approval for certain business affairs from the parent company, Seiko Epson, and by
requiring issues that meet certain criteria to be submitted to Epson’s Board of Directors for resolution. The
Company has established regional head offices in certain regions to supervise local subsidiaries in order to
ensure the suitability and efficiency of operations Group-wide.

(3) Per the Basic Regulation for Internal Audits, internal audit departments serve as monitoring organizations

that are independent from the management and supervisory functions of the operations divisions and the
Head Office. Internal audit departments audit internal controls and the state of their implementation in all
Epson Group companies, including subsidiaries. The findings of the internal audit departments are
presented to the head of the audited organization along with requests for corrective action, where needed.
This information is also regularly reported to the president of Seiko Epson and to the Audit & Supervisory
Committee. In this way, Epson strives to optimize operations across the entire Group.

Safeguarding and management of work-related information
(1) Information on the performance of duties is safeguarded and managed in accordance with regulations

governing, among other things, document control, management approval, and contracts. All directors are
able to access this information at all times.

(2) The Company strives to prevent the leak and loss of Epson Group internal information by managing
confidential information according to the level of sensitivity, in accordance with internal information
security regulations.

Audit system
(1) The Audit & Supervisory Committee can interview Directors who are not members of the Audit &

Supervisory Committee, executive officers, and other personnel whenever they deem necessary in the
performance of duties based on the Audit & Supervisory Committee Audit Regulation.

(2) Audit & Supervisory Committee members can attend Corporate Strategy Council sessions, corporate
management meetings, and other important business meetings that will enable them to conduct audits
based on the same information as that available to directors who are not members of the Audit &
Supervisory Committee. Members of the Audit & Supervisory Committee also routinely review important
documents related to management decision-making.

(3) An Audit & Supervisory Committee Office was set up to assist the duties of the Audit & Supervisory
Committee. The head of the Audit & Supervisory Committee Office serves as the Special Audit &
Supervisory Officer and assigns full-time personnel to the Audit & Supervisory Committee Office. The
head and personnel of the Audit & Supervisory Committee Office discharge their duties to assist the Audit
& Supervisory Committee, obeying the orders of the Audit & Supervisory Committee alone and not orders
from Directors who are not members of the Audit & Supervisory Committee. Matters relating to the
personnel of the office must be approved in advance by the Audit & Supervisory Committee.

(4) To ensure that audits by the Audit & Supervisory Committee are systematic and effective, a framework has

been created to secure close cooperation between the internal audit departments and the Audit &
Supervisory Committee.

(5) If a situation involving the Audit & Supervisory Committee or cooperation with the internal audit

departments or other organizations is observed to interfere with the effectiveness of audits by the Audit &
Supervisory Committee, the Audit & Supervisory Committee can ask the representative director or Board
of Directors to take corrective action.

(6) The Audit & Supervisory Committee receives audit reports from internal audit departments and can issue
specific instructions to internal audit departments as needed. If the instructions issued to internal audit
departments by the Audit & Supervisory Committee and the president are in conflict, the president will
have the internal audit departments honor the instructions of the Audit & Supervisory Committee.
(7) Per the Audit & Supervisory Committee Audit Regulation, the Audit & Supervisory Committee can ask
Directors who are not members of the Audit & Supervisory Committee, the compliance management
department, and the risk management department, as well as others to report or explain the state of
management within the Epson Group, including subsidiaries. It can also view supporting materials. The
Audit & Supervisory Committee can also ask, as needed, subsidiary company directors, corporate auditors,
internal audit departments, and other organizations to report the state of management of the subsidiary.
(8) The Audit & Supervisory Committee shall strive to enhance the effectiveness of audits by holding regular

discussions with financial auditors.

(9) The Audit & Supervisory Committee and representative director regularly meet to enable the Committee to

directly assess business operations.

(10) Funds required by the Audit & Supervisory Committee to perform its duties are properly budgeted for in
advance. However, funds required to perform the duties of the Audit & Supervisory Committee in
emergency or extraordinary situations will be promptly paid in advance or refunded on each occasion.

(3) Internal audits
Audit & Supervisory Committee audits
Epson’s Audit & Supervisory Committee is composed of four Directors, three of whom are Outside Directors.
Noriyuki Hama was selected to serve as a Full-Time Audit & Supervisory Committee member to help ensure
that the Audit & Supervisory Committee works effectively, as it was concluded that it would be necessary for
someone to prepare an environment to facilitate audits, attend important internal meetings to smoothly collect
internal information, work closely with groups such as the internal audit department, and monitor the internal
control system.
Audit & Supervisory Committee members can attend meetings of the Corporate Strategy Council and other
important meetings as part of their efforts to properly monitor business affairs. They examine the legality and
suitability of actions taken by the directors by checking and confirming compliance and by supervising and
verifying things such as the state of the internal control system, including internal control over financial
reporting. When they deem it necessary, Audit & Supervisory Committee members can ask internal audit
departments to investigate affairs or can provide specific instructions regarding the performance of their duties.

In addition, the Audit & Supervisory Committee ordinarily conducts audits using internal audit departments but
can exercise its investigation authority to conduct its own audits if the effectiveness of audits conducted by the
internal audit departments is not being maintained.
Full-Time Audit & Supervisory Committee member Noriyuki Hama has many years of experience in finance
and general accounting, while Audit & Supervisory Committee member Chikami Tsubaki is a certified public
accountant. Both have an appreciable degree of knowledge and insight into finance and accounting.

Internal audits
Epson’s internal compliance system guards against potential legal and internal regulatory violations in
departmental operations. Internal audit departments serve as monitoring organizations that are independent from
the management and supervisory functions of the operations divisions and the Head Office. They audit internal
controls and the implementation of controls in all Epson Group companies, including subsidiaries.
Internal audit departments conduct internal audits based on an annual audit plan. After conducting internal
audits, they report their observations, including recommendations for improvements based on the facts, to the
president and to the Audit & Supervisory Committee in a timely manner. Internal audit departments also
regularly report the internal audit situation to the president and Audit & Supervisory Committee.

Interconnections among Audit & Supervisory Committee audits, internal audits, and accounting audits,
and the relationship of these audits to the internal control department
In order to make Audit & Supervisory Committee audits systematic and efficient, Epson ensures close
collaboration between internal audit departments and the Audit & Supervisory Committee. In relation to the
structure of the Audit & Supervisory Committee Office and the coordination system with internal audit
departments, if circumstances hindering the effectiveness of the audit by the Audit & Supervisory Committee
are found, the Audit & Supervisory Committee requests the representative directors or the Board of Directors to
rectify them.
Epson’s internal audit departments regularly present their audit plans and audit results to the Audit &
Supervisory Committee. In response, the Audit & Supervisory Committee can, when it deems necessary, ask
internal audit departments to investigate affairs or can provide specific instructions regarding the performance
of their duties. The Audit & Supervisory Committee ordinarily conducts audits using internal audit departments
but can conduct its own audits if the effectiveness of audits conducted by the internal audit departments is not
being maintained.
Internal audit departments are seen as a keystone for internal control functions built by the president and
operations departments. On the other hand, to ensure the effectiveness and independence of audits by the Audit
& Supervisory Committee and internal audit departments, if the instructions issued to internal audit departments
by the Audit & Supervisory Committee and the president are in conflict, the president must have internal audit
departments honor the instructions of the Audit & Supervisory Committee.
The Audit & Supervisory Committee and the internal audit departments will thus proactively cooperate going
forward, but Epson set up an Audit & Supervisory Committee Office headed by the Special Audit &
Supervisory Officer as an organization dedicated to supporting the Audit & Supervisory Committee. The Audit
& Supervisory Committee Office is independent from executive management and supports the Audit &
Supervisory Committee, with a direct reporting line to it.
The Audit & Supervisory Committee and financial auditors enhance the effectiveness of audits by periodically
discussing issues with one another. Financial auditors have the right to observe meetings of the Compliance
Committee, which is made up of Outside Directors and a Director who is a member of the Audit & Supervisory
Committee.

(4) Overview of limited liability agreements
The Company has executed agreements with non-executive directors Hideaki Omiya, Mari Matsunaga,
Noriyuki Hama, Michihiro Nara, Chikami Tsubaki, and Yoshio Shirai that limit their liability for damages under
Article 423 (1), pursuant to the provisions of Article 427 (1) of the Companies Act. The maximum amount of
liability for damages under these agreements is limited to the amount provided for by laws and regulations. The
liability of the non-executive directors shall be limited only if they have acted in good faith and without gross
negligence in performing their duties.

(5) Outside Directors
The role of Outside Directors
To ensure that Outside Directors are independent from the Company’s management team, have a broad view,
and are able to objectively supervise the making of important decisions, the Company has set forth the role of
Outside Directors in the Corporate Governance Policy as below. In principle, Outside Directors should comprise
at least one-third of the members of the Board of Directors.
(i) Monitoring of the management

- Monitoring of corporate executives through involvement in the officer election process and the

compensation determination process based on an evaluation of the business as a whole

- Monitoring of the business as a whole through the exercise of voting rights on important business

decisions made by the Board of Directors
(ii) Advisory function for improving business efficiency
(iii) Monitoring of conflicts of interest

- Monitoring of conflicts of interest between Epson and its Directors and Executive Officers
- Monitoring of conflicts of interest between Epson and related parties

Principle of independence
The Company’s Board of Directors has established a “Standard of Outside Officers’ Independence” and, in
compliance with this standard, elects director candidates who are unlikely to have conflicts of interest with
general shareholders. The title of this standard and some of the content were amended at a meeting of the Board
of Directors held on April 28, 2017. The amendments were made to help guarantee the independence of Outside
Directors and to select Outside Directors from a broad range of qualified individuals who can be expected to
contribute to the Company. All current Outside Directors satisfy the independence requirements of the amended
standard.
The content of the amended standard is described below.

Criteria for Independence of Outside Directors
The Company has established the criteria below to objectively determine whether potential Outside Directors
are independent.
1. A person is not independent if:
(1) The person considers the Company to be a major business partner1, or has served as an executive2 within

the past five years in an entity for which the Company is a major business partner;

(2) The person is a major business partner3 of the Company or has served as an executive within the past five

years in an entity that is a major business partner of the Company.

(3) The person is a business consultant, certified public accountant, or lawyer who has received a large sum of
money or other forms of compensation4 (other than compensation as an officer) from the Company or has,
within the past three years, performed duties equivalent to those of an executive as an employee of a
corporation or group, such as a union, that has received a large sum of money or other forms of
compensation from the Company;

(4) The person is a major shareholder5 of the Company or has, within the past five years, been an executive or

Audit & Supervisory Board Member of an entity that is a major shareholder of the Company;

(5) The person is an executive or Audit & Supervisory Board Member of an entity in which the Company is

currently a major shareholder;

(6) The person is a major lender 6 to the Company or has been an executive of a major lender to the Company

within the past five years;

(7) The person has been employed by an auditing firm that has conducted a legal accounting audit of the

Company within the past five years;

(8) The person has been employed by a leading managing underwriter of the Company within the past five

years;

(9) The person has received a large donation7 from the Company or, within the past three years, has performed
duties equivalent to those of an executive as an employee of a corporation or a group, such as a union, that
has received a large donation from the Company;

(10) The person came from an entity that employs someone from the Company as an Outside Director; or
(11) The spouse or other immediate family member of a person to whom any of items (1) through (9) apply.

2. Even if any of the foregoing criteria apply to a potential Outside Director, the Company can elect that

person as an Outside Director if that person satisfies the requirements for Outside Directors set forth in the
Companies Act, and the Company deems the person suitable as an Outside Director of the Company in light
of his or her personality, knowledge, experience, or other qualifications upon explaining and announcing
the reasons thereof.

Notes
1 A person (usually a supplier) considers the Company to be a major business partner if 2% or more of its
consolidated net sales (consolidated revenue) has come from the Company in any fiscal year within the
past three years.
“Executive” means an executive officer, executive director, operating officer, or an employee occupying a
senior management position of department manager or higher.

3 A person (usually a buyer) is a major business partner if 2% or more of the Company’s consolidated

revenue has come from that partner in any fiscal year within the past three years.
“A large sum of money or other forms of compensation” means an average annual amount for the past
three years that is:
i) no less than 10 million yen for an individual; or
ii) no less than 2% of the annual revenues in any fiscal year for a group.
“Major shareholder” means a shareholder who directly or indirectly holds 10% or more of the voting
rights.
“A major lender” means a financial institution or other major creditor that is indispensable for the
Company’s financing and on which the Company depends to the extent that it is irreplaceable in any fiscal
year within the past three years.
“Large donation” means a donation whose annual average amount for the past three years exceeds either;
i) 10 million yen or
ii) 30% of the annual expense of the group, whichever is higher.

Number of outside directors, selection criteria, and human, capital, business or other interests between
outside directors and the Company
Epson had five outside directors (of whom three are Audit & Supervisory Committee members) as of the
submission date of its the security report.
(i) Hideaki Omiya

Mr. Omiya has served as a Chairman of the Board of Mitsubishi Heavy Industries, Ltd. and has a wealth of
experience and insight as a corporate manager and engineer.
He has monitored corporate management appropriately by expressing opinions actively including findings
and proposals regarding overall managerial issues from a perspective of a corporate manager well-versed
in the global corporate management in the heavy industry, a different business field.
Epson believes that he will appropriately monitor management to achieve sustained growth and increase
medium-to long-term corporate value.
Mr. Omiya was an executive of Mitsubishi Heavy Industries, Ltd. Although the Company has had
transactions involving the purchase and sale of semiconductor manufacturing equipment with Mitsubishi
Heavy Industries, Ltd. in the past three years, these transactions are immaterial, totaling less than 0.1% of
the consolidated net sales of the Company and Mitsubishi Heavy Industries, Ltd. and thus does not fall
under the category of “major business partner” as prescribed in the “Criteria for Independence of Outside
Directors.” Epson has registered him as an Independent Director with the Tokyo Stock Exchange.
He owns a small number of Epson shares, but there are no human, capital, business or other interests
between him and the Company.

(ii) Mari Matsunaga

Ms. Matsunaga has created new business models and has a considerable insight and experiences through
her involvement in the management of multiple companies as an Outside Officer. As an Outside Director
of the Company, she has appropriately monitored management, actively pointing out business issues and
offering recommendations particularly from a diversity and employee working environment perspective.
Epson believes that she will monitor management appropriately to achieve sustained growth and increase
medium-to long-term corporate value.
Epson has engaged Ms. Matsunaga as a speaker in the past three years, but the speaking fee was less than
500,000 yen and thus does not fall under the category of “a large sum of money or other forms of

compensation” as prescribed in the “Criteria for Independence of Outside Directors.” Epson has registered
her as an Independent Director with the Tokyo Stock Exchange.
She owns a small number of Epson shares, but there are no human, capital, business or other interests
between her and the Company.

(iii) Michihiro Nara (Outside Director who is an Audit & Supervisory Committee member)

Mr. Nara has a high level of expertise as an attorney. He has considerable insight and experience through
his involvement in the management of multiple companies as an independent outside officer and
achievements as an Outside Audit & Supervisory Board member of the Company. Epson believes that he
will monitor management appropriately to achieve sustained growth and increase medium-to long-term
corporate value. He has never been involved in corporate management except as an outside officer.
However, given the reasons above, Epson believes that he can appropriately perform his duties as an
Outside Director who is an Audit & Supervisory Committee member.
As an Outside Director of the Company, Mr. Nara has actively pointed out business issues and offered
recommendations from the perspective of a legal professional.
The Company has not entered into a consulting agreement nor has it consigned any business under any
individual agreement with Mr. Nara as an attorney-at-law or with the law office to which he belongs.
Epson has registered him as an Independent Director with the Tokyo Stock Exchange.
He owns a small number of Epson shares, but there are no human, capital, business or other interests
between him and the Company.

(iv) Chikami Tsubaki (Outside Director who is an Audit & Supervisory Committee member)

Ms. Tsubaki has a high level of expertise as a certified public accountant. She has a considerable insight
and experiences through her involvement in the management of multiple companies as independent outside
officer. Epson believes that she will monitor management appropriately to achieve sustained growth and
increase medium to long-term corporate value. She has never been involved in corporate management
except as an outside officer. However, given the reasons above, Epson believes that she can appropriately
perform her duties as an Outside Director who is an Audit & Supervisory Committee member.
As an Outside Director of the Company, Ms. Tsubaki has actively pointed out business issues and offered
recommendations from the perspective of a finance and accounting professional.
Epson does not have a business relationship with Ms. Tsubaki, a certified public accountant, and has never
engaged her based on an advisory agreement or other separate agreement. Epson has registered her as an
Independent Director with the Tokyo Stock Exchange.
She owns a small number of Epson shares, but there are no human, capital, business or other interests
between her and the Company.

(v) Yoshio Shirai (Outside Director who is an Audit & Supervisory Committee member)

Mr. Shirai has served as a director at Toyota Motor Corporation, Hino Motors, Ltd., and Toyota Tsusho
Corporation, and has considerable insight and a wealth of experience as a corporate manager. On his global
perspective as well as his management experience in a different business field, automotive industry and
trading company, Epson believes that he will monitor management appropriately to achieve sustained
growth and increase medium-to long-term corporate value.
As an Outside Director of the Company, Mr. Shirai has drawn on his global perspective as well as his
management experience in a different business field to actively point out business issues and offer
recommendations.
Mr. Shirai has served as an executive at Hino Motors, Ltd. and Toyota Tsusho Corporation within the past
five years. The Company has had no transactions with Hino Motors, Ltd. or Toyota Tsusho Corporation in
the past three years, and neither company falls under the category of a “major business partner” as
prescribed in the “Criteria for Independence of Outside Directors.” Epson has registered him as an
Independent Director with the Tokyo Stock Exchange.
He owns a small number of Epson shares, but there are no human, capital, business or other interests
between him and the Company.

(6) Officer compensation, etc.

Basic policy
The policy on director and executive officer compensation is as follows.

(a) Compensation shall provide incentive to improve business performance in order to increase

corporate value in the near, medium, and long terms.

(b) Compensation shall be sufficient to attract qualified persons both from within the Company and

from outside.

(c) Compensation shall be commensurate with period performance so that directors and executive
officers can demonstrate their management capabilities to the fullest during their tenure.

Compensation for non-executive officers

(a) The composition of compensation shall guarantee independence so that these officers can suitably

exert their general management supervisory function, etc.

(b) Compensation shall be sufficient to attract qualified persons both from within the Company and

from outside.

Compensation system
- Director and executive officer compensation of the Company consists of base compensation, bonuses,
and stock compensation. Non-executive officers receive base compensation only, a fixed amount, from
the standpoint independent from business execution, because their role is to supervise general
management. They do not receive bonuses and stock compensation, which are forms of compensation
that are linked to performance and share price.
Base compensation
Base compensation is a monetary amount that is determined by taking into account all factors such as
an individual’s position and responsibilities. It is paid as a monthly compensation that reflects the
results of annual performance evaluations based on criteria set according to the individuals’ roles.
Bonus
An annual bonus is monetary compensation in an amount that is determined by taking into account
factors such as the financial performance for the year. The bonus reflects the results of annual
performance evaluations based on criteria set according to the individuals’ roles.
Stock compensation
Under Epson’s stock-based compensation plan, a trust scheme is used to deliver Company shares to
officers, the number of shares being based on points system, where in officers are awarded points
depending on the level of achievement with respect to medium- and long-term operating performance
targets, such as business profit, ROS and ROE.

Procedure for determining compensation
- Compensation is determined by an appropriate body, such as the general meeting of shareholders, the

Board of Directors, or Audit & Supervisory Committee, after a fair, transparent, and rigorous review by
the Director Compensation Committee, which is composed mainly of Outside Directors and which
issues an opinion, to ensure transparency and objectivity.

Compensation paid

Category

Total
compensation
(millions of yen)

Total compensation by type (millions of yen)

Fixed
compensation

Variable
compensation

Base compensation

Bonus

Stock
compensation

Number of
individuals

Directors who are not
Audit & Supervisory
Committee members
(amount accounted for
by Outside Directors)
Directors who are
Audit & Supervisory
Committee members
(amount accounted for
by Outside Directors)
Audit & Supervisory
Board members
(amount accounted for
by Outside Audit &
Supervisory Board
members)

433

(28)

(36)

(9)

287

(28)

(36)

(9)

(–)

–

(–)

–

(–)

–

(–)

–

(–)

Total

512

365

(–)

–

(–)

–

(–)

(3)

Notes:
1. The amount of compensation, etc. to Directors who are not Audit & Supervisory Committee members
includes the amount of compensation, etc. to Directors prior to the Company’s transition to a company
with an Audit & Supervisory Committee.

2. The base compensation for Directors who are not Audit & Supervisory Committee members (excluding

Outside Directors) consists of fixed compensation and variable compensation. Variable compensation
refers to monetary compensation that reflects the results of annual performance evaluations based on
criteria set according to their respective roles.

3. The Company has introduced an officer stock ownership plan to link compensation more closely to
shareholders’ value. The acquisition of the Company’s shares accounts for a portion of the base
compensation.

4. Upon the resolution at the annual general meeting of shareholders of June 28, 2016, the maximum base
compensation was set to at 62 million yen per month for Directors who are not Audit & Supervisory
Committee members (Outside Directors account for 10 million yen of this amount) and at 20 million yen
for Directors who are Audit & Supervisory Committee members.

5. The amount above includes 97 million yen in bonuses to be paid to six Directors (excludes Outside

Directors and Directors who are Audit & Supervisory Committee members), as approved by shareholders
at the annual general meeting of shareholders on June 28, 2017.

6. From the current fiscal year, the Company introduced a performance-linked stock compensation plan
(stock compensation) by employing a framework referred to as the officer compensation BIP (Board
Incentive Plan) trust, for the purpose of showing its commitment to promoting sustainable growth and
increasing its medium to long-term corporate value, in addition to strengthening the sense of sharing
common interests with its shareholders. The stock compensation stated above represents the amount
recorded for the current fiscal year based on Japanese Generally Accepted Accounting Principles (JGAAP).

7. The number of individuals above includes three Directors and four Audit & Supervisory Board members
who retired at the conclusion of the annual general meeting of shareholders held on June 28, 2016.
8. The amount paid to Audit & Supervisory Board members is the amount paid for the period prior to the

Company’s transition to a company with an Audit & Supervisory Committee. The amount paid to Directors
who are Audit & Supervisory Committee members is the amount for the period after the transition to a
company with an Audit & Supervisory Committee.
In addition to the above, the Company paid a 15 million yen retirement allowance to an Audit &

Supervisory Board member (Outside Audit & Supervisory Board member) who retired at the conclusion of
the annual general meeting of shareholders held on June 28, 2016, pursuant to the discontinuation of the
retirement allowance system for executives resolved at the annual general meeting of shareholders held on
June 23, 2006.

10. Stock options are not granted.

Total compensation paid to officers whose total consolidated compensation is 100 million yen or more

Name

Total
consolidated
compensation
(millions of yen)

Total consolidated compensation by type
(millions of yen)

Category

Fixed
compensation

Variable
compensation

Base compensation

Bonus

Stock
compensation

Minoru Usui

116

Director

Note: The stock compensation stated above represents the amount recorded for the current fiscal year based on

Japanese Generally Accepted Accounting Principles (JGAAP).

(7) Securities held by the Company

a. Balance sheet total of stocks held for reasons other than pure investment:

18 companies

¥12,278 million

Issuing company, number, and balance sheet total of stocks held for reasons other than pure
investment
Previous fiscal year

Special investment securities

Company

NGK Insulators, Ltd.

Shares
(stock)
3,757,000

Balance sheet total
(millions of yen)

Reason held

7,810 To maintain and strengthen the

Mizuho Financial Group, Inc.

15,008,880

2,522 To maintain and strengthen the

business relationship with a
supplier of key parts used in
Epson products

Seiko Holdings Corporation

1,644,080

Marubun Corporation

332,640

The Hachijuni Bank, Ltd.

489,500

Hakuto Co., Ltd.

190,000

King Jim Co., Ltd.

221,980

Otsuka Corporation

30,000

Joshin Denki Co., Ltd.

70,000

Nippon BS Broadcasting
Corporation

33,200

Pixelworks, Inc.

100,000

business relationship with a
source of steady funding and a
provider of financial services

733 To maintain and strengthen the

business relationship with a
major buyer of Epson products
255 To maintain and strengthen the

business relationship with a
major buyer of Epson products
237 To maintain and strengthen the

business relationship with a
source of steady funding and a
provider of financial services

188 To maintain and strengthen the

business relationship with a
major buyer of Epson products
186 To maintain and strengthen the

business relationship with a
major buyer of Epson products
178 To maintain and strengthen the

business relationship with a
major buyer of Epson products
60 To maintain and strengthen the
business relationship with a
major buyer of Epson products
35 To maintain and strengthen the
business relationship with a
company whose parent company
is major buyer of Epson products

24 To maintain and strengthen the
business relationship with a
supplier of key parts used in
Epson products

Current fiscal year

Special investment securities

Company

NGK Insulators, Ltd.

Shares
(stock)
2,507,000

Balance sheet total
(millions of yen)

Reason held

6,317 To maintain and strengthen the

business relationship with a
supplier of key parts used in
Epson products

Mizuho Financial Group, Inc.

15,008,880

3,061 To maintain and strengthen the

Seiko Holdings Corporation

1,644,080

Otsuka Corporation

60,000

The Hachijuni Bank, Ltd.

489,500

Marubun Corporation

332,640

Hakuto Co., Ltd.

190,000

King Jim Co., Ltd.

221,980

Joshin Denki Co., Ltd.

130,000

Pixelworks, Inc.

100,000

Nippon BS Broadcasting
Corporation

33,200

c. Stocks held purely for investment purposes

None

business relationship with a
source of steady funding and a
provider of financial services

746 To maintain and strengthen the

business relationship with a
major buyer of Epson products
362 To maintain and strengthen the

business relationship with a
major buyer of Epson products
307 To maintain and strengthen the

business relationship with a
source of steady funding and a
provider of financial services

237 To maintain and strengthen the

business relationship with a
major buyer of Epson products
195 To maintain and strengthen the

business relationship with a
major buyer of Epson products
193 To maintain and strengthen the

business relationship with a
major buyer of Epson products
147 To maintain and strengthen the

business relationship with a
major buyer of Epson products
52 To maintain and strengthen the
business relationship with a
supplier of key parts used in
Epson products

35 To maintain and strengthen the
business relationship with a
company whose parent company
is major buyer of Epson products

(8) Accounting audits

1) Names and other details of certified public accountants performing audits

Name of CPA

Audit company

No. of successive years
performing audits

Designated and Engagement Partner,
Certified Public Accountant
Designated and Engagement Partner,
Certified Public Accountant
Designated and Engagement Partner,
Certified Public Accountant

Seiji
Yamamoto
Yoshiyuki
Sakuma
Yoshitomo
Matsuura

Ernst & Young
ShinNihon LLC
Ernst & Young
ShinNihon LLC
Ernst & Young
ShinNihon LLC

2) Composition of auditing team

The auditing team comprises 69 staff including 31 certified public accountants, 17 accountant
examination passers, and 21 other accounting staff.

(9) Number of directors
Epson’s Articles of Incorporation provide for a maximum of nine directors who are not members of the Audit &
Supervisory Committee and a maximum of five directors who are members of the Audit & Supervisory
Committee.

(10) Election and retirement of directors
According to its Articles of Incorporation, Directors of the Company can be elected by a majority vote by at
least one-third of shareholders with voting rights, and not through cumulative voting.
Provisions regarding the retirement of directors do not vary from the provisions of the Companies Act.

(11) Matters requiring resolutions of general meetings of shareholders that can be implemented by

resolutions of the Board of Directors

Treasury stock acquisition
The Company’s Articles of Incorporation allow the Company to acquire treasury stock through stock market
trade and other means by resolution of the Board of Directors. This enables a more flexible capital policy in
response to a changing business environment.

Director exemption from liability
When liability falls under the requirements stipulated in Article 426, Paragraph 1 of the Companies Act, the
Company’s Articles of Incorporation allow the Company to exempt the Directors from liability for damages in
Article 423, Paragraph 1 of the Companies Act up to the amount remaining after the legal minimum liability is
deducted from the total liability amount by resolution of the Board of Directors so that the Directors (excluding
Executive Director) to fully apply themselves to their expected roles.

Interim dividend
The Company’s Articles of Incorporation allow the Company to declare an interim dividend with a date of
record of September 30 every year by resolution of the board of directors. This provides the Company with
flexibility in paying dividends to shareholders.

(12) Special resolution requirements of the general meeting of shareholders
The Company’s Articles of Incorporation set forth the requirements for a special resolution of the general
meeting of shareholders stipulated in Article 309, Paragraph 2, of the Companies Act as a two-thirds majority
vote by at least one-third of shareholders with voting rights. This policy is intended to ensure smooth operation
of the general meeting of shareholders by relaxing the quorum requirements for special resolutions at the
general meeting of shareholders.

2. Details of audit remuneration
(1) Remuneration for audits by certified public accountants

(Millions of yen)

Category

Filing company
Consolidated
subsidiaries
Total

Previous fiscal year

Fiscal year under review

Remuneration for
audit certification
work

Remuneration for
non-audit work

Remuneration for
audit certification
work

Remuneration for
non-audit work

149

65
214

3
4

152

61
214

－
2

(2) Other important remuneration
Previous fiscal year
Total payments for audits carried out on behalf of 64 consolidated overseas subsidiaries by certified public
accountants belonging to the Ernst & Young network for the fiscal year ended March 31, 2016, amounted to
¥590 million.

Fiscal year under review
Total payments for audits carried out on behalf of 64 consolidated overseas subsidiaries by certified public
accountants belonging to the Ernst & Young network for the fiscal year ended March 31, 2017, amounted to
¥576 million.

(3) Non-audit work performed by certified public accountant at filing company
Previous fiscal year
Remuneration paid for non-audit work performed by the certified public accountant was for various consultancy
services.

Fiscal year under review
Remuneration paid for non-audit work performed by the certified public accountant was for various consultancy
services.

(4) Governing policy for audit remuneration
This does not apply because remuneration for auditing services is determined according to the nature of the
audit work.

3. Basic policy regarding company control

Epson’s board of directors agreed on a basic policy governing persons who control our financial and business
policy decisions (hereinafter the “basic policy”).

(1) Overview
Epson believes that its shareholders should be determined through free trade on the market. Therefore, the
decision as to whether to accept a takeover offer that would allow another party to acquire a controlling share of
Epson and thus gain power over the Company’s financial and business decisions should ultimately be put before
the shareholders.
To ensure and enhance the corporate value and common interests of shareholders, Epson believes it is essential
for Epson’s directors, managers, and employees to work as a team to create value, to pursue the Epson tradition
of creativity and challenge, and to earn and keep the trust of its customers.
Not all large-scale acquisitions of shares enhance the value of the company whose shares are being acquired,
nor do they always serve the common interests of shareholders. Epson recognizes the need to use all necessary
and appropriate means to protect the Company’s corporate value and the common interests of its shareholders
against persons seeking to improperly acquire large numbers of shares in an attempt to gain control over
decisions concerning the Company’s financial and business policies.

(2) Summary of measures in support of the basic policy
1) Specific actions in support of the basic policy

In March 2016 the Company established the Epson 25 Corporate Vision, a document that describes Epson’s
goals over the decade between the 2016 and 2025 fiscal years. At the same time, the Company established
the Epson 25 Mid-Range Business Plan (FY2016-2018), a three-year plan for the first phase of work toward
achieving the Epson 25 vision.
Under the Phase 1 Mid-Range Business Plan, Epson will build a robust foundation for business by
sustaining the results of successful strategic initiatives pursued to date, developing products for the future,
and aggressively investing as needed.

2) Efforts to deter parties who are deemed inappropriate based on Epson’s basic policy in gaining control over

the Company’s financial and business policy decision making
To ensure and enhance corporate value and the common interests of its shareholders, Epson updated its
measures to prevent large-scale acquisitions of Epson shares and received approval for them at the June
2014 Ordinary General Meeting of Shareholders. Epson revised these old measures to further enhance
appropriateness and transparency. Shareholders approved the new measures at the June 28, 2017 Ordinary
General Meeting of Shareholders. (The new measures are called “the Plan” below.)
The purpose of the Plan is to prevent large-scale acquisitions of Epson stock certificates by having
shareholders decide whether to allow such acquisitions and by giving the Epson board of directors the time
and information they need to present shareholders with an alternative proposal and enable the board to
negotiate with the acquirer on behalf of shareholders. Specifically, a party that intends to acquire or make a
takeover bid for 20% or more of stock certificates outstanding shall be required to submit in advance to the
Epson board of directors a statement of intent as well as sufficient and necessary information for decision
making on the part of shareholders and for evaluation and consideration by a special committee. The party
shall also be required to comply with the procedures defined in the Plan. Furthermore, the Plan allows for
the activation of defensive measures if, for example, the proposed acquisition is not conducted in line with
the Plan or it is deemed contrary to Epson’s corporate value or the common interest of its shareholders.
To prevent the Epson board of directors from making arbitrary decisions about whether to activate takeover
defense measures, a special committee composed entirely of highly independent outside directors shall
assess the need for a defense. The special committee shall examine the nature of a proposed stock
acquisition, request information from the Epson board of directors regarding alternative proposals, provide
information to shareholders, and negotiate with a potential acquirer. The special committee shall
recommend whether to active a defense to the Epson board of directors. The Epson board of directors shall
accept the committee’s recommendation (unless the board concludes that doing so would violate the
directors’ duty of care) and formally resolve in a prompt manner whether or not to activate a defense.

(3) Decisions made by the Epson board of directors regarding specific actions and the justification for

those decisions

Specifically, the Plan guarantees fairness and objectivity, is reasonable, and supports Epson’s corporate value
and the common interests of its shareholders because, among other things, a) it was introduced (and updated)
after being approved by shareholders at the general meeting of shareholders; b) it contains provisions for
reasonable and objective implementation; c) a special committee composed solely of outside directors with a
high degree of independence from Epson management was established and activation of defensive measures is
subject to the assessment of that special committee; d) the special committee may solicit expert opinions from
third parties at Epson’s expense; and e) the Plan was determined to be valid for approximately three years from
the introduction and update and may be abolished by the board of directors at any time. The Plan is not for
keeping Epson executive officers in their posts.

Management

Directors, audit & supervisory committee members and executive officers of the Company as of the date when
the annual securities report (yukashoken-houkokusho) was submitted and their functions are listed below.

Current function

Chief Operating Officer,
Wearable Products &
Industrial Solutions
Operations Segment,
Chief Operating Officer,
Wearable Products
Operations Division, and
General Administrative
Manager, Corporate
Planning Division

Chief Operating Officer,

Printing Solutions
Operations Division
General Administrative

Manager, Human
Resources Division, and
General Administrative
Manager, CSR
Management Office
General Administrative
Manager, Management
Control Division

Name

Minoru Usui

Shigeki Inoue

Position

President

(Representative
Director)
Director,

Senior Managing
Executive Officer
(Representative
Director)

Koichi Kubota

Masayuki Kawana

Director,

Senior Managing
Executive Officer

Director,

Executive Officer

Tatsuaki Seki

Hideaki Omiya
Mari Matsunaga
Noriyuki Hama

Michihiro Nara

Director,

Executive Officer

Outside Director
Outside Director
Director,

Full-Time Audit &
Supervisory
Committee
Member

Outside Director,

Audit &
Supervisory
Committee
Member

Chikami Tsubaki

Outside Director,

Audit &
Supervisory
Committee
Member

Name

Position

Current function

Yoshio Shirai

Outside Director,

Audit &
Supervisory
Committee
Member

Tadaaki Hagata

Managing

President, Epson Precision

Executive Officer

(Philippines), Inc.

Motonori Okumura

Managing

Executive Officer

Junichi Watanabe

Managing

Executive Officer

Hideki Shimada

Managing

Executive Officer

General Administrative
Manager, Technology
Development Division;
Deputy Chief Operating
Officer, Wearable Products
& Industrial Solutions
Operations Segment
General Administrative
Manager, Production
Planning Division;
Deputy Chief Operating
Officer, Wearable Products
& Industrial Solutions
Operations Segment
Deputy Chief Operating

Officer, Printing Solutions
Operations Division

Yasumasa Kitamatsu

Executive Officer

Deputy General

Akihiro Fukaishi

Executive Officer

President, Epson (China)

Co., Ltd.

Sunao Murata

Executive Officer

Deputy Chief Operating

Administrative Manager,
Technology Development
Division

Yoshiyuki Moriyama

Executive Officer

Toshiya Takahata

Executive Officer

Officer, Printing Solutions
Operations Division
Chairman and President,

Epson Engineering
(Shenzhen) Ltd.

General Administrative
Manager, Intellectual
Property Division

Tsuyoshi Kitahara

Executive Officer

Technology Development

Naoyuki Saeki

Executive Officer

Nobuyuki Shimotome

Executive Officer

Division

President, Epson Sales
Japan Corporation

Chief Operating Officer,
Microdevices Operations
Division

Kazuyoshi Yamamoto

Executive Officer

President, Epson Europe

B.V.

Name

Munenori Ando

Position

Executive Officer

Hitoshi Igarashi

Executive Officer

Keith Kratzberg

Executive Officer

Current function
General Administrative

Manager, Sales &
Marketing Division
Deputy Chief Operating

Officer, Printing Solutions
Operations Division
President and Chief

Executive Officer, Epson
America, Inc.

Isamu Otsuka

Executive Officer

President, Epson Atmix

Corporation

Yasunori Ogawa

Executive Officer

Chief Operating Officer,

Eiichi Abe

Executive Officer

President, P.T. Indonesia

Visual Products Operations
Division

Kazuhiro Ichikawa

Executive Officer

Keijiro Naito

Executive Officer

Epson Industry
Deputy General

Administrative Manager,
Technology Development
Division

Deputy Chief Operating
Officer, Visual Products
Operations Division

Taro Shigemoto

Special Audit &
Supervisory
Officer

General Administrative

Manager, Audit &
Supervisory Committee
Office

Index to Consolidated Financial Statements
Seiko Epson Corporation and Subsidiaries

Consolidated Statement of Financial Position................................................................................................ 58

Consolidated Statement of Comprehensive Income ...................................................................................... 60

Consolidated Statement of Changes in Equity ............................................................................................... 62

Consolidated Statement of Cash Flows ........................................................................................................... 64

Notes to Consolidated Financial Statements .................................................................................................. 65

Report of Independent Auditors ................................................................................................................... 125

Consolidated Statement of Financial Position

Years ended March 31, 2016 and 2017:

Thousands ofU.S. dollarsNotesMarch 31,2016March 31,2017March 31,2017Assets Current assets Cash and cash equivalents8,36230,498221,7821,976,842 Trade and other receivables9,36151,660155,7041,387,859 Inventories10201,608208,5121,858,561 Income tax receivables1,2322,47622,069 Other financial assets11,361,6747546,720 Other current assets1214,33513,176117,464 Subtotal601,010602,4065,369,515 Non-current assets held for sale44139357 Total current assets601,451602,4465,369,872 Non-current assets Property, plant and equipment13,15244,463275,1952,452,936 Intangible assets1418,17921,553192,111 Investment property171,9671,28811,480 Investments accounted for using the equity method1,6051,43812,817 Net defined benefit assets23-00 Other financial assets11,3621,96220,544183,117 Other non-current assets125,1225,48648,939 Deferred tax assets1846,58746,433413,878 Total non-current assets339,888371,9403,315,278 Total assets941,340974,3878,685,150Millions of yen

Thousands ofU.S. dollarsNotesMarch 31,2016March 31,2017March 31,2017Liabilities and equity Liabilities Current liabilities Trade and other payables19,36130,624141,6331,262,438 Income tax payables6,8307,26364,738 Bonds issued, borrowings and lease liabilities20,3661,65476,200679,204 Other financial liabilities368241,31811,747 Provisions2123,01921,981195,926 Other current liabilities22102,065102,992918,035 Total current liabilities325,019351,3893,132,088 Non-current liabilities Bonds issued, borrowings and lease liabilities20,3680,10070,371627,248 Other financial liabilities361,6401,58614,136 Net defined benefit liabilities2354,84545,281403,609 Provisions214,9416,20955,343 Other non-current liabilities223,1143,52131,423 Deferred tax liabilities181,0011,30411,623 Total non-current liabilities145,644128,2751,143,382 Total liabilities470,663479,6644,275,470 Equity Share capital2453,20453,204474,231 Capital surplus2484,32184,321751,591 Treasury shares24(20,471)(30,812)(274,641) Other components of equity2457,98953,176473,990 Retained earnings292,775332,3062,961,993 Equity attributable to owners of the parent company467,818492,1964,387,164 Non-controlling interests2,8582,52622,516 Total equity470,676494,7224,409,680 Total liabilities and equity941,340974,3878,685,150Millions of yen

Consolidated Statement of Comprehensive Income

Years ended March 31, 2016 and 2017:

Thousands of U.S.dollarsNotes20162017Revenue7,261,092,4811,024,8569,135,003Cost of sales10,13,14(694,821)(658,882)(5,872,912)Gross profit397,660365,9743,262,091Selling, general and administrative expenses13,14,27(312,708)(300,167)(2,675,523)Other operating income2914,8075,42148,319Other operating expense13,30(5,732)(3,335)(29,736)Profit from operating activities94,02667,892605,151Finance income311,6521,38312,327Finance costs31(4,252)(1,858)(16,560)Share of profit of investments accounted for using theequity method10453472Profit before tax91,53067,470601,390Income taxes18(45,421)(18,461)(164,551) Profit from continuing operations46,10949,009436,839Loss from discontinued operations32(42)(582)(5,197)Profit for the period46,06748,426431,642Profit for the period attributable to:Owners of the parent company45,77248,320430,698Non-controlling interests294106944Profit for the period46,06748,426431,642Millions of yenYear endedMarch 31,Year endedMarch 31,2017

Thousands of U.S.dollarsNotes20162017Other comprehensive income Items that will not be reclassified subsequently to profit or loss, net of taxRemeasurement of net defined benefit liabilities (assets)33(22,161)10,78596,131Net gain (loss) on revaluation of financial assetsmeasured at FVTOCI (Note)33(2,610)2,21919,788Subtotal(24,771)13,005115,919 Items that may be reclassified subsequently to profit or loss, net of taxExchange differences on translation of foreignoperations33(21,309)(5,477)(48,809)Net changes in fair value of cash flow hedges33(1,215)47418Share of other comprehensive income of investmentsaccounted for using the equity method33(240)(20)(178)Subtotal(22,765)(5,450)(48,569)Total other comprehensive income, net of tax(47,536)7,55567,350 Total comprehensive income for the period(1,469)55,982498,992Total comprehensive income for the periodattributable to:Owners of the parent company(1,456)56,028499,402Non-controlling interests(12)(46)(410)Total comprehensive income for the period(1,469)55,982498,992 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeU.S. dollarsNotes20162017Earnings per share for the period:Basic earnings per share for the period34127.94136.821.22Diluted earnings per share for the period34127.94136.821.22Earnings per share from continuing operations for theperiod:Basic earnings per share for the period34128.06138.471.23Diluted earnings per share for the period34128.06138.461.23Earnings per share from discontinued operations for theperiod:Basic loss per share for the period34(0.12)(1.65)(0.01)Diluted loss per share for the period34(0.12)(1.65)(0.01)Millions of yenYear endedMarch 31,Year endedMarch 31,2017YenYear endedMarch 31,Year endedMarch 31,2017

Consolidated Statement of Changes in Equity

Years ended March 31, 2016 and 2017:

NotesRemeasurement of netdefined benefitliabilities (assets)Net gain (loss) onrevaluation of financialassets measured atFVTOCI (Note)Exchange differenceson translation offoreign operationsNet changes in fairvalue of cash flowhedgesTotal othercomponents of equityAs of April 1, 201653,20484,321(20,471)-4,53353,616(160)57,989292,775467,8182,858470,676Profit for the period - - - - - - - -48,32048,32010648,426Other comprehensive income - - -10,7902,221(5,351)477,707 -7,707(152)7,555Total comprehensive income for the period - - -10,7902,221(5,351)477,70748,32056,028(46)55,982Acquisition of treasury shares24 - -(10,340) - - - - - -(10,340) -(10,340)Dividends25 - - - - - - - -(21,299)(21,299)(237)(21,537)Share-based payment transactions35 -12 - - - - - - -12 -12Acquisition of subsidiaries - - - - - - - - - -2626Changes in interests in subsidiaries -(12) - -(10)0 -(9) -(21)(75)(97)Transfer from other components of equityto retained earnings - - -(10,790)(1,720) - -(12,510)12,510 - - -Total transactions with the owners -0(10,340)(10,790)(1,730)0 -(12,520)(8,789)(31,650)(285)(31,936)As of March 31, 201753,20484,321(30,812) -5,02448,265(112)53,176332,306492,1962,526494,722 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeNotesRemeasurement of netdefined benefitliabilities (assets)Net gain (loss) onrevaluation of financialassets measured atFVTOCI (Note)Exchange differenceson translation offoreign operationsNet changes in fairvalue of cash flowhedgesTotal othercomponents of equityAs of April 1, 2016474,231751,591(182,476)-40,405477,902(1,416)516,8912,609,6354,169,87225,4664,195,338Profit for the period - - ------430,698430,698944431,642Other comprehensive income - - -96,17619,805(47,695)41868,704-68,704(1,354)67,350Total comprehensive income for the period - - -96,17619,805(47,695)41868,704430,698499,402(410)498,992Acquisition of treasury shares24 - -(92,165) - - - - - -(92,165) -(92,165)Dividends25 - - - - - - - -(189,847)(189,847)(2,112)(191,959)Share-based payment transactions35 -106 - - - - - - -106 -106Acquisition of subsidiaries - - - - - - - - - -231231Changes in interests in subsidiaries -(106) - -(98)0 -(98) -(204)(659)(863)Transfer from other components of equityto retained earnings - - -(96,176)(15,331) - -(111,507)111,507 - - -Total transactions with the owners -0(92,165)(96,176)(15,429)0 -(111,605)(78,340)(282,110)(2,540)(284,650)As of March 31, 2017474,231751,591(274,641)-44,781430,207(998)473,9902,961,9934,387,16422,5164,409,680 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeThousands of U.S. dollarsEquity attributable to owners of the parent companyNon-controllinginterestsTotal equityShare capitalCapital surplusTreasury sharesOther components of equityRetainedearningsTotal equityattributable to ownersof the parentcompanyMillions of yenEquity attributable to owners of the parent companyNon-controllinginterestsTotal equityShare capitalCapital surplusTreasury sharesOther components of equityRetainedearningsTotal equityattributable to ownersof the parentcompany

Consolidated Statement of Cash Flows

Years ended March 31, 2016 and 2017:

Thousands of U.S. dollarsYear ended March 31,Notes201620172017Cash flows from operating activitiesProfit for the period46,06748,426431,642Depreciation and amortisation45,92343,679389,330Impairment loss and reversal of impairment loss(2,210)2392,130Finance (income) costs, net2,6004754,233Share of (profit) loss of investments accounted for using the equitymethod(104)(53)(472)Loss (gain) on sales and disposal of property, plant and equipment,intangible assets and investment property, net(6,886)96855Income taxes45,42118,461164,551Decrease (increase) in trade receivables10,661(3,691)(32,899)Decrease (increase) in inventories6,610(10,729)(95,632)Increase (decrease) in trade payables(8,915)10,89297,085Increase (decrease) in net defined benefit liabilities1,5141561,390Other, net(3,215)8,39974,884Subtotal137,468116,3521,037,097Interest and dividend income received1,6641,41412,603Interest expenses paid(1,218)(981)(8,744)Payments for loss on litigation(4,144)--Income taxes paid(20,715)(19,910)(177,484)Net cash provided by (used in) operating activities113,05496,873863,472Cash flows from investing activitiesProceeds from sales of investment securities513,10327,658Purchase of property, plant and equipment(59,614)(70,637)(629,619)Proceeds from sales of property, plant and equipment5827466,649Purchase of intangible assets(6,538)(6,899)(61,493)Proceeds from sales of intangible assets3124213Proceeds from sales of investment property13,9691,0889,697Purchase of investments in subsidiaries(500)(2,743)(24,449)Other, net460(441)(3,930)Net cash provided by (used in) investing activities(51,558)(75,759)(675,274)Cash flows from financing activitiesNet increase (decrease) in current borrowings(1,819)(14,374)(128,151)Proceeds from non-current borrowings-5004,456Repayment of non-current borrowings(86)(500)(4,456)Proceeds from issuance of bonds issued-49,759443,524Redemption of bonds issued(40,000)(30,000)(267,403)Payments of lease obligations(103)(101)(900)Dividends paid25(25,044)(21,299)(189,847)Dividends paid to non-controlling interests(111)(236)(2,103)Payments for purchase of subsidiaries’ equity from non-controllinginterests-(97)(863)Purchase of treasury shares(6)(10,340)(92,165)Net cash provided by (used in) financing activities(67,171)(26,691)(237,908)Effect of exchange rate changes on cash and cash equivalents(9,155)(3,139)(27,980)Net increase (decrease) in cash and cash equivalents(14,832)(8,716)(77,690)Cash and cash equivalents at beginning of period8245,330230,4982,054,532Cash and cash equivalents at end of period8230,498221,7821,976,842Millions of yenYear ended March 31,

Notes to Consolidated Financial Statements

1. Reporting Entity

Seiko Epson Corporation (the “Company”) is a stock corporation domiciled in Japan. The addresses of the
Company’s registered head office and principal business offices are available on the Company’s website
(http://global.epson.com/). The details of businesses and principal business activities of the Company and its
affiliates (“Epson”) are stated in “7. Segment Information.”

2. Basis of Preparation

(1) Compliance with IFRS
Epson’s consolidated financial statements are prepared in accordance with International Financial Reporting
Standards (hereinafter referred to as “IFRS”) as issued by the International Accounting Standards Board which are
applied based on the provision of Article 93 of Ordinance on Terminology, Forms and Preparation Methods of
Consolidated Financial Statements, as Epson meets the criteria of a “Specified Companies applying Designated
IFRS” defined under Article 1-2 of Ordinance on Terminology, Forms and Preparation Methods of Consolidated
Financial Statements.

(2) Basis of Measurement
Except for the financial instruments stated in “3. Significant Accounting Policies,” Epson’s consolidated financial
statements are prepared on the cost basis.

(3) Functional Currency and Presentation Currency
Epson’s consolidated financial statements are presented in Japanese yen (hereinafter referred to as “yen” or “¥”),
which is the functional currency of the Company. The units are in millions of yen unless otherwise noted, and
figures less than one million yen are rounded down.
The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of
readers outside Japan and have been made at the rate of ¥112.19 to U.S. $1 as of March 31, 2017.

(4) Reporting Period of Subsidiaries
The fiscal year end date of certain overseas subsidiaries is December 31, and Epson consolidates financial results
of those subsidiaries in conformity with the provisional settlement of accounts as of the consolidated fiscal year
end.

(5) Changes in Presentation
The presentation of certain items in the consolidated financial statements has been changed from the fiscal year
2016. The changes are made to aim for improving the presentation clear and understandable for users of the
consolidated financial statements.
Other related presentation has been changed along with the changes of the consolidated financial statements.
Comparative information in respect of the preceding period of the items has also been changed in presentation.

Changes in presentation of financial liabilities in Consolidated Statement of Financial Position

Before the changes

After the changes

Other financial liabilities

Bonds issued, borrowings and lease liabilities

Other financial liabilities

3. Significant Accounting Policies

(1) Basis of Consolidation
Consolidated financial statements of Epson include financial statements of the Company and subsidiaries, and
interests in investments in associates and joint ventures.

(A) Subsidiaries
A subsidiary is an entity that is controlled by Epson. Epson controls the entity when it is exposed, or has rights, to
variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. The acquisition date of a subsidiary is the date on which Epson obtains control of the subsidiary,
and the subsidiary is included in the consolidation from the date of acquisition until the date on which Epson loses
control.
All intergroup balances, transactions, unrealised profit or loss arising from intergroup transaction are eliminated on
consolidation. Comprehensive income for subsidiaries is attributed to the owners of the parent company and to the
non-controlling interests even if this results in the non-controlling interests having a deficit balance.

(B) Associates
An associate is an entity over which Epson has significant influence that is the power to participate in the financial
and operating policy decisions of the entity. Investments in associates are accounted for using the equity method
from the date on which Epson has the significant influence until the date on which it ceases to have the significant
influence.

(C) Joint Ventures
A joint venture is a joint arrangement whereby Epson and the other parties that have joint control of the
arrangement have rights to the net assets of the arrangement. The joint control is the contractually agreed sharing of
control of an arrangement, which exists only when decisions about the relevant activities, that significantly affect
the returns of the arrangement, require the unanimous consent of the parties sharing control. Epson accounts for
that investment using the equity method.

(2) Business Combinations
Each business combination is accounted for by applying the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of
the assets transferred by Epson, the liabilities incurred by Epson to former owners of the acquiree and the equity
interests issued by Epson. Goodwill is recognised in the consolidated statement of financial position, as the excess
of the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
fair value of the Epson’s previously held equity interest in the acquiree over the net of the acquisition-date amounts
of the identifiable assets acquired and the liabilities assumed. If the difference is a negative monetary value, the
resulting gain is immediately recognised as profit in the consolidated statement of comprehensive income.
Acquisition-related costs incurred are recognised as expenses except for the costs to issue debt or equity securities.

(3) Foreign Currency Translation
Consolidated financial statements of Epson are presented in Japanese yen, which is the functional currency of the
Company. Each company in Epson determines its functional currency and measures its results and financial
position in that currency.
A foreign currency transaction is translated into the functional currency at a spot exchange rate at the date of the
transaction or a rate that approximates the actual rate at the date of the transaction. Foreign currency monetary
items are translated using the closing rate. Exchange differences arising on the settlement of monetary items or on
translating monetary items are recognised in profit or loss. However, exchange differences arising on financial
instruments designated as hedging instruments for net investments in foreign operations, financial assets measured
at fair value through other comprehensive income, and cash flow hedges are recognised in other comprehensive
income.
Assets and liabilities of foreign operations are translated into Japanese yen at the closing date, while income and
expenses of foreign operations are translated into Japanese yen at exchange rates at the dates of the transactions or
a rate that approximates the exchange rates at the dates of the transactions. All resulting exchange differences are
recognised in other comprehensive income. On the disposal of a foreign operation, the cumulative amount of the
exchange differences relating to that foreign operation is recognised in profit or loss in the period of disposition.

(4) Financial Instruments
Epson accounts for financial instruments in accordance with IFRS 9 “Financial Instruments” (announced in
November 2009, revised in October 2010), which Epson has early adopted.

(A) Financial Assets

(i) Initial Recognition and Measurement
Financial assets are classified into financial assets measured at fair value and amortised cost at initial recognition.

Financial assets are classified as financial assets measured at amortised cost if both of the following conditions
are met. Otherwise, they are classified as financial assets measured at fair value.

(a) The asset is held within a business model whose objective is to hold assets in order to collect contractual
cash flows.

(b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.

For financial assets measured at fair value, each equity instrument is designated as measured at fair value through
profit or loss or as measured at fair value through other comprehensive income, except for equity instruments
held for trading purposes that must be measured at fair value through profit or loss. Such designations are applied
continuously.
All financial assets are initially measured at fair value plus transaction costs that are directly attributable to the
financial assets, except when classified in the category of financial assets measured at fair value through profit or
loss.
Epson recognises trade and other receivables on the date they are originated. All other financial assets are
recognised on the trade date when Epson becomes a party to the contractual provisions of the instrument.

(ii) Subsequent Measurement
After initial recognition, financial assets are measured based on the classification as follows:

(a) Financial Assets Measured at Amortised Cost
Financial assets measured at amortised cost are measured at amortised cost using the effective interest method.

(b) Financial Assets Measured at Fair Value
Financial assets other than those measured at amortised cost are measured at fair value.
Changes in fair value of financial assets measured at fair value are recognised in profit or loss. However,
changes in fair value of equity instruments designated as measured at fair value through other comprehensive
income are recognised in other comprehensive income and the cumulative change in fair value in other
comprehensive income is transferred to retained earnings when equity instruments are derecognised or the
decline in their fair value is significant. Dividends on the financial assets are recognised in profit or loss for
each fiscal year.

(iii) Derecognition
Financial assets are derecognised when the contractual rights to the cash flows from them expire or when they are
transferred in transactions in which substantially all the risks and rewards of ownership are transferred.

(B) Impairment of Financial Assets
At the end of each fiscal year, Epson assesses whether there is any objective evidence that financial assets
measured at amortised cost are impaired. Evidence of impairment includes significant financial difficulty of the
borrower or a group of borrowers, a default or delinquency in interest or principal payments, and bankruptcy of the
borrower. Epson assesses whether objective evidence of impairment exists individually for financial assets that are
individually significant and collectively for financial assets that are not individually significant.
If there is any objective evidence that impairment losses on financial assets measured at amortised cost have been
incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows.
When impairment is recognised, the carrying amount of the financial asset is reduced by an allowance account and
impairment loss is recognised in profit or loss. If the amount of the impairment loss provided decreases due to an
event occurring after the impairment was recognised, the previously recognised impairment loss is reversed in
profit or loss through the allowance account.

(i) Initial Recognition and Measurement
Financial liabilities are classified into financial liabilities measured at fair value through profit or loss and
financial liabilities measured at amortised cost. Epson determines the classification at initial recognition.

All financial liabilities are measured at fair value at initial recognition. However, financial liabilities measured at
amortised cost are measured at cost after deducting transaction costs that are directly attributable to the financial
liabilities.

(ii) Subsequent Measurement
After initial recognition, financial liabilities are measured based on the classification as follows:

(a) Financial Liabilities Measured at Fair Value through Profit or Loss
Financial liabilities measured at fair value through profit or loss include financial liabilities designated as
measured at fair value through profit or loss at initial recognition.

(b) Financial Liabilities Measured at Amortised Cost
Financial liabilities measured at amortised cost are measured at amortised cost using the effective interest
method.

(iii) Derecognition
Financial liabilities are derecognised when the obligation is discharged, canceled or expired.

(D) Offsetting a Financial Asset and a Financial Liability
A financial asset and a financial liability are offset and the net amount presented in the consolidated statement of
financial position when there is a legally enforceable right to set off the recognised amounts and Epson intends
either to settle on a net basis or to realise the asset and settle the liability simultaneously.

(E) Derivatives Accounting
Epson utilizes derivatives, including forward foreign exchange contracts and non-deliverable forwards, to hedge
foreign exchange and interest rate risks. These derivatives are initially measured at fair value when the contract is
entered into, and are subsequently remeasured at fair value.
Changes in fair value of derivatives are recognised in profit or loss in the consolidated statement of comprehensive
income. However, the gains or losses on hedging instruments relating to the effective portion of cash flow hedges
and hedges of net investments in foreign operations are recognised in other comprehensive income in the
consolidated statement of comprehensive income.

(F) Hedge Accounting
At the inception of a hedge, Epson formally designates and documents the hedging relationship to which hedge
accounting is applied and the objectives and strategies of risk management for undertaking the hedge. The
documentation includes identification of hedging instruments, the hedged items or transactions, the nature of the
risks being hedged and how the hedging instrument’s effectiveness is assessed in offsetting the exposure to changes
in the hedged item’s fair value or cash flows attributable to the hedged risks. Even though these hedges are
expected to be highly effective in offsetting changes in fair value or cash flows, they are assessed on an ongoing
basis and determined actually to have been highly effective throughout the financial reporting periods for which the
hedges were designated. Epson classifies hedging relationships that meet the qualifying criteria for hedge
accounting in the following categories and applies hedge accounting to the hedging relationships.

(i) Fair Value Hedge
The gain or loss on the derivative is recognised in profit or loss in the consolidated statement of comprehensive
income. The hedging gain or loss on the hedged items attributable to the hedged risks adjust the carrying amount
of the hedged item and is recognised in profit or loss in the consolidated statement of comprehensive income.

(ii) Cash Flow Hedge
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised
in other comprehensive income in the consolidated statement of comprehensive income, while the ineffective
portion is recognised immediately in profit or loss in the consolidated statement of comprehensive income.
The amounts of hedging instruments recognised in other comprehensive income are reclassified to profit or loss
when the transactions of the hedged items affect profit or loss. In cases where hedged items result in the
recognition of non-financial assets or liabilities, the amounts recognised in other comprehensive income are
accounted for as adjustments to the initial carrying amount of non-financial assets or liabilities.
When forecast transactions or firm commitments are no longer expected to occur, any related cumulative gains or
losses that have been recognised in other comprehensive income are reclassified to profit or loss. When hedging
instruments expire, are sold, terminated or exercised without the replacement or rollover of other hedging
instruments, or when the hedge designation is revoked, amounts that have been recognised in other

comprehensive income continue to be recognised in equity until the forecast transactions or firm commitments
occur.

(iii) Hedges of a Net Investment in Foreign Operation
Hedges of a net investment in foreign operation are accounted for similarly to cash flow hedges. The portion of
the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other
comprehensive income in the consolidated statement of comprehensive income, while the ineffective portion is
recognised in profit or loss in the consolidated statement of comprehensive income. On the disposal of the
foreign operation, the cumulative gain or loss on the hedging instrument relating to the effective portion of the
hedge that has been recognised in other comprehensive income is reclassified from equity to profit or loss.

(G) Fair Value of Financial Instruments
Fair value of financial instruments that are traded in an active market as of the end of fiscal year refers to quoted
market prices or dealer quotations.
If there is no active market, fair value of financial instruments is determined using appropriate valuation models.

(5) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits, and short-term, highly liquid investments that
are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value
as such that has a short maturity of three months or less from the date of acquisition.

(6) Inventories
The cost of inventories includes all costs of purchase, costs of conversion and other costs incurred in bringing the
inventories to their present location and condition.
Inventories are measured at the lower of cost or net realizable value, and the cost of inventories is assigned by
using the weighted-average cost formula. Net realizable value is the estimated selling price in the ordinary course
of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(7) Property, Plant and Equipment
The cost of property, plant and equipment includes any costs directly attributable to the acquisition of the asset and
dismantlement, removal and restoration costs, as well as borrowing costs eligible for capitalisation.
After recognition as an asset, property, plant, and equipment is measured by using the cost model and is carried at
its cost less any accumulated depreciation and any accumulated impairment losses.
Except for assets that are not subject to depreciation such as land, assets are depreciated using the straight-line
method over their estimated useful lives. The estimated useful lives of major assets are as follows:
• Buildings and structures: 10 to 35 years
• Machinery and vehicles: 2 to 12 years
The estimated useful lives, depreciation method and residual value are reviewed at each fiscal year end and, if
expectations differ from previous estimates, the effect of changes in accounting estimates is recognised
prospectively.

(8) Intangible Assets

(A) Goodwill
Goodwill acquired in a business combination is measured at the amount recognised at the acquisition date less any
accumulated impairment losses.
Goodwill is not amortised and allocated to a cash-generating unit that is identified according to locations and types
of businesses. The cash-generating unit to which goodwill has been allocated is tested for impairment annually, and
whenever there is an indication that the unit may be impaired. An impairment loss is recognised in profit or loss in
the consolidated statement of comprehensive income and not reversed in a subsequent period.

(B) Intangible Assets
The cost of a separately acquired intangible asset is measured initially at cost, and the cost of intangible asset
acquired in a business combination is its fair value at the acquisition date. The cost of internally generated
intangible asset is the sum of expenditure incurred from the date when the intangible asset first meets the
recognition criteria.
After initial recognition, an intangible asset is measured by using the cost model and is carried at its cost less any
accumulated amortisation and any accumulated impairment losses.
An intangible asset with a finite useful life is amortised using the straight-line method over its estimated useful life.

The estimated useful life of major intangible asset with a finite useful life is as follows:
• Software: 3 to 10 years
The estimated useful lives and amortisation method are reviewed at each fiscal year end and, if expectations differ
from previous estimates, the effect of changes in accounting estimates is recognised prospectively.
An intangible asset with an indefinite useful life or an intangible asset not yet available for use are not amortised
and tested for impairment annually, and whenever there is an indication that the intangible asset may be impaired.

(9) Leases
Epson classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to
ownership of an asset and a lease as an operating lease if it does not transfer substantially all the risks and rewards
incidental to ownership of an asset.
At the commencement of the lease term, finance leases are recognised as assets and liabilities in the consolidated
statement of financial position at amounts equal to the fair value of the leased property or, if lower, the present
value of the minimum lease payments, each determined at the inception of the lease. Minimum lease payments are
apportioned between the finance charge and the reduction of the outstanding liability. The asset is depreciated
using the straight-line method over the shorter of the lease term and its estimated useful life which is consistent
with that for depreciable assets that are owned. Contingent rents are recognised as expenses in the periods in which
they are incurred.
Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term
in the consolidated statement of comprehensive income.
Determining whether an arrangement is, or contains, a lease is based on the substance of the arrangement and
requires an assessment of whether fulfilment of the arrangement is dependent on the use of a specific asset or assets
(the asset) and the arrangement conveys a right to use the asset.

(10) Investment Property
Investment property is property held to earn rentals or for capital appreciation or both.
After recognition as an asset, investment property is measured by using the cost model and is carried at its cost less
any accumulated depreciation and any accumulated impairment losses.
Except for assets that are not subject to depreciation such as land, investment property is depreciated using the
straight-line method over its estimated useful life. The estimated useful life of major investment properties that are
subject to depreciation is 35 years.

(11) Impairment of Non-financial Assets
Epson assesses whether there is any indication that an asset may be impaired. If any such indication exists, or
irrespective of whether there is any indication of impairment, where impairment testing is required, the recoverable
amount of the asset is estimated. If it is not possible to estimate the recoverable amount for each asset, the
recoverable amount of the cash-generating unit to which the asset belongs is determined. The recoverable amount
is measured at the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use.
If carrying amount of an asset or cash-generating unit exceeds its recoverable amount, an impairment loss is
recognised and the carrying amount of the asset is reduced to its recoverable amount. The impairment loss is
recognised in profit or loss. In determining an asset’s value in use, an estimate of the future cash flows expected to
derive from the asset are discounted to the present value, using pretax discount rates that reflect current market
assessments of the time value of money and the risks specific to the asset.
An impairment loss for goodwill is recognised in profit or loss in the consolidated statement of comprehensive
income and not reversed in a subsequent period. Epson assesses whether there is any indication that an impairment
loss recognised in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any
such indication exists, the recoverable amount of that asset is estimated. If the recoverable amount exceeds the
carrying amount of the asset, an impairment loss is reversed to the carrying amount that would have been
determined (net of amortisation or depreciation) if no impairment loss had been recognised for the asset in prior
years.

(12) Non-current Assets Held for Sale and Discontinued Operations
Epson classifies a non-current asset or disposal group as held for sale if its carrying amount will be recovered
principally through a sale transaction rather than through continuing use. The non-current asset or disposal group as
held for sale is available for immediate sale in its present condition and its sale is highly probable when Epson
management commits to a plan to sell the asset or disposal group.
Epson measures the non-current asset or disposal group classified as held for sale at the lower of its carrying
amount and fair value less costs to sell. The non-current asset is not depreciated or amortised while it is classified
as held for sale or while it is part of a disposal group classified as held for sale.
A discontinued operation is a component of an entity, that is a cash-generating unit or a group of cash-generating

units, that either has been disposed of, or is classified as held for sale, and (a) represents a separate major line of
business or geographical area of operations, (b) is part of a single co-ordinated plan to dispose of a separate major
line of business or geographical area of operations or (c) is a subsidiary acquired exclusively with a view to resale.

(13) Post-employment Benefits
Epson has defined benefit plans and defined contribution plans as post-employment benefits plans.
For each defined benefit plan, Epson calculates the present value of defined benefit obligations and the related
current service cost and past service cost, using the projected unit credit method. For a discount rate, a discount
period is set based on the estimated timing of benefit payments in each period, and the discount rate is determined
by reference to market yields as of the end of fiscal year on high quality corporate bonds for the period
corresponding to the discount period. The net defined benefit liability (asset) is measured by deducting the fair
value of any plan assets (including adjustments of the net defined benefit asset and the asset ceiling, if necessary)
from the present value of the defined benefit obligation. Net interest on the net defined benefit liability (asset) is
recognised in profit or loss. Remeasurements of the net defined benefit liability (asset) are recognised in other
comprehensive income and transferred to retained earnings immediately. Past service cost is recognised as an
expense at the earlier of when a plan amendment or curtailment occurs and when any related restructuring costs or
termination benefits are recognised.
The contribution payable to a defined contribution plan is recognised as an expense.

(14) Share-based Payment
The Company has employed a framework referred to as BIP (Board Incentive Plan) trust as performance-linked
equity-settled share-based payment plan for eligible officers. The shares of the Company held by the trust are
recognised as treasury shares. The Company measures the service received at the fair value of its shares granted at
the grant date and recognises the consideration as expenses over the vesting period while the corresponding amount
is recognised as an increase in equity.

(15) Provisions
Epson recognises a provision when it has a present legal or constructive obligation as a result of a past event, it is
probable that an outflow of resources embodying economic benefits is required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation.
Where the effect of the time value of money is material, the amount of a provision is measured at the present value
of the expenditures expected to be required to settle the obligation.

(16) Revenue

(A) Sale of Goods
Epson recognises revenue from the sale of goods when the significant risks and rewards of ownership of the goods
have been transferred to the buyers, Epson retains neither continuing managerial involvement nor effective control
over the goods sold, it is probable that the economic benefits associated with the transaction will flow to Epson,
and the amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured
reliably. The risks and rewards of ownership of the goods are usually transferred at the time of delivery of the
goods to customers. The amount of revenue is measured at the fair value of the consideration received or receivable
taking into account the amount of any trade discounts and volume rebates.

(B) Interest
Interest is recognised using the effective interest method.

(D) Royalties
Royalties are recognised on an accrual basis in accordance with the substance of the relevant agreement.

(E) Rendering of Services
Revenues arising from the rendering of services are recognised by reference to the stage of completion of the
transaction as of the end of fiscal year.

(17) Government Grants
A government grant is recognised at fair value when there is reasonable assurance that Epson will comply with the

conditions attaching to it, and that the grant will be received.
Grants related to assets are deducted in calculating the carrying amount of the asset.
Grants related to income are recognised in profit or loss on a systematic basis over the periods in which Epson
recognises as expenses the related costs for which the grants are intended to compensate.

(18) Borrowing Costs
Borrowing costs are interest and other costs incurred in connection with the borrowing of funds.
The borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset,
that necessarily takes a substantial period of time to get ready for their intended use or sale, are capitalized as part
of the cost of that asset. Other borrowing costs are recognised as an expense in the period when they are incurred.

(19) Income Taxes
Income taxes are presented as the total of current tax expense and deferred tax expense.
Current tax is the amount of income taxes payable or recoverable and is recognised as an expense or income and
included in profit or loss for the period, except to the extent that the tax arises from a transaction which is
recognised either in other comprehensive income or directly in equity, or a business combination. For the
calculation of the tax amount, Epson uses the tax rates and tax laws that have been enacted or substantively enacted
by the end of fiscal year.
Deferred tax expense is calculated based on a temporary difference that is the difference between the carrying
amount of the assets or liabilities in the consolidated financial statements and their tax bases. A deferred tax asset is
recognised for all deductible temporary differences, the carryforward of unused tax credits and unused tax losses to
the extent that it is probable that future taxable profit will be available against which they can be utilized. A
deferred tax liability is recognised for all taxable temporary differences.
A deferred tax liability is not recognised for taxable temporary differences when the deferred tax liability arises
from the initial recognition of goodwill or the initial recognition of an asset or liability in a transaction which is not
a business combination and affects neither accounting profit nor taxable profit or loss at the time of the transaction.
Also a deferred tax liability is not recognised for taxable temporary differences associated with investments in
subsidiaries and associates, and interests in joint ventures to the extent that the timing of the reversal of the
temporary difference is controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
A deferred tax asset is not recognised for deductible temporary differences arising from investments in subsidiaries
and associates, and interests in joint ventures to the extent that it is not probable that the temporary difference will
reverse in the foreseeable future and that taxable profit will be available against which the temporary difference can
be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively
enacted by the end of fiscal year.

(20) Treasury Shares
Treasury shares are measured at their cost and deducted from equity. No gain or loss is recognised in profit or loss
on the purchase, sale or cancellation of the treasury shares. Any difference between the carrying amount and the
consideration paid is recognised in equity.

(21) Earnings per Share
Basic earnings per share are calculated by dividing profit or loss attributable to ordinary shareholders of the
Company by the weighted-average number of ordinary shares outstanding during the period, adjusting by the
number of treasury shares. For the purpose of the calculation, the shares of the Company held by BIP trust are
excluded because the shares are accounted as treasury shares. For the purpose of calculating diluted earnings per
share, the rights for the treasury shares held by the trust to be received by eligible officers are adjusted.

(22) Dividends
Year-end dividend distributions to the shareholders of the Company are recognised as liabilities in the period in
which the distribution is approved at the Annual Shareholders’ Meeting. Interim dividend distributions are
recognised as liabilities in the period in which the distribution is approved by Epson’s Board of Directors.

4. Significant Accounting Estimates and Judgments

The preparation of Epson’s consolidated financial statements includes management estimates and assumptions in
order to measure income, expenses, assets and liabilities, and disclosed contingencies as of the fiscal year end date.
These estimates and assumptions are based on the best judgment of management in light of historical experience
and various factors deemed to be reasonable as of the fiscal year end date. Given their nature, actual results may
differ from those estimates and assumptions.
The estimates and assumptions are continuously reviewed by management. The effects of a change in estimates and
assumptions are recognised in the period of the change and subsequent periods.
Among the above estimates and assumptions, the following were items that may have a material effect on the
amounts recognised in Epson’s consolidated financial statements:

(1) Impairment of Property, Plant and Equipment, Goodwill, Intangible Assets and Investment
Property
Epson performs an impairment test for property, plant and equipment, goodwill, intangible assets and investment
property when there is any indication that the recoverable amount has fallen below the carrying amount of the
assets or when it is required annually.
The impairment test is performed by comparing the carrying amount and the recoverable amount of assets. If the
recoverable amount falls below the carrying amount, impairment losses are recognised. Recoverable amount is
determined with certain assumptions of useful life, future cash flow of an asset, discount rate and long-term growth
rate. These assumptions are based on the best estimates and judgments of management, but they could be affected
by variable and uncertain future economic conditions. Any changes in these assumptions could have a material
impact on Epson’s consolidated financial statements in future periods.
The method for calculating the recoverable amount is stated in “13. Property, Plant and Equipment.”

(2) Post-employment Benefits
Epson has several types of post-employment benefit plans, including defined benefit plans.
The present value of defined benefit obligations on each of these plans and the related service costs and others are
calculated based on actuarial assumptions. These actuarial assumptions require estimates and judgments on
variables, such as discount rates.
The actuarial assumptions are determined based on the best estimates and judgments of management, but they
could be affected by variable and uncertain future economic conditions. Any changes in these assumptions could
have a material impact on Epson’s consolidated financial statements in future periods.
These actuarial assumptions and related sensitivity analysis are stated in “23. Post-employment Benefits.”

(3) Provisions
Epson recognises various provisions, including provisions for product warranties and provisions for loss on
litigation, in the consolidated statement of financial position.
These provisions are recognised based on the best estimates of the expenditures required to settle the obligations,
taking into account risks and uncertainty related to the obligations as of the fiscal year end date.
Expenditures necessary for settling the obligations are calculated by taking all possible future results into account;
however, they may be affected by unexpected events or changes in conditions which may have a material impact
on Epson’s consolidated financial statements in future periods.
The nature and amount of recognised provisions are stated in “21. Provisions.”

(4) Income Taxes
Epson, which conducts business around the world, makes reasonable estimates of income tax to be paid to local tax
authorities in accordance with local laws and regulations, and recognises income taxes payable and current tax
expense based on these estimates.
Calculating income taxes payable and current tax expense requires estimates and judgments on various factors,
including, for example, the interpretation of tax regulations by taxable entities and the tax authority in the
jurisdiction or experience of prior tax investigation.
Therefore, there may be differences between the amount recognised as income taxes payable and current tax
expense and the amount of actual income taxes payable and current tax expense. These differences may have a
material impact on Epson’s consolidated financial statements in future periods.
In addition, deferred tax assets are recognised to the extent that it is probable that taxable income will be available
against which deductible temporary differences can be utilised. In recognising the deferred tax assets, Epson judges
the possibility of future taxable income and reasonably estimate the timing and amount of future taxable income

based on the business plan. The timing and amount of taxable income may be affected by variable and uncertain
future economic conditions, and changes could have a material impact on Epson’s consolidated financial
statements in future periods.
The content and amounts related to income taxes are stated in “18. Income Taxes.”

(5) Contingencies
With regard to contingencies, any items that may have a material impact on business in the future are disclosed in
light of all the available evidence as of the fiscal year end date and by taking into account the probability of these
contingencies and their impact on financial reporting.
The content of contingencies is stated in “40. Contingencies.”

5. Changes in Accounting Policies

There is no application of standard and interpretation newly by Epson from the fiscal year 2016.

6. New Standards and Interpretations Not Yet Applied

The new standards, amended standards and new interpretations that have been issued as of the date of approval of
the consolidated financial statements, but have not yet been applied by Epson as of March 31, 2017 are as follows.
The potential impacts that application of these standards and interpretations will have on the consolidated financial
statements are currently evaluated by Epson.

IFRS

IFRS 9

Financial
Instruments

IFRS 15 Revenue from
Contracts with
Customers

IFRS 16 Leases

Date of mandatory
application
(from the fiscal year
beginning on or
after)

January 1, 2018

Reporting
periods of
application by
Epson
(The reporting
period ending)
March 31, 2019 Amendments to hedge accounting

Description of new and revised standards

Limited changes to classification and
measurement of financial assets, and
introduction of an expected credit loss
impairment model

January 1, 2018

March 31, 2019 Amendments to accounting treatment for
recognising revenue

January 1, 2019

To be determined Amendments to the principles for the

recognition, measurement, presentation
and disclosure of leases
Recognision of assets and liabilities for
most leases by lessees
Substantially unchanged in lessor
accounting

7. Segment Information

(1) Outline of Reportable Segments
The reportable segments of Epson are determined based on the operating segments that are components of Epson
about which separate financial information is available and are evaluated regularly by the Board of Directors in
deciding how to allocate resources and in assessing performance.
The reportable segments of Epson are composed of
three segments: “Printing Solutions,” “Visual
Communications” and “Wearable & Industrial Products.” They are determined by types of products, nature of
products, and markets.
Epson conducts development, manufacturing and sales within its reportable segments as follows:

Reportable segments

Printing Solutions

Main products
Inkjet printers, serial impact dot matrix printers, page printers, color image scanners,
large-format inkjet printers, industrial inkjet printing systems, printers for use in POS
systems, label printers and related consumables, office papermaking systems, personal
computers and others.

Visual Communications 3LCD projectors, HTPS-TFT panels for 3LCD projectors, smart eyewear and others.
Wearable & Industrial
Products

Watches, watch movements, sensing equipment, industrial robots, IC handlers, crystal
units, crystal oscillators, quartz sensors, CMOS LSIs, metal powders, surface finishing
and others.

(2) Revenues and Performances for Reportable Segments
Revenues and performances for reportable segments were as follows. Transactions between the segments were
mainly based on prevailing market prices.

FY2015: Year ended March 31, 2016

Millions of yen

Printing
Solutions

Reportable segments
Visual
Communi-
cations

Wearable &
Industrial
Products

Subtotal

Other
(Note 2)

Adjustments
(Note 3)

Consolidated

Revenue

External revenue

736,033

183,997

164,384 1,084,415

Inter-segment revenue

336

6,031

6,403

753

651

7,312 1,092,481

(7,055)

Total revenue

736,369

184,033

170,415 1,090,819

1,404

257 1,092,481

Segment profit (loss)
(Business profit)
(Note 1)

104,740

15,593

9,817

130,150

(566)

(44,632)

84,951

Other operating income
Profit from operating activities

(expense)

Finance income (costs), net
Share of profit of
investments accounted for
using the equity method

Profit before tax

9,074

94,026

(2,600)

104

91,530

Other
(Note 2)

Adjustments
(Note 4)

Consolidated

Printing
Solutions

Reportable segments
Visual
Communi-
cations

Wearable &
Industrial
Products

Subtotal

(24,183)

(7,420)

(8,171)

(39,775)

(21)

(5,602)

(45,399)

(251)

(406)

(203)

(861)

3,071

2,210

Other items

Depreciation and
amortisation expense
Impairment loss and
Reversal of impairment
loss on other than
financial assets
Segment assets

Capital expenditures

36,623

10,763

10,293

348,610

108,097

130,867

587,576
57,680

638

353,125

941,340

11,701

69,423

(Note 1) Segment profit (loss) (Business profit) is calculated by subtracting Cost of sales and Selling, general and
administrative expenses from Revenue.

(Note 2) “Other” consists of the intra-group services.

(Note 3) “Adjustments” to Segment profit (loss) (Business profit) of (¥44,632) million comprised “Eliminations”
of ¥470 million and “Corporate expenses” of (¥45,102) million. “Corporate expenses” included expenses relating
to research and development for basic technology, new businesses and general corporate expenses which are not
attributed to reportable segments.

(Note 4) “Adjustments” to Segment assets of ¥353,125 million comprised “Eliminations” of (¥3,999) million and
“Corporate assets” of ¥357,124 million.

FY2016: Year ended March 31, 2017

Millions of yen

Printing
Solutions

Reportable segments

Visual
Communi-
cations

Wearable &
Industrial
Products

Subtotal

Other
(Note 2)

Adjustments
(Note 3)

Consolidated

Revenue

External revenue

686,353

179,642

150,674 1,016,671

Inter-segment revenue

265

7,873

8,179

787

721

7,398 1,024,856

(8,901)

Total revenue

686,619

179,682

158,548 1,024,850

1,509

(1,502) 1,024,856

Segment profit (loss)
(Business profit)
(Note 1)

84,127

16,142

7,813

108,084

(482)

(41,794)

65,807

(expense)

Other operating income
Profit from operating activities

Finance income (costs), net

Share of profit of
investments accounted for
using the equity method

Profit before tax

2,085

67,892

(475)

67,470

Other items

Depreciation and
amortisation expense
Impairment loss and
Reversal of impairment
loss on other than
financial assets
Segment assets

Printing
Solutions

Reportable segments
Visual
Communi-
cations

Wearable &
Industrial
Products

Subtotal

Other
(Note 2)

Adjustments
(Note 4)

Consolidated

(23,079)

(7,885)

(7,956)

(38,920)

(22)

(4,272)

(43,215)

(45)

(0)

(161)

(206)

(32)

(239)

376,782

115,024

133,982

625,790

299

348,297

974,387

Capital expenditures

43,930

10,201

9,189

63,321

11,995

75,319

(Note 1) Segment profit (loss) (Business profit) is calculated by subtracting Cost of sales and Selling, general and
administrative expenses from Revenue.

(Note 2) “Other” consists of the intra-group services.

(Note 3) “Adjustments” to Segment profit (loss) (Business profit) of (¥41,794) million comprised “Eliminations”
of ¥496 million and “Corporate expenses” of (¥42,291) million. “Corporate expenses” included expenses relating
to research and development for basic technology, new businesses and general corporate expenses which are not
attributed to reportable segments.

(Note 4) “Adjustments” to Segment assets of ¥348,297 million comprised “Eliminations” of (¥3,992) million and
“Corporate assets” of ¥352,290 million.

FY2016: Year ended March 31, 2017

Thousands of U.S. dollars

Printing
Solutions

Reportable segments
Visual
Communi-
cations

Wearable &
Industrial
Products

Subtotal

Other
(Note 2)

Adjustments
(Note 3)

Consolidated

6,117,791 1,601,230 1,343,025 9,062,046

7,014

65,943 9,135,003

2,363

356

70,184

72,903

6,436

(79,339)

6,120,154 1,601,586 1,413,209 9,134,949

13,450

(13,396) 9,135,003

749,881

143,880

69,640

963,401

(4,305)

(372,528)

586,568

Other operating income

(expense)

18,583

Profit from operating activities

605,151

Finance income (costs), net

(4,233)

Share of profit of
investments accounted for
using the equity method

Profit before tax

472

601,390

Other
(Note 2)

Adjustments
(Note 4)

Consolidated

Printing
Solutions

Reportable segments
Visual
Communi-
cations

Wearable &
Industrial
Products

Subtotal

(205,714)

(70,282)

(70,915)

(346,911)

(196)

(38,087)

(385,194)

(401)

(0)

(1,435)

(1,836)

(294)

(2,130)

3,358,447 1,025,260 1,194,241 5,577,948

2,665 3,104,537 8,685,150

Revenue

External revenue
Inter-segment
revenue
Total revenue

Segment profit (loss)
(Business profit)
(Note 1)

Other items

Depreciation and
amortisation expense
Impairment loss and
Reversal of impairment
loss on other than
financial assets
Segment assets

Capital expenditures

391,577

90,926

81,905

564,408

106,927

671,352

(Note 1) Segment profit (loss) (Business profit) is calculated by subtracting Cost of sales and Selling, general and
administrative expenses from Revenue.

(Note 2) “Other” consists of the intra-group services.

(Note 3) “Adjustments” to Segment profit (loss) (Business profit) of ($372,528) thousand comprised
“Eliminations” of $4,430 thousand and “Corporate expenses” of ($376,958) thousand. “Corporate expenses”
included expenses relating to research and development for basic technology, new businesses and general corporate
expenses which are not attributed to reportable segments.

(Note 4) “Adjustments” to Segment assets of $3,104,537 thousand comprised “Eliminations” of ($35,582)
thousand and “Corporate assets” of $3,140,119 thousand.

(3) Geographic Information
The regional breakdowns of non-current assets and external revenues as of each fiscal year end were as follows:

Non-current Assets

Japan
The Philippines
Indonesia
China
Other

Total

Millions of yen
March 31,

2016

2017

Thousands of U.S. dollars

March 31,
2017

168,114
26,404
23,281
25,704
27,833
271,338

188,412
31,436
29,146
25,048
30,918
304,962

1,679,401
280,203
259,791
223,264
275,624
2,718,283

(Note) Non-current assets, excluding Other financial assets, Deferred tax assets and retirement benefits assets, are
segmented by the location of the assets.

External Revenue

Japan
The United States
China
Other

Total

Millions of yen
Year ended March 31,
2017
2016

Thousands of U.S. dollars

Year ended March 31,
2017

264,012
227,849
144,466
456,152
1,092,481

251,395
202,416
129,834
441,210
1,024,856

2,240,796
1,804,224
1,157,268
3,932,715
9,135,003

(Note) Revenue is segmented by country based on the location of the customers.

(4) Major Customers Information
Epson had no transactions with a single external customer amounting to 10% or more of total external revenue.

8. Cash and Cash Equivalents

The breakdown of “Cash and cash equivalents” was as follows:

Cash and deposits
Short-term investments
Total

Millions of yen
March 31,

2016
102,404
128,093
230,498

2017
105,188
116,593
221,782

Thousands of
U.S. dollars
March 31,
2017
937,588
1,039,254
1,976,842

9. Trade and Other Receivables

The breakdown of “Trade and other receivables” was as follows:

Notes and trade receivables
Other receivables
Allowance account for credit losses
Total

Millions of yen
March 31,

2016
140,623
12,463
(1,426)
151,660

2017
143,060
14,071
(1,427)
155,704

Thousands of
U.S. dollars
March 31,
2017
1,275,158
125,420
(12,719)
1,387,859

Trade and other receivables are presented net of the allowance account for credit losses in the consolidated
statement of financial position.
Trade and other receivables are classified as financial assets measured at amortised cost.

10. Inventories

The breakdown of “Inventories” was as follows:

Merchandise and finished goods
Work in process
Raw materials
Supplies
Total

Millions of yen
March 31,

2016
122,013
52,256
20,363
6,975
201,608

2017

123,050
55,366
22,403
7,692
208,512

Thousands of
U.S. dollars
March 31,
2017
1,096,800
493,502
199,688
68,571
1,858,561

The amount of inventories included in cost of sales recognised as an expense totaled (¥687,289) million and
(¥644,777) million (($5,747,187) thousand) for the years ended March 31, 2016 and 2017, respectively.
Losses recognised as cost of sales as a result of valuations for the years ended March 31, 2016 and 2017 were
(¥29,158) million and (¥31,275) million (($278,768) thousand), respectively. In addition, Epson has no
inventories pledged as collateral.

11. Other Financial Assets

(1) The breakdown of “Other financial assets”

Derivative assets
Equity securities
Bonds receivable
Time deposits
Other
Allowance account for credit losses
Total

Current assets
Non-current assets
Total

Millions of yen
March 31,

2016

2017

1,383
16,060
88
37
6,119
(53)
23,637

1,674
21,962
23,637

449
15,809
75
37
4,985

(57)

21,298

754
20,544
21,298

Thousands of
U.S. dollars

March 31,
2017

4,002
140,903
668
329
44,443
(508)
189,837

6,720
183,117
189,837

Derivative assets are classified as financial assets measured at fair value through profit or loss, excluding a case
where hedge accounting is applied. Equity securities held for other than trading purposes are classified as financial
assets measured at fair value through other comprehensive income, and bonds receivables and time deposits are
classified as financial assets measured at amortised cost.

(2) Names of major equity securities measured at fair value through other comprehensive
income, their fair values and dividends received

Equity securities are held mainly for strengthening relationships with investees. Therefore, they are designated as
financial assets measured at fair value through other comprehensive income.

In order to pursue the efficiency of assets held, sales of financial assets measured at fair value through other
comprehensive income have been carried out (derecognition). The major description is as follows.

Fair valueDividendsreceived (Note)Fair valueFair valueDividendsreceived (Note)NGK Insulators, Ltd.7,8101236,31756,306891Mizuho Financial Group, Inc.2,5221163,06127,284998(Note) Dividends received from the derecognised financial assets during the reporting periods are not included.100112March 31, 2017Dividendsreceived (Note)Millions of yenThousands of U.S. dollarsMarch 31, 2016March 31, 2017FY2015: Year ended March 31, 2016Fair value at thedate of saleAccumulated gainsDividends receivedNGK Insulators, Ltd.---(Note) Accumulated gain or loss recognised as other comprehensive income is transferred to retained earnings when an equity instrument is sold or the decline in its fair value is significant.-Accumulated gainstransferred intoretained earnings(net of tax) (Note)Millions of yen

12. Other Assets

The breakdown of “Other current assets” and “Other non-current assets” was as follows:

Prepaid expense
Advances to suppliers
Other
Total

Current assets
Non-current assets
Total

Millions of yen
March 31,

2016
13,887
1,724
3,845
19,457

14,335
5,122
19,457

2017
13,840
1,502
3,319
18,663

13,176
5,486
18,663

Thousands of
U.S. dollars
March 31,
2017
123,362
13,388
29,653
166,403

117,464
48,939
166,403

FY2016: Year ended March 31, 2017Fair value at thedate of saleAccumulated gainsDividends receivedNGK Insulators, Ltd.2,8842,18350(Note) Accumulated gain or loss recognised as other comprehensive income is transferred to retained earnings when an equity instrument is sold or the decline in its fair value is significant.FY2016: Year ended March 31, 2017Fair value at thedate of saleAccumulated gainsDividends receivedNGK Insulators, Ltd.25,70619,458445(Note) Accumulated gain or loss recognised as other comprehensive income is transferred to retained earnings when an equity instrument is sold or the decline in its fair value is significant.Thousands of U.S. dollarsAccumulated gainstransferred intoretained earnings(net of tax) (Note)14,181Accumulated gainstransferred intoretained earnings(net of tax) (Note)1,591Millions of yen

13. Property, Plant and Equipment

(1) Schedule of Property, Plant and Equipment
The schedules of the cost, accumulated depreciation and accumulated impairment losses, and carrying amount of
“Property, plant and equipment” were as follows:

CostLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of April 1, 2015468,469460,050184,6114,1433,1371,120,412Individual acquisition3,9977,6588,78743,87476465,083Acquisition of subsidiary71725362--1,033Transfer from (to) investmentproperty(182)----(182)Transfer from (to) non-currentassets held for sale(1,267)(40)(111)--(1,418)Sale or disposal(17,675)(10,000)(9,699)(79)(187)(37,641)Exchange differences ontranslation of foreign operations(5,173)(11,160)(7,430)(901)(11)(24,678)Transfer from constructionin progress9,26716,0386,112(31,418)--Other195(1,230)85(534)(1,210)(2,694)As of March 31, 2016458,348461,570182,41815,0842,4921,119,913Individual acquisition3,4777,0198,84250,63851670,494Acquisition of subsidiary31749126-29523Transfer from (to) investmentproperty(100)----(100)Sale or disposal(6,222)(11,908)(12,524)(120)(64)(30,840)Exchange differences ontranslation of foreign operations(1,693)(4,707)(1,244)286(9)(7,368)Transfer from constructionin progress9,75618,11510,832(38,704)--Other620(1,812)(558)(440)(28)(2,219)As of March 31, 2017464,504468,327187,89126,7442,9351,150,402CostLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of March 31, 20164,085,4624,114,1811,625,973134,45022,2139,982,279Individual acquisition30,99262,56378,812451,3594,618628,344Acquisition of subsidiary2,8254361,123-2774,661Transfer from (to) investmentproperty(891)----(891)Sale or disposal(55,459)(106,141)(111,632)(1,069)(589)(274,890)Exchange differences ontranslation of foreign operations(15,090)(41,955)(11,088)2,549(90)(65,674)Transfer from constructionin progress86,959161,46796,550(344,976)--Other5,535(16,142)(4,981)(3,932)(259)(19,779)As of March 31, 20174,140,3334,174,4091,674,757238,38126,17010,254,050Millions of yenThousands of U.S. dollars

(Note) Depreciation expense for Property, plant and equipment was included in Cost of sales and Selling, general
and administrative expenses in the consolidated statement of comprehensive income.

Accumulated Depreciation andAccumulated Impairment LossesLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of April 1, 2015(340,803)(391,441)(159,629)-(1,280)(893,155)Depreciation expense (Note)(8,797)(15,443)(13,888)-(38)(38,168)Impairment losses(725)(149)(357)(161)-(1,395)Acquisition of subsidiary(43)(79)(47)--(169)Transfer to (from) investmentproperty136----136Transfer to (from) non-currentassets held for sale83240106--979Sale or disposal17,4549,5559,373552736,466Exchange differences ontranslation of foreign operations2,3378,7186,393-917,459Other21,18484-1,1242,396As of March 31, 2016(329,606)(387,615)(157,965)(105)(157)(875,449)Depreciation expense (Note)(8,090)(16,441)(13,154)-(21)(37,708)Impairment losses(78)(33)(74)(20)-(206)Acquisition of subsidiary(42)(42)(62)-(17)(165)Transfer to (from) investmentproperty84----84Sale or disposal5,88311,73512,2661052130,011Exchange differences ontranslation of foreign operations8873,8881,032-95,818Other2171,7584370(5)2,406As of March 31, 2017(330,744)(386,751)(157,520)(20)(170)(875,207)Accumulated Depreciation andAccumulated Impairment LossesLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of March 31, 2016(2,937,926)(3,454,987)(1,408,013)(935)(1,410)(7,803,271)Depreciation expense (Note)(72,109)(146,546)(117,247)-(206)(336,108)Impairment losses(705)(294)(659)(178)-(1,836)Acquisition of subsidiary(374)(374)(552)-(170)(1,470)Transfer to (from) investmentproperty748----748Sale or disposal52,437104,599109,332935198267,501Exchange differences ontranslation of foreign operations7,90634,6559,198-9951,858Other1,95315,6623,8950(46)21,464As of March 31, 2017(2,948,070)(3,447,285)(1,404,046)(178)(1,535)(7,801,114)Millions of yenThousands of U.S. dollars

The carrying amount of property, plant and equipment includes the carrying amount of the following leased assets:

(2) Impairment Losses
Epson’s business assets are generally grouped by business segment under the Company’s management accounting
system, and their cash flows are continuously monitored. Assets planned to be sold and idle assets are separately
assessed for impairment on the individual asset level.
Impairment losses recognised in the years ended March 31, 2016 and 2017, represent the losses related to idle
assets that Epson has no plan to use in the future, and the carrying amounts were reduced to the recoverable
amounts. They were recognised as Other operating expense in the consolidated statement of comprehensive
income.
The recoverable amounts of these assets are determined using their fair values less disposal cost, which were
assessed on the basis of reasonable estimates such as a valuation by an external real estate appraiser. The valuation
is made in accordance with the income approach using Level 3 inputs which include the future cash flow.

Carrying AmountLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of April 1, 2015127,66568,60924,9824,1431,856227,257As of March 31, 2016128,74173,95524,45214,9782,335244,463As of March 31, 2017133,75981,57530,37126,7232,764275,195Carrying AmountLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of March 31, 20161,147,536659,194217,960133,51520,8032,179,008As of March 31, 20171,192,263727,124270,711238,20324,6352,452,936Millions of yenThousands of U.S. dollarsLeased AssetsLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesTotalAs of April 1, 20151099876284As of March 31, 20166318846298As of March 31, 20175717830267Leased AssetsLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesTotalAs of March 31, 20165611,6854102,656As of March 31, 20175081,6042672,379Thousands of U.S. dollarsMillions of yen

14. Intangible Assets

The schedules of the cost, accumulated amortisation and accumulated impairment losses, and carrying amount of
“Intangible assets” were as follows:

CostSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of April 1, 201541,58616,3067,4212,3264,10471,744Individual acquisition5,809273571-116,665Acquisition of subsidiary1-23132320Sale or disposal(1,544)-(0)-(33)(1,578)Exchange differences ontranslation of foreign operations(792)-(11)(57)(320)(1,182)Other(303)0(2)-(1,770)(2,075)As of March 31, 201644,75616,5807,9802,5821,99473,894Individual acquisition4,957111,332-3256,627Acquisition of subsidiary4--2,1055942,704Sale or disposal(1,794)(0)--(7)(1,803)Exchange differences ontranslation of foreign operations(285)-(0)7417(194)Other1145910-11494As of March 31, 201747,65117,0509,3234,7612,93681,723CostSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of March 31, 2016398,930147,78571,12923,01417,791658,649Individual acquisition44,1839811,872-2,91659,069Acquisition of subsidiary35--18,7635,30324,101Sale or disposal(15,990)(0)--(80)(16,070)Exchange differences ontranslation of foreign operations(2,540)-(0)659152(1,729)Other1164,09199-984,404As of March 31, 2017424,734151,97483,10042,43626,180728,424Millions of yenThousands of U.S. dollars

(Note) Amortisation expense for Intangible assets was included in Cost of sales and Selling, general and
administrative expenses in the consolidated statement of comprehensive income.

Accumulated Amortisation andAccumulated Impairment LossesSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of April 1, 2015(30,678)(13,255)(5,130)-(3,509)(52,574)Amortisation expense (Note)(4,666)(1,037)(1,363)-(382)(7,449)Impairment losses(31)---(0)(32)Acquisition of subsidiary(0)-(0)-(0)(0)Sale or disposal1,538-0-81,546Exchange differences ontranslation of foreign operations563-9-308881Other142(0)--1,7711,913As of March 31, 2016(33,132)(14,293)(6,484)-(1,805)(55,715)Amortisation expense (Note)(3,714)(739)(1,362)-(79)(5,896)Impairment losses(5)(1)(23)-(1)(32)Acquisition of subsidiary(2)----(2)Sale or disposal1,6880---1,689Exchange differences ontranslation of foreign operations209-0-7217Other40(459)--(10)(429)As of March 31, 2017(34,916)(15,493)(7,870)-(1,888)(60,169)Accumulated Amortisation andAccumulated Impairment LossesSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of March 31, 2016(295,320)(127,399)(57,794)-(16,099)(496,612)Amortisation expense (Note)(33,104)(6,587)(12,121)-(741)(52,553)Impairment losses(44)(8)(233)-(0)(285)Acquisition of subsidiary(17)----(17)Sale or disposal15,0540---15,054Exchange differences ontranslation of foreign operations1,862-0-721,934Other347(4,102)--(79)(3,834)As of March 31, 2017(311,222)(138,096)(70,148)-(16,847)(536,313)Millions of yenThousands of U.S. dollarsCarrying AmountSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of April 1, 201510,9073,0502,2912,32659419,170As of March 31, 201611,6242,2861,4962,58218818,179As of March 31, 201712,7341,5561,4534,7611,04721,553Carrying AmountSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of March 31, 2016103,61020,38613,33523,0141,692162,037As of March 31, 2017113,51213,87812,95242,4369,333192,111Thousands of U.S. dollarsMillions of yen

15. Finance Lease Transactions

Epson leases host computers and computer terminals as a lessee.
The total of future minimum lease payments, future finance costs and their present value for leased assets
recognised based on the finance lease contracts by maturity were as follows:

Not later than 1 year

Total of future minimum lease payments
Future finance costs
Present value

Later than 1 year and not later than 5 years
Total of future minimum lease payments
Future finance costs
Present value

Later than 5 years

Total of future minimum lease payments
Future finance costs
Present value

Total

Total of future minimum lease payments
Future finance costs
Present value

Millions of yen
March 31,

2016

2017

Thousands of
U.S. dollars

March 31,
2017

92
(3)
88

150
(5)
145

0
(0)
0

242
(9)
233

89
(2)
87

131
(2)
128

0
(0)
0

221
(5)
216

793
(12)
781

1,156
(12)
1,144

0
(0)
0

1,949
(24)
1,925

16. Operating Lease Transactions

(1) Future Minimum Lease Payments under Non-cancellable Operating Leases
The total of future minimum lease payments under non-cancellable operating leases was as follows:

Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Total

Millions of yen
March 31,

2016

5,277
11,926
1,046
18,251

2017

5,581
9,989
903
16,474

Thousands of
U.S. dollars
March 31,
2017

49,745
89,047
8,048
146,840

(2) Total of Minimum Lease Payments and Contingent Rents
The total of minimum lease payments and contingent rents of operating lease contracts recognised as an expense
was as follows:

Total of minimum lease payments
Contingent rents

Millions of yen
Year ended
March 31,

2016

8,264
120

2017

8,611
112

Thousands of
U.S. dollars
Year ended
March 31,
2017

76,753
998

17. Investment Property

(1) Schedule of Investment Property
The schedule of the carrying amount of “Investment property” was as follows:

Balance at the beginning of the year
Expenditure after acquisition
Transfer from (to) property, plant and equipment
Depreciation expense
Impairment losses and reversal of impairment losses
Sale or disposal
Exchange differences on translation of foreign operations
Balance at the end of the year
Breakdown of “Balance at the beginning of the year”
Cost
Accumulated depreciation and accumulated impairment
losses
Total
Breakdown of “Balance at the end of the year”
Cost
Accumulated depreciation and accumulated impairment
losses
Total

Millions of yen
Year ended
March 31,

2016

2017

Thousands of
U.S. dollars
Year ended
March 31,
2017

4,758
-
45
(90)
3,637
(6,335)
(46)
1,967

11,595

(6,837)

4,758

4,173

(2,205)

1,967

1,967
-
15
(75)
-
(610)
(8)
1,288

4,173

(2,205)

1,967

2,694

(1,405)

1,288

17,532
-
143
(668)
-
(5,456)
(71)
11,480

37,186

(19,654)

17,532

24,003

(12,523)

11,480

(2) Fair Value
The carrying amount and the fair value of “Investment property” were as follows:

Millions of yen

March 31, 2016

March 31, 2017

Thousands of
U.S. dollars
March 31, 2017

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

Investment property

1,967

1,468

1,288

990

11,480

8,824

The fair value of Investment property is determined on the basis of a valuation conducted by an external real estate
appraiser. The valuation is made in accordance with the income approach using Level 3 inputs which include the
future cash flow.

18. Income Taxes

(1) Deferred Tax Assets and Deferred Tax Liabilities
The breakdown of “Deferred tax assets” and “Deferred tax liabilities” by major causes of their occurrence were as
follows:

Inter-company profits and write downs on
inventories
Carryforward of unused tax losses
Net defined benefit liabilities
Fixed assets (Note 1)
Other

Total deferred tax assets

Undistributed profit
Fixed assets (Note 1)
Other

Total deferred tax liabilities
Net deferred tax assets (Note 2)

Millions of yen
March 31,

2016

2017

Thousands of
U.S. dollars
March 31,
2017

18,995

19,533

174,106

9,032
7,983
6,113
22,947
65,073
(12,922)
(3,078)
(3,486)
(19,488)
45,585

10,828
7,237
5,912
21,582
65,093
(13,590)
(2,668)
(3,705)
(19,965)
45,128

96,514
64,506
52,696
192,390
580,212
(121,133)
(23,781)
(33,043)
(177,957)
402,255

(Note 1) “Fixed assets” include impairment losses and excess of depreciation of property, plant and equipment,
intangible assets and investment property.

(Note 2) The difference between the net amount of deferred tax assets recognised in the years ended March 31,
2016 and 2017, less the respective net amounts of deferred tax assets recognised directly in equity and in other
comprehensive income, is mainly attributable to the impact of foreign exchange movements.

Epson assesses its ability to utilize carryforward of unused tax losses in future periods based on the Mid-Range
Business Plan and financial forecasts approved by the Board of Directors annually. This takes account of Epson’s
medium and long-term strategy and financial plans and the expected future economic outlook. The ability to utilize
carryforward of unused tax losses in future periods for recognising deferred tax assets also takes account of
material tax adjusting items, the expected future taxable income and the period (if any) in which carryforward of
unused tax losses might expire. Epson believes that the recognised deferred tax assets are probable and the tax
benefits can be realised based on the prior taxable income and the expected future taxable income when the
deferred tax assets can be recognised.
Epson does not recognise deferred tax assets for some carryforward of unused tax losses and some deductible
temporary differences. Epson reduces the amount of the deferred tax assets to the extent that it is no longer
probable that the tax benefits can be realised based on an individual analysis of each company’s condition as a
result of assessing the recoverability of the deferred tax assets.
The amounts of carryforward of unused tax losses, for which deferred tax assets have not been recognised, as of
March 31, 2016 and 2017, were ¥64,751 million and ¥57,903 million ($516,115 thousand), respectively. The
amounts of deductible temporary differences, for which deferred tax assets have not been recognised, as of March
31, 2016 and 2017, were ¥324,150 million and ¥143,599 million ($1,279,962 thousand), respectively. The
deductible temporary differences are not expired under present tax laws. The expiration schedule of carryforward
of unused tax losses was as follows:

1st year
2nd year
3rd year
4th year
5th year and thereafter

Total

Millions of yen
March 31,

2016

2017

-
-
-
-
64,751
64,751

-
-
-
-
57,903
57,903

Thousands of
U.S. dollars
March 31,
2017

-
-
-
-
516,115
516,115

Epson has no taxable temporary differences associated with investments in subsidiaries for which deferred tax
liabilities have not been recognised as of March 31, 2016 and 2017.

(2) Tax Expense
“Tax expense” recognised as an expense was as follows:

Current tax expense
Deferred tax expense

Total

Millions of yen
Year ended
March 31,

2016
(19,720)
(25,700)
(45,421)

2017
(18,433)
(27)
(18,461)

Thousands of
U.S. dollars
Year ended
March 31,
2017
(164,301)
(250)
(164,551)

Deferred tax expense increased by ¥1,575 million and decreased by ¥1,791 million ($15,963 thousand) mainly due
to the effect of changes in Japanese applicable tax rates for the years ended March 31, 2016 and 2017, respectively.
Deferred tax expense includes the benefit arising from a previously unrecognised tax loss, tax credit or temporary
difference of a prior period, and expenses or benefits arising from write-downs of deferred tax assets or the reversal
of previous write-downs of deferred tax assets. Due to these effects, the deferred tax expense increased by ¥11,740
million and decreased by ¥5,737 million ($51,136 thousand) for the years ended March 31, 2016 and 2017,
respectively.

(3) Reconciliation of the Effective Tax Rate
The breakdown of major items that caused differences between the effective statutory tax rate and the actual tax
rate was as follows.
Epson is subject mainly to corporate tax, inhabitant tax, and enterprise tax, and the effective statutory tax rates
calculated based on these taxes were 32.8% and 30.7% for the years ended March 31, 2016 and 2017, respectively.
Foreign subsidiaries are subject to income tax at their locations.

Effective statutory tax rate
Different tax rates applied to foreign subsidiaries
Expenses not deductible for tax purposes
Reassessment of recoverability of deferred tax assets
Other
Actual tax rate

Year ended
March 31, 2016

Year ended
March 31, 2017

32.8
(3.4)
1.0
16.7
2.5
49.6

30.7
(2.7)
(0.3)
(2.5)
2.2
27.4

19. Trade and Other Payables

The breakdown of “Trade and other payables” was as follows:

Notes and trade payables
Other payables
Total

Millions of yen
March 31,

2016

2017

Thousands of
U.S. dollars
March 31,
2017

69,972
60,651
130,624

81,651
59,981
141,633

727,792
534,646
1,262,438

Trade and other payables are classified as financial liabilities measured at amortised cost.

20. Bonds issued, Borrowings and Lease liabilities

The breakdown of “Bonds issued, borrowings and lease liabilities” was as follows:

(Note 1) The average interest rate is calculated using the interest rate and outstanding balance as of March 31,
2017.
(Note 2) The summary of issuing conditions of the bonds issued was as follows:

Thousands ofU.S. dollarsMarch 31,201620172017Current borrowings31,10416,118143,6661.42-Current portion of non-currentborrowings50050,000445,6720.56-Current portion of bonds issued(Note 2)29,9899,99589,089--Non-current borrowings50,0004994,4470.282022Bonds issued (Note 2)29,92869,742621,653--Lease liabilities2332161,9252.402017 to 2022 Total141,755146,5721,306,452Current liabilities61,65476,200679,204Non-current liabilities80,10070,371627,248 Total141,755146,5721,306,452Millions of yen%DueMarch 31,Average interestrate (Note 1)

*The figures in parentheses represent the current portion of bonds issued.

Bonds issued, borrowings and lease liabilities were classified as financial liabilities measured at amortised cost.
There were no financial covenants on bonds issued and borrowings that had a significant impact on Epson’s
financing activities.

Thousands ofU.S. dollarsMarch 31,20162017201720,000(20,000)10,00089,134(10,000)(89,134)10,000(10,000)The CompanyThe 11th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 11, 20130.57NonSep 11, 201810,00010,00089,134The CompanyThe 12th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Jun 13, 20140.35NonJun 13, 201910,00010,00089,134The CompanyThe 13th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 21, 20160.10NonSep 21, 2021-20,000178,269The CompanyThe 14th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 21, 20160.27NonSep 21, 2023-20,000178,269The CompanyThe 15th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 21, 20160.34NonSep 18, 2026-10,00089,13460,00080,000713,074(30,000)(10,000)(89,134)--Millions of yeninterestrateMarch 31,Maturity dateNonNon-Jun 14, 2016-10,000Sep 9, 2016NonCompanyName of bonds issuedIssue date%CollateralThe CompanyThe 7th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Jun 14, 20110.72The CompanyThe 9th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 12, 20120.67Sep 12, 2017The CompanyThe 10th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 11, 20130.33

21. Provisions

The breakdown and the schedule of “Provisions” were as follows:

FY2015: Year ended March 31, 2016Provision for productwarrantiesProvision forrebatesAsset retirementobligationsProvision forloss onlitigationOtherprovisionsTotalAs of April 1, 201511,3767,8231,4743,3266,46130,463Arising during the year11,72910,037824195,15427,765Utilised(10,831)(7,823)(66)(3,265)(6,038)(28,025)Unused amounts reversed(514)---(94)(608)Exchange differences ontranslation of foreignoperations(575)(965)(21)52(124)(1,634)As of March 31, 201611,1859,0722,2111335,35827,960Current liabilities9,8069,07229953,83523,019Non-current liabilities1,378-1,9111271,5224,941 Total11,1859,0722,2111335,35827,960FY2016: Year ended March 31, 2017Provision for productwarrantiesProvision forrebatesAsset retirementobligationsProvision forloss onlitigationOtherprovisionsTotalAs of April 1, 201611,1859,0722,2111335,35827,960Arising during the year11,1039,3951,149214,46126,131Utilised(10,725)(9,072)(499)-(3,708)(24,005)Unused amounts reversed(460)-(320)-(171)(951)Exchange differences ontranslation of foreignoperations(203)(434)(16)(8)(281)(944)As of March 31, 201710,8998,9602,5241465,65828,190Current liabilities9,2958,96026263,67121,981Non-current liabilities1,604-2,4981191,9866,209 Total10,8998,9602,5241465,65828,190FY2016: Year ended March 31, 2017Provision for productwarrantiesProvision forrebatesAsset retirementobligationsProvision forloss onlitigationOtherprovisionsTotalAs of April 1, 201699,69680,86219,7071,18547,770249,220Arising during the year98,95683,73210,23118739,811232,917Utilised(95,596)(80,862)(4,447)-(33,062)(213,967)Unused amounts reversed(4,100)-(2,852)-(1,524)(8,476)Exchange differences ontranslation of foreignoperations(1,809)(3,868)(142)(71)(2,535)(8,425)As of March 31, 201797,14779,86422,4971,30150,460251,269Current liabilities82,85079,86423123132,750195,926Non-current liabilities14,297-22,2661,07017,71055,343 Total97,14779,86422,4971,30150,460251,269Millions of yenMillions of yenThousands of U.S. dollars

(1) Provision for product warranties
Epson recognises an accrual for estimated future warranty costs based on the rate of historical service contract
expenses to sales. Other specific warranty provisions are made for those products where future warranty expenses
can be specifically estimated. Most of these expenses are expected to be incurred in the next fiscal year.

(2) Provision for rebates
Epson recognises provisions for rebates, related to sales made on or prior to the fiscal year end, that are paid to
distributors or customers based on direct outcomes such as the sales performance or early payment. These expenses
are expected to be paid in the next fiscal year.

(3) Asset retirement obligations
Epson recognises a provision for retirement costs of property, plant and equipment for which Epson is required to
bear, and which derive from the acquisition, construction, development or normal use of such assets to the amount
that it is probable that Epson will pay in light of historical experience. These expenses are expected to be paid
mainly after five years or more. However, they may be affected by future business plans.

(4) Provision for loss on litigation
Epson recognises a provision for loss on litigation based on the estimated future compensation payment and
litigation expenses which need to be provided at each fiscal year end. These expenses are expected to be paid after
three years or more.

22. Other Liabilities

The breakdown of “Other current liabilities” and “Other non-current liabilities” was as follows:

Accrued expense
Accrued bonus to employees
Accrued employee’s unused paid vacations
Other

Total

Current liabilities
Non-current liabilities

Total

Millions of yen
March 31,

2016
25,948
28,564
25,052
25,615
105,179

102,065
3,114
105,179

2017
28,948
25,543
24,847
27,175
106,514

102,992
3,521
106,514

Thousands of
U.S. dollars
March 31,
2017
258,026
227,676
221,472
242,284
949,458

918,035
31,423
949,458

23. Post-employment Benefits

The Company and some Japanese subsidiaries have the following defined benefit plans: defined benefit corporate
pension plans and lump-sum severance plans. In addition, they also have defined contribution plans.
Some overseas subsidiaries have defined benefit plans and defined contribution plans.
Epson’s major defined benefit plans are administrated by the Corporate Pension Fund (the “Fund”) in accordance
with the Defined-Benefit Corporate Pension Act (Act No. 50 of 2001).
The benefits of defined benefit plans are determined based on conditions, such as years of service, the salary
proportional method based on average employee salaries for services or final base salaries for retirement benefits
and a funded method based on the points employees have earned for each year of service.
The Fund has a Board of Representatives consisting of representatives of the Company and its Japanese
subsidiaries and representatives of the plan participants in accordance with the rules of the Fund. The Board of
Representatives is responsible for changes in the rules of the Fund, dismissal of the board members including
members who execute operations related to the administration and investment of pension reserves for the Fund, and
resolutions of the business report and the closing of account.

(1) Schedule of Defined Benefit Obligations
The schedule of the defined benefit obligations was as follows:

Balance at the beginning of the year

Service cost
Interest cost
Remeasurement

Actuarial gains and losses arising from
changes in demographic assumptions
Actuarial gains and losses arising from
changes in financial assumptions

Past service cost and losses (gains) arising
from settlements
Exchange differences on translation of foreign
operations
Benefits paid
Effects of business combinations and
disposals

Millions of yen
Year ended
March 31,

2016
293,035
10,480
3,673

2017
311,452
11,550
2,284

Thousands of
U.S. dollars
Year ended
March 31,
2017
2,776,111
102,950
20,358

(2,811)

1,341

11,952

20,008

(4,502)

(40,128)

(2,270)

(290)

(2,584)

(2,039)

(8,625)

(2,567)

(10,358)

(22,890)

(92,325)

231

Balance at the end of the year

311,452

308,935

2,753,675

(2) Schedule of Plan Assets
The schedule of the plan assets was as follows.
Epson’s major defined benefit plans are regulated by maintaining a balance between the pension obligations and
plan assets through reviewing the financial condition of the fund that affects future benefits.
Epson plans to pay contributions of ¥8,567 million ($76,361 thousand) for the year ending March 31, 2018.

Balance at the beginning of the year

Interest income
Remeasurement

Return on plan assets

Gains (losses) arising from settlements
Exchange differences on translation of foreign
operations
Contributions by the employer
Contributions by plan participants
Benefits paid

Millions of yen
Year ended
March 31,

2016
261,808
2,972

2017
256,606
1,579

(4,993)
(2,270)

(1,310)

7,342
1,177
(8,119)

7,498
-

(1,974)

7,149
1,169
(8,375)

Thousands of
U.S. dollars
Year ended
March 31,
2017
2,287,244
14,083

66,833
-

(17,585)

63,722
10,419
(74,650)

Balance at the end of the year

256,606

263,654

2,350,066

(3) Schedule of Right to Reimbursement
As Epson’s major defined benefit plans are corporate defined benefit pension plans, there are no contributions from
third parties.

(4) Effect of Asset Ceiling
There was no effect from the asset ceiling.

(5) Reconciliation of Defined Benefit Obligations and Plan Assets
The reconciliation of the defined benefit obligations and plan assets to the net defined benefit liabilities or assets
recognised in the consolidated statement of financial position were as follows:

Funded defined benefit obligations
Plan assets
Subtotal

Unfunded defined benefit obligations
Net defined benefit liabilities or assets
recognised in the consolidated statement of
financial position

Net defined benefit liabilities
Net defined benefit assets
Net defined benefit liabilities and assets
recognised in the consolidated statement of
financial position

Millions of yen
March 31,

2016
305,438
(256,606)
48,831
6,014

2017
303,459
(263,654)
39,804
5,476

Thousands of
U.S. dollars
March 31,
2017
2,704,856
(2,350,066)
354,790
48,819

54,845

45,281

403,609

54,845
-

45,281
0

403,609
0

54,845

45,281

403,609

(6) Breakdown of Plan Assets
The breakdown of plan assets by major category was as follows:

Investments quoted in active markets
Equity securities
Bonds receivable
Alternative investments (Note 1)
Cash and deposits
Other
Total

Investments unquoted in active markets
Pooled funds (Equity securities)
Pooled funds (Bonds receivable)
General accounts of life insurance companies
(Note 2)
Alternative investments (Note 1)
Other
Total

Millions of yen
March 31,

2016

2017

Thousands of
U.S. dollars
March 31,
2017

19,923
48
6,926
4,630
3,196
34,725

29,647
62,220

93,829

36,183
-
221,881

16,319
6,795
2,990
3,477
3,223
32,806

33,011
57,939

102,648

36,840
408
230,848

145,458
60,566
26,651
30,992
28,747
292,414

294,241
516,436

914,947

328,371
3,657
2,057,652

(Note 1) Alternative investments are the investments through hedge funds, multi-asset funds, securitization funds
and other funds.

(Note 2) A certain interest rate and principal for the general accounts of life insurance companies are guaranteed by
life insurance companies.

(Note 3) In plan assets, there are no transferable financial instruments, real estate held by Epson or other assets
used by Epson.

The investment strategy for Epson’s plan assets was as follows:
Epson’s plan assets under defined benefit plans are managed in accordance with the rules of the Fund for securing
stable returns in the middle- and long-term in order to ensure the redemption of the defined benefit obligations.
Epson sets a best qualified asset mix policy through performing pension ALM, which is combined management of
assets and liabilities by an external agency to secure stable returns. Epson invests plan assets consistently with the
asset mix policy which includes setting of the risk, target rate of return and composition ratio of plan assets by asset
category.

(7) Matters Related to Actuarial Assumptions
The major item of actuarial assumptions was as follows:

Discount rate

0.8

0.9

March 31, 2016

March 31, 2017

The valuation of defined benefit obligations reflects judgments on uncertain future events. The sensitivities of
defined benefit obligations due to changes of 1% in the discount rate as of March 31, 2017 were as follows. Each
of these sensitivities assumes that other variables remain fixed. Negative figures show a decrease in the defined
benefit obligations, while positive figures show an increase.

Discount rate (1% increase)
Discount rate (1% decrease)

Millions of yen
March 31,
2017
(45,403)
54,313

Thousands of
U.S. dollars
March 31,
2017
(404,697)
484,116

The weighted-average duration of the defined benefit obligations at March 31, 2017 was 15.5 years.

(8) Defined Contribution Plans
Expenses for the defined contribution plans were ¥19,340 million and ¥18,781 million ($167,403 thousand) for the
years ended March 31, 2016 and 2017, respectively.

100

24. Equity and Other Equity Items

(1) Share Capital and Capital Surplus

(A) Authorised Shares
The number of authorised shares as of March 31, 2016 and 2017 was 1,214,916,736 ordinary shares.

(B) Fully Paid Issued Shares
The schedule of the number of issued shares, the amount of “Share capital” and “Capital surplus” was as follows:

(Note1) The shares issued by the Company are non-par value ordinary shares that have no restriction on any
content of rights.

(Note2) Increase in the number of ordinary issued shares during the year ended March 31, 2016 resulted from the
Company’s common shares split with an effective date of April 1, 2015.

(2) Treasury Shares
The schedule of the number of treasury shares and the corresponding amount was as follows:

(Note1) Increase in the number of treasury shares during the year ended March 31, 2016 resulted from the purchase
of odd shares and the Company’s common shares split with an effective date of April 1, 2015.

(Note2) Increase in the number of treasury shares during the year ended March 31, 2017 resulted from:
the purchase by the resolution of the board of directors
the purchase by BIP trust
the purchase of odd shares

5,370,000 shares
180,000 shares
1,261 shares

(Note3) The number of treasury shares as of March 31, 2017 includes 180,000 shares held by BIP trust.

101

Number of ordinaryissued shares(Note1)Share capitalCapital surplusShare capitalCapital surplusAs of April 1, 2015199,817,38953,20484,321Increase (decrease) (Note2)199,817,389--As of March 31, 2016399,634,77853,20484,321474,231751,591Increase (decrease)--0-0As of March 31, 2017399,634,77853,20484,321474,231751,591Thousands of U.S. dollarsMillions of yena shareThousands ofU.S. dollarsNumber of sharesAmountAmountAs of April 1, 201520,928,65720,464Increase (decrease) (Note1)20,931,7396As of March 31, 201641,860,39620,471182,476Increase (decrease) (Note2)5,551,26110,34092,165As of March 31, 2017 (Note3)47,411,65730,812274,641a shareMillions of yen

(3) Other Components of Equity

(A) Remeasurement of net defined benefit liabilities (assets)
Remeasurement of net defined benefit liabilities (assets) comprise actuarial gain and loss on the present value of
defined benefit obligations and the return on plan assets excluding amounts included in net interest. The amount is
recognised as other comprehensive income when occurred and is transferred immediately from other components
of equity to retained earnings.

(B) Net gain (loss) on revaluation of financial assets measured at fair value through other comprehensive income
This is the valuation difference in fair value of financial assets measured at fair value through other comprehensive
income.

(C) Exchange differences on translation of foreign operations
This is a foreign currency translation difference that occurs when consolidating financial statements of foreign
operations are prepared in foreign currencies.

(D) Net changes in fair value of cash flow hedges
Epson uses derivatives for hedging to avoid the risk of fluctuation in future cash flows. This is the effective portion
of changes in fair value of derivative transactions designated as cash flow hedges.

102

25. Dividends

Dividends paid were as follows:

(Note) The Company completed the Company’s ordinary shares split with an effective date of April 1, 2015 based
on the resolution by the Company’s Board of Directors on January 30, 2015. Dividends per share for the dividends
with a basis date on or before March 31, 2015 was stated by the actual dividends paid without adjusting the effect
of the shares split.

103

FY2015: Year ended March 31, 2016Millions of yenYen(Resolution)Total dividendsDividendsper shareFY2016: Year ended March 31, 2017Millions of yenYen(Resolution)Total dividendsDividendsper shareFY2016: Year ended March 31, 2017Thousands of U.S.dollarsU.S. dollars(Resolution)Total dividendsDividendsper shareSeptember 30, 2016November 30, 2016Class of sharesBasis dateEffective dateBoard of Directors(October 27, 2016)Ordinary shares94,2320.26Annual Shareholders Meeting(June 28, 2016)Ordinary shares95,6680.26Class of sharesBasis dateEffective dateMarch 31, 2016June 29, 2016March 31, 2016June 29, 2016Class of sharesBasis dateEffective dateBoard of Directors(October 27, 2016)Ordinary shares10,57230Annual Shareholders Meeting(June 28, 2016)Ordinary shares10,73330September 30, 2016November 30, 201680March 31, 2015June 26, 2015Board of Directors(October 29, 2015)Ordinary shares10,733Annual Shareholders Meeting(June 25, 2015)Ordinary shares14,31130September 30, 2015December 4, 2015

Dividends whose basis dates were during the years ended March 31, 2016 and 2017, but whose effective dates
were subsequent to March 31, 2016 and 2017 were as follows:

26. Revenue

The breakdown of “Revenue” was as follows:

Sale of goods
Royalty income
Other

Total

Millions of yen
Year ended
March 31,

2016
1,080,551
4,137
7,793
1,092,481

2017
1,012,810
4,174
7,871
1,024,856

Thousands of
U.S. dollars
Year ended
March 31,
2017
9,027,631
37,204
70,168
9,135,003

104

FY2015: Year ended March 31, 2016Millions of yenYen(Resolution)Total dividendsDividendsper shareFY2016: Year ended March 31, 2017Millions of yenYen(Resolution)Total dividendsDividendsper shareFY2016: Year ended March 31, 2017Thousands of U.S.dollarsU.S. dollars(Resolution)Total dividendsDividendsper shareJune 29, 2017Annual Shareholders Meeting(June 28, 2017)Ordinary shares94,2320.26Annual Shareholders Meeting(June 28, 2017)Ordinary shares10,57230March 31, 201710,73330March 31, 2017June 29, 2017Class of sharesBasis dateEffective dateClass of sharesBasis dateEffective dateAnnual Shareholders Meeting(June 28, 2016)March 31, 2016June 29, 2016Class of sharesBasis dateEffective dateOrdinary shares

27. Selling, General and Administrative Expenses

The breakdown of “Selling, general and administrative expenses” was as follows:

Millions of yen
Year ended
March 31,

2016
(98,355)
(53,172)
(32,284)
(22,624)
(21,269)
(16,590)
(68,410)
(312,708)

2017
(95,939)
(52,735)
(29,361)
(21,053)
(19,291)
(16,097)
(65,687)
(300,167)

Thousands of
U.S. dollars
Year ended
March 31,
2017
(855,147)
(470,050)
(261,707)
(187,654)
(171,949)
(143,479)
(585,537)
(2,675,523)

Employee benefit expense
Research and development expense
Promotion expense
Advertising expense
Service contract expense
Transportation expense
Other

Total

28. Employee Benefit Expenses

The employee benefit expenses included in the consolidated statement of comprehensive income were as follows:

Salaries and wages
Legal welfare expense
Welfare expense
Expenses of post-employment benefits

Expense for defined contribution plans
Expense for defined benefit plans

Total

Millions of yen
Year ended
March 31,

2016
(211,849)
(19,519)
(11,188)

(19,340)
(32,334)
(294,232)

2017
(203,531)
(18,401)
(10,372)

(18,781)
(1,140)
(252,227)

29. Other Operating Income

The breakdown of “Other operating income” was as follows:

Foreign exchange gain
Gain on sales of property, plant and equipment,
intangible assets and investment property
Income from reversal of impairment loss
Other

Total

Millions of yen
Year ended
March 31,

2017

1,258

680

-
3,482
5,421

2016

931

7,733

3,828
2,314
14,807

105

Thousands of
U.S. dollars
Year ended
March 31,
2017
(1,814,163)
(164,016)
(92,450)

(167,403)
(10,180)
(2,248,212)

Thousands of
U.S. dollars
Year ended
March 31,
2017

11,213

6,061

-
31,045
48,319

30. Other Operating Expense

The breakdown of “Other operating expense” was as follows:

Loss on the disposal of property, plant and
equipment and intangible assets
Other

Total

Millions of yen
Year ended
March 31,

2016

2017

(755)

(4,977)
(5,732)

(750)

(2,584)
(3,335)

Thousands of
U.S. dollars
Year ended
March 31,
2017

(6,685)

(23,051)
(29,736)

31. Finance Income and Finance Costs

The breakdowns of “Finance income” and “Finance costs” were as follows:

Finance Income

Interest income
Dividend income
Other
Total

Finance Costs

Interest expense
Employee benefit expense
Foreign exchange loss (Note)
Other
Total

Millions of yen
Year ended
March 31,

2016
1,275
340
36
1,652

2017
1,007
364
11
1,383

Millions of yen
Year ended
March 31,

2016
(1,319)
(700)
(2,177)
(55)
(4,252)

2017
(826)
(704)
(301)
(25)
(1,858)

Thousands of
U.S. dollars
Year ended
March 31,
2017

8,985
3,244
98
12,327

Thousands of
U.S. dollars
Year ended
March 31,
2017

(7,381)
(6,275)
(2,682)
(222)
(16,560)

(Note) The increase or decrease in the fair value of currency derivatives is included in the foreign exchange gain
(loss).

106

32. Discontinued Operations

As of April 1, 2010, Epson transferred a part of its business and some assets in the field of small- and
medium-sized liquid crystal displays to Sony Corporation and Sony Mobile Display Corporation and terminated
the production operation at the end of December, 2010. The profit and loss related to allegations concerning a LCD
price-fixing cartel that occurred during the years ended March 31, 2016 and 2017 was classified into “Discontinued
operations.”

(1) Reportable Segments
Small- and medium-sized liquid crystal displays business: Other

(2) The analysis of profit and loss of discontinued operations

Selling, general and administrative expenses
Other operating expense
Loss from operating activities
Loss before tax
Loss from discontinued operations

Millions of yen
Year ended
March 31,

2016

2017

(42)
-
(42)
(42)
(42)

(16)
(565)
(582)
(582)
(582)

Thousands of
U.S. dollars
Year ended
March 31,
2017

(142)
(5,055)
(5,197)
(5,197)
(5,197)

(3) The analysis of cash flow of discontinued operations

Net cash provided by (used in) operating
activities
Total

Millions of yen
Year ended
March 31,

2016

2017

Thousands of
U.S. dollars
Year ended
March 31,
2017

(1,060)

(14)

(124)

107

33. Other Comprehensive Income

The amount arising during the year, reclassification adjustments to profit or loss and tax effects for each component
of “Other comprehensive income” were as follows:

108

FY2015: Year ended March 31, 2016Amount arisingReclassificationadjustmentsBefore taxeffectsTax effectsNet oftax effectsRemeasurement of net defined benefit liabilities (assets)(22,465)-(22,465)304(22,161)Net gain (loss) on revaluation of financial assetsmeasured at FVTOCI (Note)(3,547)-(3,547)937(2,610)Exchange differences on translation of foreign operations(21,309)-(21,309)-(21,309)Net changes in fair value of cash flow hedges175(1,953)(1,777)561(1,215)Share of other comprehensive income of investmentsaccounted for using the equity method(240)-(240)-(240) Total(47,386)(1,953)(49,340)1,803(47,536) (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeFY2016: Year ended March 31, 2017Amount arisingReclassificationadjustmentsBefore taxeffectsTax effectsNet oftax effectsRemeasurement of net defined benefit liabilities (assets)9,959-9,95982610,785Net gain (loss) on revaluation of financial assetsmeasured at FVTOCI (Note)2,768-2,768(548)2,219Exchange differences on translation of foreign operations(5,477)-(5,477)-(5,477)Net changes in fair value of cash flow hedges1,726(1,658)67(20)47Share of other comprehensive income of investmentsaccounted for using the equity method(20)-(20)-(20) Total8,956(1,658)7,2972577,555 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeFY2016: Year ended March 31, 2017Amount arisingReclassificationadjustmentsBefore taxeffectsTax effectsNet oftax effectsRemeasurement of net defined benefit liabilities (assets)88,769-88,7697,36296,131Net gain (loss) on revaluation of financial assetsmeasured at FVTOCI (Note)24,681-24,681(4,893)19,788Exchange differences on translation of foreign operations(48,809)-(48,809)-(48,809)Net changes in fair value of cash flow hedges15,375(14,778)597(179)418Share of other comprehensive income of investmentsaccounted for using the equity method(178)-(178)-(178) Total79,838(14,778)65,0602,29067,350 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeThousands of U.S. dollarsMillions of yenMillions of yen

34. Earnings per Share

(1) Basis of calculating basic earnings per share

(A) Profit attributable to ordinary shareholders of the parent company

Profit from continuing operations
attributable to owners of the parent
company
Loss from discontinued operations
attributable to owners of the parent
company
Profit used for calculation of basic
earnings per share

Millions of yen
Year ended
March 31,

2016

2017

Thousands of
U.S. dollars
Year ended
March 31,
2017

45,815

48,903

435,895

(42)

(582)

(5,197)

45,772

48,320

430,698

(B) Weighted-average number of ordinary shares outstanding during the period

Thousands of shares

Year ended
March 31, 2016

Year ended
March 31, 2017

Weighted-average number of
ordinary shares

357,775

353,160

109

(2) Basis of calculating diluted earnings per share

(A) Profit attributable to ordinary shareholders of the parent company

Millions of yen
Year ended
March 31,

2016

2017

Thousands of
U.S. dollars
Year ended
March 31,
2017

45,815

48,903

435,895

Profit from continuing operations
attributable to owners of the parent
company

Adjustments

Profit from continuing operations
attributable to owners of the parent
company used for calculation of diluted
earnings per share
Loss from discontinued operations
attributable to owners of the parent
company

Adjustments

Loss from discontinued operations
attributable to owners of the parent
company used for calculation of diluted
earnings per share

Profit attributable to owners of the parent
company

45,815

48,903

435,895

(42)

(582)

(5,197)

(582)

(5,197)

45,772

48,320

430,698

Adjustments

Profit used for calculation of diluted
earnings per share

45,772

48,320

430,698

(B) Weighted-average number of ordinary shares outstanding during the period

Weighted-average number of
ordinary shares

Effect of dilutive securities

BIP trust for eligible officers

Diluted outstanding shares

Thousands of shares

Year ended
March 31, 2016

Year ended
March 31, 2017

357,775

353,160

357,775

353,181

(Note) In the calculation of basic earnings per share and diluted earnings per share, because the shares of the
Company held by BIP trust are accounted as treasury shares, the number of those shares are deducted from
weighted-average number of common shares outstanding during the year.

110

35. Share-based Payment

(1) Summary of Performance-Linked Stock Compensation Plan
The Company has employed a framework referred to as BIP (Board Incentive Plan) trust as performance-linked
equity-settled share-based payment plan for the Company’s directors and executive officers who have been
engaged by the Company (collectively referred to hereafter as “Eligible Officers,” and excluding outside directors
and persons such as Audit and Supervisory Committee members who are not directly engaged in the operations of
the Company, and persons residing outside Japan) from the year ended March 31, 2017. The plan is intended to
heighten directors’ sense of shared interest with shareholders and to show a commitment to sustaining growth and
increasing corporate value over the mid- to long-term.
The Eligible Officers are awarded a specific number of points each year based on their position and other factors (1
point = 1 share). Such points fluctuate depending on the levels of achievement of the mid- to long-term operating
performance targets of Epson. The vesting condition is basically for the Eligible Officers to render services for
three years to a vesting date after a grant date of points.

(2) Number of Granted Points and Weighted Average Fair Value
The fair values of granted points at the grant date are measured based on observable market prices. Moreover, the
expected dividends are incorporated into the measurement of fair values. The number of granted points and
weighted average fair value at the grant date were as follows:

Number of granted points
Weighted average fair value at the grant date

Year ended
March 31,

2016

-
-

2017
41,954
¥1,754

Year ended
March 31,
2017

-
$16

(3) Stock Compensation Expenses
The total expense recognised from the performance-linked stock compensation plan was ¥12 million ($106
thousand) for the years ended March 31, 2017.

111

36. Financial Instruments

(1) Capital Management
Epson selects the most effective fund management method focusing on the preservation of funds in view of
safeness and flexibility. In addition, Epson obtains financing from bank loans and bonds issued. Epson has a policy
not to transact derivatives for speculation purposes, but for avoiding the risks stated below.
Epson manages net interest-bearing debt, where cash and cash equivalents are deducted from interest-bearing debt,
and capital (equity attributable to owners of the parent company). The amounts were as follows:

Interest-bearing debt
Cash and cash equivalents
Net interest-bearing debt
Capital (equity attributable to
owners of the parent company)

Millions of yen
March 31,

2016

2017

141,755
(230,498)
(88,743)

467,818

146,572
(221,782)
(75,209)

492,196

Thousands of
U.S. dollars
March 31,
2017

1,306,452
(1,976,842)
(670,390)

4,387,164

Epson monitors financial indicators in order to maintain a well-balanced capital structure that ensures an
appropriate return on equity and a sound and flexible financial condition for future investment. Epson monitor
credit ratings for financial soundness and flexibility, and ROE (return on equity) for profitability, while focusing on
changes in the domestic and overseas environment.

(2) Financial Risk Management
Epson is exposed to financial risks (credit risks, liquidity risks, foreign exchange risks, interest rate risks, and
market price fluctuation risks) in the process of its business activities; and it manages risks based on a specific
policy in order to avoid or reduce said risks. The results of risk management are regularly reported by the financial
and general accounting department to the Executive Committee of the Company.
Epson’s policy limits derivatives to transactions for the purpose of mitigating risks from transactions based on
actual demand. Therefore, Epson do not transact derivatives for speculation purposes or trading purposes.

112

(3) Credit Risk
Receivables, such as notes and trade receivables, resulting from the operating activities of Epson are exposed to
customer credit risks.
Epson holds mainly bonds receivable as investments of surplus funds and equity securities of customers and
suppliers to strengthen relationships with them; those securities are exposed to the issuers’ credit risks.
In addition, through derivative transactions that Epson conducts in order to hedge foreign exchange fluctuation
risks and interest rate fluctuation risks, Epson is exposed to the credit risks of the financial institutions which are
counterparties to these transactions.
In principle, Epson sets credit lines or transaction conditions with respect to trade receivables for counterparties
based on Epson’s Credit Control Regulation in order to prevent credit risks relating to counterparties. In addition,
the receivable balances of counterparties are monitored in order to mitigate the credit risks. The financial and
general accounting department of the Company regularly monitors the status of the occurrence and collection of
bad debts, and reports them to the Executive Committee of the Company. There is no over-concentrated credit risk
for a single customer.
With regard to the investment of cash surpluses and derivatives, Epson invests in bonds receivable and other
financial instruments with a certain credit rating and transacts with financial institutions with a high credit rating in
principle in order to prevent credit risks based on Epson’s Capital Management Regulation. In addition, the
financial and general accounting department of the Company regularly monitors the performances of these
transactions and reports the results to the Executive Committee of the Company.

The analysis of the aging of “Trade and other receivables” and “Other Financial Assets” that are past due but not
impaired as of March 31, 2017 was as follows. It includes amounts considered recoverable by credit insurance and
collateral.

Within 30 days
Over 30 days, within 60 days
Over 60 days, within 90 days
Over 90 days

Total

Millions of yen
March 31,
2017

Thousands of
U.S. dollars
March 31,
2017

8,034
533
48
273
8,889

71,621
4,750
427
2,433
79,231

Epson uses an allowance account for credit losses to record impairment losses on the uncollectible amounts of
individually significant trade receivables at the end of the reporting period and to record impairment losses on trade
receivables that are not individually significant at an amount based on the historical loan loss ratio at the end of the
reporting period. The allowance account for credit losses against the financial assets is included in “Trade and other
receivables” and “Other Financial Assets” in the consolidated statement of financial position.
The schedule of the allowance account for credit losses of “Trade and other receivables” and “Other Financial
Assets” was as follows:

Balance as of April 1
Addition (Note)
Decrease (utilised)
Decrease (reversal)
Other
Balance as of March 31

Millions of yen
March 31,

2016

2017

1,586
669
(724)
(12)
(39)
1,479

1,479
401
(355)
(11)
(28)
1,485

Thousands of
U.S. dollars
March 31,
2017

13,182
3,556
(3,164)
(98)
(249)
13,227

(Note) “Trade and other receivables” and “Other Financial Assets” for which impairment was recognised
individually at March 31, 2016 and 2017 were ¥45 million and ¥33 million ($294 thousand), respectively; and their
corresponding allowance account for credit losses were ¥45 million and ¥33 million ($294 thousand), respectively.

113

(4) Liquidity Risk
Epson raises funds by borrowings and bonds issued; however, these liabilities are exposed to the liquidity risk that
it would not be able to repay liabilities on the due date due to the deterioration of the financing environment.
Epson establishes a financing plan based on the annual business plan and the financial and general accounting
department of the Company regularly monitors and collects information on the balance of liquidity-in-hand and
interest-bearing debt and reports it to the Executive Committee of the Company. In addition, Epson manages
liquidity risks with the balance of liquidity-in-hand maintained at a proper level by working out the financing plan
on a timely basis, and by taking into consideration the financial environment.
The financial liability balance (including derivative financial instruments) by maturity was as follows:

114

FY2015: As of March 31, 2016CarryingamountContractualcash flowDue within1 yearDue after 1year through 2 yearsDue after 2years through3 yearsDue after 3years through4 yearsDue after 4years through 5 yearsDue after5 years Trade and other payables130,624130,624130,624----- Borrowings81,60481,60431,60450,000---- Bonds issued59,91760,00030,00010,00010,00010,000-- Lease obligations2332429276481940 Other1,6411,64106333734941,111 Total274,021274,112192,32260,14010,38610,053981,111Derivative financial liabilities Foreign exchange forward contract823823823----- Total823823823-----FY2016: As of March 31, 2017CarryingamountContractualcash flowDue within1 yearDue after 1year through 2 yearsDue after 2years through3 yearsDue after 3years through4 yearsDue after 4years through 5 yearsDue after5 years Trade and other payables141,633141,633141,633----- Borrowings66,61866,61866,118---500- Bonds issued79,73880,00010,00010,00010,000-20,00030,000 Lease obligations2162218969381840 Other1,7921,7922066942106841,282 Total289,998290,265218,04710,13810,08112520,58831,282Derivative financial liabilities Foreign exchange forward contract1,1121,1121,112----- Total1,1121,1121,112-----FY2016: As of March 31, 2017CarryingamountContractualcash flowDue within1 yearDue after 1year through 2 yearsDue after 2years through3 yearsDue after 3years through4 yearsDue after 4years through 5 yearsDue after5 years Trade and other payables1,262,4381,262,4381,262,438----- Borrowings593,785593,785589,338---4,447- Bonds issued710,742713,07489,13489,13489,134-178,269267,403 Lease obligations1,9251,949793615342164350 Other15,97915,9791,84861538095075911,427 Total2,584,8692,587,2251,943,55190,36489,8561,114183,510278,830Derivative financial liabilities Foreign exchange forward contract9,9119,9119,911----- Total9,9119,9119,911-----Non-derivative financial liabilitiesMillions of yenNon-derivative financial liabilitiesMillions of yenNon-derivative financial liabilitiesThousands of U.S. dollars

(5) Foreign Exchange Risk
Epson operates businesses globally and, therefore, is exposed to the following risks due to foreign exchange
fluctuation:

(A) The risk that the profit or loss and cash flow in each functional currency of Epson is influenced by foreign
exchange fluctuation as a result of external transactions and intergroup transactions, including the payment and
receipt of dividends, in currencies that are different from each functional currency of Epson.

(B) The risk that the equity of Epson is influenced by foreign exchange fluctuation when equity denominated in
each functional currency of Epson is translated into Japanese yen and consolidated.

(C) The risk that the profit or loss of Epson is influenced by foreign exchange fluctuation when profit or loss
denominated in each functional currency of Epson is translated into Japanese yen and consolidated.

Epson hedges against risk (A) using derivatives or foreign currency-denominated interest-bearing debt when future
cash flow is projected or when receivables and payables are fixed. As a rule, the net of foreign
currency-denominated operating receivables and payables is hedged mainly using forward foreign exchange
contracts.

Epson does not hedge against risk (B) and (C), in principle.
In order to mitigate risks mentioned above resulting from the foreign exchange fluctuation, in accordance with
Epson’s Foreign Exchange Management Regulation, Epson establishes a foreign currency hedge policy based on
the current conditions and forecast of the foreign exchange market, implements the aforementioned hedges under
the supervision of the Foreign Exchange Management Committee of the Company. The financial and general
accounting department of the Company regularly reports the performances to the Executive Committee of the
Company.
The breakdown of currency derivatives was follows:

(Note) Cash flow hedge is applied, and derivative transactions are measured at fair value in the consolidated
statement of financial position.

115

Derivative transactions to which hedge accounting is not appliedContractamountOver oneyearFair valueContractamountOver oneyearFair valueContractamountOver oneyearFair valueForeign exchange forward contractBuying4,146-576,456-(9)57,545-(80)Selling32,978-73231,577-(345)281,460-(3,094)Non-Deliverable ForwardSelling2,754-(24)3,761-(163)33,523-(1,452) Total39,879-76541,794-(519)372,528-(4,626)Derivative transactions to which hedge accounting is appliedContractamountOver oneyearFair valueContractamountOver oneyearFair valueContractamountOver oneyearFair value(Note)Foreign exchange forward contractSelling35,755-2831,171-113277,841-1,007Non-Deliverable ForwardSelling7,504-(240)7,231-(256)64,453-(2,281) Total43,259-(212)38,402-(143)342,294-(1,274)Millions of yenThousands of U.S. dollarsMarch 31,March 31,201620172017Millions of yenThousands of U.S. dollarsMarch 31,March 31,201620172017

Foreign Exchange Sensitivity Analysis
In cases where each currency other than the functional currency that denominates the financial instruments held by
Epson as of March 31, 2017 increases by 10% in value against the functional currency, the impact on profit before
tax in the consolidated statement of comprehensive income was as follows.
The impact from the translation of functional currency-denominated financial instruments, and assets, liabilities,
income and expenses of foreign operations into Japanese yen is not included. Also, it is based on the assumption
that currencies other than the currencies used for the calculation do not fluctuate.

Millions of yen
March 31,
2017

Thousands of
U.S. dollars
March 31,
2017

Profit before tax

2,679

23,879

(6) Interest Rate Risk
Epson’s interest rate risk arises from cash equivalents and interest-bearing debt. Borrowings and bonds issued with
floating rates are subject to the effects of changes in future cash flows caused by the fluctuation of market interest
rates; while, borrowings and bonds issued with fixed rates are subject to the effects of changes in the fair value
caused by the fluctuation of market interest rates.
In response to the fluctuation of market interest rates, Epson reduces the interest rate risk by implementing an
interest rate swap and adjusting appropriate proportion of financing between floating rates and fixed rates.
In accordance with Epson’s Capital Management Regulation, the interest rate swap is approved by the finance
officer of the Company.

Interest Rate Sensitivity Analysis
In cases where the interest rate of financial instruments held by Epson as of March 31, 2017 increases by 100bp,
the impact on profit before tax in the consolidated statement of comprehensive income was as follows:
The analysis included financial instruments affected by interest rate fluctuation and based on the assumption that
other factors, including the impacts of foreign exchange fluctuation, were constant.

Millions of yen
March 31,
2017

Thousands of
U.S. dollars
March 31,
2017

Profit before tax

661

5,891

(7) Market Price Fluctuation Risk
With respect to equity securities, Epson regularly assesses the fair value and financial conditions of the issuers, and
reviews the portfolio held by taking into account the relationship with counterparty entities in accordance with
Epson’s Securities Operation Regulation.
Epson intends to hold equity instruments not for short-term trading but for long-term investment. Therefore, Epson
does not sell the instruments actively. The equity price fluctuation risks are calculated based on the price of equity
instruments at the fiscal year end. In cases where the equity price changes by 5% in value, the impact on other
comprehensive income before tax effects as of March 31, 2017 was ¥793 million ($7,068 thousand) due to the
changes in the fair value.

116

(8) Fair Value of Financial Instruments

(A) Fair value measurement
The fair values of financial assets and liabilities are determined as follows:

(Derivatives)
The fair values are calculated based on prices obtained from financial institutions.

(Equity securities and bonds receivable)
When market values for equity securities and bonds receivable are available, such values are used as the fair values.
The fair values of the equity securities and bonds receivable whose market values are unavailable are measured by
using the discounted cash flow method, price comparison method based on the prices of similar types of securities
and bonds and other valuation methods.

(Borrowings)
As current borrowings are settled on a short-term basis, the fair values approximate their carrying amounts. For
non-current borrowings with floating rates, it is assumed that the fair value is equal to the carrying amounts,
because the rates are affected in the short term by fluctuations in market interest rates, and because Epson’s credit
status has not greatly changed since they were implemented. The fair values of non-current borrowings with fixed
rates are calculated by the total sum of the principal and interest discounted using the interest rates that would be
applied if similar new borrowings were conducted.

(Bonds issued)
The fair values are calculated based on prices obtained from financial institutions.

(Lease obligations)
The fair values are calculated based on the present value of the total amount discounted by the interest rate
corresponding to the period to maturity and the credit risk per each lease obligation classified per certain period.

(Other)
Other financial instruments are settled mainly on a short-term basis, and the fair values approximate the carrying
amounts.

117

(B) Fair value hierarchy
The fair value hierarchy of financial instruments is categorized from Level 1 to Level 3 as follows:

Level 1: Fair value measured at quoted prices in active markets for identical assets or liabilities
Level 2: Fair value calculated using inputs other than quoted prices included within Level 1 that are observable,
either directly or indirectly
Level 3: Fair value calculated using valuation techniques including unobservable inputs for the assets and liabilities
Epson does not have any financial instruments for which there is significant measurement uncertainty and
subjectivity which needs to subdivide each level stated above for disclosure.
The transfers between levels in the fair value hierarchy are deemed to have occurred at the end of the reporting
period.

(i) Financial instruments measured at amortised cost
The carrying amounts and the fair value hierarchy of financial instruments measured at amortised cost were as
follows. The fair values of financial instruments that are not listed on the table below approximate the carrying
amounts.

There were no transfers of financial instruments between Level 1 and Level 2 of the fair value hierarchy at the end
of each reporting period.

(Note) Current portion is included.

118

FY2015: As of March 31, 2016Level 1Level 2Level 3TotalFinancial liabilities measured atamortised cost Borrowings (Note)81,604-81,728-81,728 Bonds issued (Note)59,917-60,297-60,297Total141,521-142,025-142,025FY2016: As of March 31, 2017Level 1Level 2Level 3TotalFinancial liabilities measured atamortised cost Borrowings (Note)66,618-66,674-66,674 Bonds issued (Note)79,738-79,838-79,838Total146,356-146,512-146,512FY2016: As of March 31, 2017Level 1Level 2Level 3TotalFinancial liabilities measured atamortised cost Borrowings (Note)593,785-594,295-594,295 Bonds issued (Note)710,742-711,632-711,632Total1,304,527-1,305,927-1,305,927Millions of yenMillions of yenFair value CarryingamountCarryingamountThousands of U.S. dollarsFair value CarryingamountFair value

(ii) Financial instruments measured at fair value
The fair value hierarchy of financial instruments measured at fair value was as follows:

There were no transfers of financial instruments between Level 1 and Level 2 of the fair value hierarchy at the end
of each reporting period.

119

FY2015: As of March 31, 2016Level 1Level 2Level 3TotalFinancial assets measured atfair value Derivative financial assets-1,383-1,383 Equity securities14,006-2,05416,060Total14,0061,3832,05417,444Financial liabilities measured atfair valueDerivative financial liabilities-823-823Total-823-823FY2016: As of March 31, 2017Level 1Level 2Level 3TotalFinancial assets measured atfair value Derivative financial assets-449-449 Equity securities13,310-2,49815,809Total13,3104492,49816,258Financial liabilities measured atfair valueDerivative financial liabilities-1,112-1,112Total-1,112-1,112FY2016: As of March 31, 2017Level 1Level 2Level 3TotalFinancial assets measured atfair value Derivative financial assets-4,002-4,002 Equity securities118,638-22,265140,903Total118,6384,00222,265144,905Financial liabilities measured atfair valueDerivative financial liabilities-9,911-9,911Total-9,911-9,911Fair value Millions of yenFair value Millions of yenFair value Thousands of U.S. dollars

The movement of financial instruments categorized within Level 3 of the fair value hierarchy was as follows:

Balance as of April 1
Gains and losses

Other comprehensive income

Sales
Other
Balance as of March 31

Millions of yen
Year ended
March 31,

2016

2,406

2017

2,054

Thousands of
U.S. dollars
Year ended
March 31,
2017

18,308

(319
)
(32)
-
2,054

550

(54)
(51)
2,498

4,902

(481)
(464)
22,265

120

37. Principal Subsidiaries

Principal subsidiaries as of March 31, 2017 were as follows:

Company name

Location

Main business

Epson Sales Japan
Corporation

Epson Direct
Corporation

Shinjuku-ku, Tokyo

Printing solutions,
Visual communications,
Wearable & Industrial products

Matsumoto-shi, Nagano Printing solutions

Orient Watch Co., Ltd. Shinjuku-ku, Tokyo

Wearable & Industrial products

Miyazaki Epson
Corporation
Tohoku Epson
Corporation
Akita Epson
Corporation
Epson Atmix
Corporation

Miyazaki-shi, Miyazaki Wearable & Industrial products

Sakata-shi, Yamagata

Yuzawa-shi, Akita

Printing solutions,
Wearable & Industrial products
Printing solutions,
Wearable & Industrial products

Hachinohe-shi, Aomori Wearable & Industrial products

U.S. Epson, Inc.

Long Beach, U.S.A.

Holding company

Epson America, Inc.

Long Beach, U.S.A.

Regional headquarters,
Printing solutions,
Visual communications,
Wearable & Industrial products

Epson Electronics
America, Inc.

San Jose, U.S.A.

Wearable & Industrial products

Epson Portland Inc.

Portland, U.S.A.

Printing solutions

Epson El Paso, Inc.

El Paso, U.S.A.

Printing solutions

Epson Europe B.V.

Amsterdam, the
Netherlands

Epson (U.K.) Ltd.

Hemel Hempstead, UK

Epson Deutschland
GmbH

Epson Europe
Electronics GmbH

Dusseldorf, Germany

Regional headquarters,
Printing solutions,
Visual communications
Printing solutions,
Visual communications
Printing solutions,
Visual communications,
Wearable & Industrial products

Munich, Germany

Wearable & Industrial products

Epson France S.A.

Levallois-Perret, France

Epson Italia S.p.A.

Milan, Italy

Printing solutions,
Visual communications
Printing solutions,
Visual communications

For.Tex S.r.l.

Como, Italy

Printing solutions

121

Ownership percentage of
voting rights (%) (Note)

100.0

100.0
(100.0)

100.0

100.0
(100.0)

100.0
(100.0)
100.0
(100.0)
100.0
(100.0)

100.0

100.0
(100.0)

100.0
(100.0)
100.0
(100.0)
100.0
(100.0)
100.0
(100.0)

Company name

Location

Main business

Epson Iberica, S.A.

Cerdanyola, Spain

Printing solutions,
Visual communications

Epson Telford Ltd.

Telford, UK

Printing solutions

Fratelli Robustelli S.r.l.

Como, Italy

Printing solutions

Ownership percentage of
voting rights (%) (Note)
100.0
(100.0)
100.0
(100.0)
100.0
(100.0)

Epson (China) Co., Ltd. Beijing, China

Epson Korea Co., Ltd.

Seoul, Korea

Epson Hong Kong Ltd. Hong Kong, China

Epson Taiwan
Technology & Trading
Ltd.

Taipei, Taiwan

Epson Singapore Pte.
Ltd.

Singapore

P.T. Epson Indonesia

Jakarta, Indonesia

Epson (Thailand)
Co., Ltd.
Epson Philippines
Corporation
Epson Australia
Pty. Ltd.

Bangkok, Thailand

Pasig, the Philippines

North Ryde, Australia

Epson India Pvt. Ltd.

Bangalore, India

Regional headquarters,
Printing solutions,
Visual communications,
Wearable & Industrial products
Printing solutions,
Visual communications
Printing solutions,
Visual communications,
Wearable & Industrial products
Printing solutions,
Visual communications,
Wearable & Industrial products
Regional headquarters,
Printing solutions,
Visual communications,
Wearable & Industrial products
Printing solutions,
Visual communications
Printing solutions,
Visual communications
Printing solutions,
Visual communications
Printing solutions,
Visual communications
Printing solutions,
Visual communications

Tianjin Epson Co., Ltd. Tianjin, China

Printing solutions

Epson Precision
(Hong Kong) Ltd.

Epson Engineering
(Shenzhen) Ltd.

Epson Precision
(Shenzhen) Ltd.
Orient Watch
(Shenzhen) Ltd.
Singapore Epson
Industrial Pte. Ltd.

Hong Kong, China

Shenzhen, China

Printing solutions,
Visual communications
Printing solutions,
Visual communications,
Wearable & Industrial products

Shenzhen, China

Wearable & Industrial products

Shenzhen, China

Wearable & Industrial products

Singapore

Wearable & Industrial products

P.T. Epson Batam

Batam, Indonesia

Printing solutions

122

100.0

100.0
(100.0)
100.0
(100.0)
100.0
(100.0)

100.0

100.0
(100.0)
80.0
(80.0)

100.0

100.0
(100.0)

100.0
(100.0)
100.0
(100.0)

100.0

100.0
(100.0)

Company name

Location

Main business

P.T. Indonesia Epson
Industry
Epson Precision
(Philippines), Inc.
Epson Precision
Malaysia Sdn. Bhd.
Epson Precision
(Johor) Sdn. Bhd.

Bekasi, Indonesia

Printing solutions

Lipa, the Philippines

Kuala Lumpur,
Malaysia

Printing solutions,
Visual communications

Wearable & Industrial products

Johor, Malaysia

Wearable & Industrial products

Ownership percentage of
voting rights (%) (Note)

100.0

100.0
(100.0)

(Note) Ownership percentage of voting rights indicated inside parentheses refers to indirect ownership percentage.

38. Related Parties

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been
eliminated in consolidation and are not disclosed in this note. There were no significant transactions between the
Company, its subsidiaries and other related parties.

The remuneration for directors and other members of key management personnel was as follows:

Short-term remuneration
Stock compensation
Total

Millions of yen
Year ended
March 31,

2016

2017

550
-
550

475
6
481

Thousands of
U.S. dollars
Year ended
March 31,
2017

4,234
53
4,287

(Note 1) The Company has introduced an officers’ shareholding association system to link compensation more
closely to shareholders’ value. The acquisition of the Company’s shares accounts for a portion of the short-term
remuneration.

(Note 2) A statutory auditor (outside statutory auditor) who retired at the closing of the general shareholders’
meeting held on June 28, 2016 received a retirement benefit of ¥15 million ($133 thousand) based on the abolition
of the retirement allowance system for executives resolved at the general shareholders’ meeting held on June 23,
2006.

39. Commitments

Commitments for the acquisition of assets after the fiscal year end were as follows:

Millions of yen
March 31,

2016

2017

Thousands of
U.S. dollars
March 31,
2017

Acquisition of property, plant and equipment
Acquisition of intangible assets

Total

6,048
1,682
7,730

25,994
613
26,608

231,706
5,463
237,169

123

40. Contingencies

Material litigation
In general, litigation has uncertainties and it is difficult to make reliable judgments for the possibility of an outflow
of resources embodying economic benefits and to estimate the financial effect.
Provisions are not recognised either if an outflow of resources embodying economic benefits is not probable or to
estimate the financial effect is not practicable. Epson was contending the following material actions.

(1) The liquid crystal display price-fixing cartel
The Company is currently under investigation by a certain anti-monopoly-related authority, regarding allegations
of involvement in a liquid crystal display price-fixing cartel.

(2) The civil action on copyright fee of ink-jet printers
In June 2010, Epson Europe B.V. (“EEB”), a consolidated subsidiary of the Company, brought a civil suit against
La SCRL Reprobel (“Reprobel”), a Belgium-based group that collects copyright royalties, seeking restitution for
copyright royalties for multifunction printers. After that, Reprobel also brought a civil suit against EEB. As a result,
these two lawsuits were adjoined. EEB’s claims were rejected at the first trial, but EEB, dissatisfied with the
decision, intends to appeal.

41. Subsequent Events

No material subsequent events were identified.

42. Approval of Consolidated Financial Statements

The consolidated financial statements were approved by Minoru Usui (President and Representative Director) and
Tatsuaki Seki (Director and General Administrative Manager, Management Control Division) on June 28, 2017.

124

Report of Independent Auditors

125

Additional Information
1. Principal subsidiaries and affiliates

Company name

Location

Paid-in capital or
amount invested

Main business

Ownership
percentage of
voting rights (%)

Relationship between parent
company and subsidiary

(Consolidated subsidiaries)

Epson Sales Japan
Corporation
*

Shinjuku-ku,
Tokyo

4,000
(million JPY)

Printing solutions,
Visual
communications,
Wearable & Industrial
products

100.0

Sales of the Company’s
products,
Interlocking directors,
Financial assistance,
Rental of assets

Epson Direct
Corporation

Matsumoto-shi,
Nagano

150
(million JPY)

Printing solutions

100.0
(100.0)

Sales of PCs, etc.,
Rental of assets

Orient Watch Co., Ltd.

Shinjuku-ku,
Tokyo

100
(million JPY)

Wearable & Industrial
products

Miyazaki Epson
Corporation

Miyazaki-shi,
Miyazaki

100
(million JPY)

Wearable & Industrial
products

Tohoku Epson
Corporation

Sakata-shi,
Yamagata

100
(million JPY)

Printing solutions,
Wearable & Industrial
products

Akita Epson
Corporation

Yuzawa-shi,
Akita

80
(million JPY)

Printing solutions,
Wearable & Industrial
products

Epson Atmix
Corporation

Hachinohe-shi,
Aomori

450
(million JPY)

Wearable & Industrial
products

100.0

Sales of watches,
Interlocking directors,
Rental and borrowing of
assets

100.0

Manufacture of crystal
devices

100.0

Manufacture of printer
components and
semiconductors

Manufacture of printer
components, watch
movements and sensing
equipment,
Financial assistance

100.0

Manufacture and sales of
metal powders, etc.,
Rental and borrowing of
assets

U.S. Epson, Inc.
*

Long Beach,
U.S.A.

126,941
(thousand USD)

Holding company

100.0

Holding company in
Americas,
Interlocking directors

Regional headquarters in
Americas,
Sales of printers, 3LCD
projectors, and factory
automation products, etc.,
Interlocking directors

Sales of electronic devices

100.0
(100.0)

Manufacture of printer
consumables

100.0
(100.0)

Distribution of printer
consumables

Epson America, Inc.
*

Long Beach,
U.S.A.

40,000
(thousand USD)

Regional headquarters,
Printing solutions,
Visual
communications,
Wearable & Industrial
products

Epson Electronics
America, Inc.

Epson Portland Inc.

Epson El Paso, Inc.

San Jose,
U.S.A.

Portland,
U.S.A.

El Paso,
U.S.A.

10,000
(thousand USD)

Wearable & Industrial
products

31,150
(thousand USD)

51,000
(thousand USD)

Printing solutions

126

Company name

Location

Paid-in capital or
amount invested

Main business

Ownership
percentage of
voting rights (%)

Relationship between parent
company and subsidiary

Epson Europe B.V.
*

Amsterdam,
the Netherlands

95,000
(thousand EUR)

Regional headquarters,
Printing solutions,
Visual
communications

Epson (U.K.) Ltd.

Hemel
Hempstead,
UK

1,600
(thousand GBP)

Printing solutions,
Visual
communications

Epson Deutschland
GmbH

Dusseldorf,
Germany

5,200
(thousand EUR)

Printing solutions,
Visual
communications,
Wearable & Industrial
products

Epson Europe
Electronics GmbH

Munich,
Germany

2,000
(thousand EUR)

Wearable & Industrial
products

Epson France S.A.

Epson Italia S.p.A.

For.Tex S.r.l.

Levallois-
Perret,
France

Milan,
Italy

Como,
Italy

4,000
(thousand EUR)

3,000
(thousand EUR)

80
(thousand EUR)

Epson Iberica, S.A.

Cerdanyola,
Spain

1,900
(thousand EUR)

Epson Telford Ltd.

Fratelli Robustelli S.r.l.

Telford,
UK

Como,
Italy

8,000
(thousand GBP)

90
(thousand EUR)

Epson (China) Co., Ltd.
*

Beijing,
China

1,211
(million CNY)

Printing solutions,
Visual
communications

Printing solutions

Printing solutions,
Visual
communications

Printing solutions

Regional headquarters,
Printing solutions,
Visual
communications,
Wearable & Industrial
products

Epson Korea Co., Ltd.

Seoul,
Korea

1,466
(million KRW)

Printing solutions,
Visual
communications

Epson Hong Kong Ltd.

Hong Kong,
China

2,000
(thousand HKD)

Printing solutions,
Visual
communications,
Wearable & Industrial
products

127

100.0

Regional headquarters in
Europe,
Sales of printers and 3LCD
projectors, etc.,
Interlocking directors,
Guaranty of liabilities

100.0
(100.0)

Sales of printers and 3LCD
projectors, etc.,
Guaranty of liabilities

100.0
(100.0)

Sales of printers, 3LCD
projectors, and factory
automation products, etc.,
Guaranty of liabilities

100.0
(100.0)

Sales of electronic devices,
Interlocking directors,
Guaranty of liabilities

100.0
(100.0)

Sales of printers and 3LCD
projectors, etc.

100.0
(100.0)

Sales of printers and 3LCD
projectors, etc.,
Guaranty of liabilities

100.0
(100.0)

Sales, etc. of printer
consumables

100.0
(100.0)

Sales of printers and 3LCD
projectors, etc.,
Guaranty of liabilities

100.0
(100.0)

100.0

Manufacture of printer
consumables,
Interlocking directors

Manufacture, etc. of printers

Regional headquarters in
China,
Sales of printers, 3LCD
projectors and factory
automation products, etc.,
Interlocking directors

100.0

Sales of printers and 3LCD
projectors, etc.

100.0

Sales of printers, 3LCD
projectors, watch
movements, factory
automation products and
electronic devices, etc.

Company name

Location

Paid-in capital or
amount invested

Main business

Ownership
percentage of
voting rights (%)

Relationship between parent
company and subsidiary

Epson Taiwan
Technology & Trading
Ltd.

Taipei,
Taiwan

25,000
(thousand TWD)

Epson Singapore
Pte. Ltd.

Singapore

200
(thousand SGD)

P.T. Epson
Indonesia

Jakarta,
Indonesia

918,000
(thousand IDR)

Epson (Thailand)
Co., Ltd.

Bangkok,
Thailand

103,000
(thousand THB)

Epson Philippines
Corporation

Pasig,
Philippines

50,000
(thousand PHP)

Epson Australia
Pty. Ltd.

North Ryde,
Australia

1,000
(thousand AUD)

Epson India
Pvt. Ltd.

Bangalore,
India

108,628
(thousand INR)

Printing solutions,
Visual
communications,
Wearable & Industrial
products

Regional headquarters,
Printing solutions,
Visual
communications,
Wearable & Industrial
products

Printing solutions,
Visual
communications

Tianjin Epson Co., Ltd.

Tianjin,
China

172,083
(thousand CNY)

Printing solutions

Epson Precision
(Hong Kong), Ltd.
*

Epson Engineering
(Shenzhen) Ltd.
*

Hong Kong,
China

81,602
(thousand USD)

Shenzhen,
China

56,641
(thousand USD)

Printing solutions,
Visual
communications

Printing solutions,
Visual
communications,
Wearable & Industrial
products

Epson Precision
(Shenzhen) Ltd.

Orient Watch
(Shenzhen) Ltd.

Shenzhen,
China

25,000
(thousand USD)

Wearable & Industrial
products

100.0

Sales of printers, 3LCD
projectors, factory
automation products and
electronic devices, etc.,
Interlocking directors,
Guaranty of liabilities

Regional headquarters in
Asia-Pacific,
Sales of printers, 3LCD
projectors, and electronic
devices, etc.,
Interlocking directors,
Guaranty of liabilities

100.0
(100.0)

Sales of printers and 3LCD
projectors, etc.

100.0
(100.0)

Sales of printers and 3LCD
projectors, etc.

100.0
(100.0)

Sales of printers and 3LCD
projectors, etc.

100.0

100.0
(100.0)

Sales of printers and 3LCD
projectors, etc.,
Interlocking directors,
Guaranty of liabilities

80.0
(80.0)

Manufacture of printer
consumables,
Interlocking directors

100.0

Management of components
of printers and 3LCD
projectors, etc. used for
contract services

100.0
(100.0)

Manufacture of printers,
3LCD projectors and factory
automation products, etc.

100.0
(100.0)

Manufacture of watches,
etc.,
Interlocking directors

37,748
(thousand CNY)

Wearable & Industrial
products

100.0
(100.0)

Manufacture of watches,
etc.

128

100.0

Manufacture of
semiconductors, and surface
finishing,
Guaranty of liabilities

100.0
(100.0)

Manufacture of printer
consumables,
Guaranty of liabilities

Company name

Location

Paid-in capital or
amount invested

Main business

Ownership
percentage of
voting rights (%)

Relationship between parent
company and subsidiary

Singapore Epson
Industrial
Pte. Ltd.

Singapore

71,700
(thousand SGD)

Wearable & Industrial
products

P.T. Epson Batam

P.T. Indonesia Epson
Industry
*

Batam,
Indonesia

Bekasi,
Indonesia

7,000
(thousand USD)

Printing solutions

23,000
(thousand USD

Printing solutions

100.0

Manufacture of printers,
Interlocking directors,
Guaranty of liabilities

Epson Precision
(Philippines), Inc.
*

Lipa,
Philippines

157,533
(thousand USD)

Printing solutions,
Visual
communications

100.0

Manufacture of printers and
3LCD projectors,
Guaranty of liabilities

Epson Precision
Malaysia Sdn. Bhd.

Kuala Lumpur,
Malaysia

16,000
(thousand MYR)

Wearable & Industrial
products

Epson Precision
(Johor) Sdn. Bhd.

Johor,
Malaysia

22,800
(thousand MYR)

Wearable & Industrial
products

100.0

Manufacture of crystal
devices,
Interlocking directors

100.0
(100.0)

Manufacture of watch
components,
Guaranty of liabilities

42 other companies

–

(Equity method affiliates)
Two companies
Notes
1. Ownership percentage of voting rights indicated inside parentheses refers to indirect ownership percentage.
2. * indicates a specified subsidiary (tokutei-kogaisha).
3. The revenue (excluding revenues among consolidated subsidiaries) of Epson Sales Japan Corporation and Epson
America, Inc. each amounts to more than 10% of the consolidated revenue. Key information on the operations of
these subsidiaries is as follows.

Company name

Revenue

Profit before
tax

Profit for the
period

Total equity

Total assets

(Millions of yen)

Epson Sales Japan Corporation

182,091

Epson America, Inc.

284,341

3,208

9,990

2,289

7,298

15,297

65,498

39,714

126,100

The amounts for Epson America, Inc. are included in consolidated business results.

129

2. Distribution of ownership among shareholders

Category

Government and

Japanese

regional public

financial

securities

bodies

institutions

companies

Other Japanese

corporations

Foreign institutions and

Japanese

others

individuals

Total

Institutions

Individuals

and others

Shares less

than one

unit (Shares)

Share ownership (100 shares per unit)

As of March 31, 2017

Number of

shareholders

(Persons)

Number of

shares owned

(Units)

Percentage of

shares owned

(%)

–

300

547

34,674

35,683

–

935,190

138,340

546,946

1,206,892

192

1,167,565 3,995,125

122,278

–

23.41

3.46

13.69

30.21

0.01

29.22

100.00

–

Notes
1. 47,231,657 shares of treasury stock are included as 472,316 units under “Japanese individuals and others” and 57
shares under “Shares less than one unit.” Treasury shares do not include the Company’s shares (180,000 shares)
owned by the officer compensation BIP (Board Incentive Plan) trust.

2. Six units in the name of Japan Securities Depository Center, Inc. are included under “Other Japanese

corporations.”

130

3. Major shareholders

Name

Address

Number of shares held

As of March 31, 2017

Shareholding
ratio (%)

Sanko Kigyo Kabushiki
Kaisha
Japan Trustee Services
Bank, Ltd. (Trustee
Account)
The Master Trust Bank
of Japan, Ltd. (Trust
account)
Seiko Holdings
Corporation

6-1 Ginza 5-chome, Chuo-ku,
Tokyo

8-11, Harumi 1-chome, Chuo-ku,
Tokyo

11-3 Hamamatsu-cho 2-chome,
Minato-ku, Tokyo

5-11 Ginza 4-chome, Chuo-ku,
Tokyo

Yasuo Hattori

Minato-ku, Tokyo

Noboru Hattori

Minato-ku, Tokyo

The Dai-ichi Life
Insurance Company,
Limited
(Standing proxy: Trust &
Custody Services Bank,
Ltd.)
Mizuho Trust & Banking
Co., Ltd., Retirement
benefit trust, Mizuho
Bank, Ltd. account,
Beneficiary of the
re-trust, Trust & Custody
Services Bank, Ltd.
Seiko Epson Corporation
Employees’
Shareholding
Association
Ichigo Trust Pte. Ltd.
(Standing proxy:
Custody Service
Department, Tokyo
Branch, The Hongkong
and Shanghai Banking
Corporation Limited)

13-1, Yurakucho 1-chome,
Chiyoda-ku, Tokyo
(Harumi Island Triton Square
Office Tower Z, 8-12, Harumi
1-chome, Chuo-ku, Tokyo)

Harumi Island Triton Square
Office Tower Z, 8-12, Harumi
1-chome, Chuo-ku, Tokyo

3-5, Owa 3-chome, Suwa-shi,
Nagano

1 North Bridge Road, 06-08
High Street Centre, Singapore
179094
(11-1 Nihonbashi 3-chome,
Chuo-ku, Tokyo)

20,000,000

16,797,700

13,957,500

12,000,000

11,932,612

11,199,936

5.00

4.20

3.49

3.00

2.98

2.80

8,736,000

2.18

8,153,800

2.04

7,564,504

1.89

6,766,200

1.69

Total

—

117,108,252

29.30

Notes
1. Although the Company holds 47,231,657 shares of treasury stock, the Company is excluded from the above list

of major shareholders. (The ratio of the treasury shares held by the Company to the total number of shares issued
is 11.81%.) Treasury shares do not include the Company’s shares (180,000 shares) owned by the officer
compensation BIP trust.

2. The shares held by Mizuho Trust & Banking Co., Ltd., Retirement benefit trust, Mizuho Bank, Ltd. account,

Beneficiary of the re-trust, Trust & Custody Services Bank, Ltd., were contributed by Mizuho Bank, Ltd. to the
trust assets of the Retirement benefit trust.

3. Mizuho Bank, Ltd. and its joint holders submitted a Report of Change to the Director of the Kanto Local Finance
Bureau as of October 21, 2016, claiming that they hold the Company’s shares as follows as of October 14, 2016.

131

However, we have not been able to confirm the number of shares they held at the end of the fiscal year under
review. Therefore, they are not included in the above major shareholders.

Name

Address

Number of shares held

Shareholding ratio
(%)

Mizuho Bank, Ltd.

Mizuho Securities Co.,
Ltd.
Mizuho Trust & Banking
Co., Ltd.
Asset Management One
Co., Ltd.

5-5, Otemachi 1-chome,
Chiyoda-ku, Tokyo
5-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo
2-1, Yaesu 1-chome,
Chuo-ku, Tokyo
8-2, Marunouchi 1-chome,
Chiyoda-ku, Tokyo

Total

–

13,894,000

1,108,500

400,000

11,155,300

26,557,800

3.48

0.28

0.10

2.79

6.65

132

4. Employee stock ownership plans

The Company has introduced a transparent & fair performance-linked stock compensation plan (hereinafter
referred to as the “Plan”) for the Company’s directors and executive officers who have been engaged by the
Company (hereinafter collectively referred to as the “Eligible Officers,” and excluding outside directors and
persons such as Audit and Supervisory Committee members who are not directly engaged in the operations of the
Company, and persons residing outside Japan). The Plan is intended to heighten directors’ sense of shared interest
with shareholders and to show a commitment to sustaining growth and increasing corporate value over the mid- to
long-term.

(1) Summary of the Plan
The Plan has employed a framework referred to as the officer compensation BIP (Board Incentive Plan) trust
(hereinafter referred to as the “BIP Trust”). The BIP Trust is an incentive plan for officers modeled on the U.S.
Performance Share and Restricted Stock systems. The Plan provides the officers with Epson’s own shares, which
will be acquired through the BIP Trust based on the levels of achievement of operating performance targets.

f
o
t
n
e
m
e
r
i
t
e
r

d
n
a

r
e
f
s
n
a
r
t

s
i
t
a
r
G

)
7
(

s
t
e
s
s
a

l
a
u
d
i
s
e
r

f
o

y
r
e
v
i
l
e
D

)
8
(

s
e
r
a
h
s

l
a
u
d
i
s
e
r

Trustor

Epson

s
t
s
o
c

f
o
t
n
e
m
y
a
P
)
3
(

s
d
n
e
d
i
v
i
D

)
4
(

i
d

s
e
r
a
h
s

n
o
s
p
E
)
3
(

Trustee

t
n
e
m
h
s
i
l
b
a
t
s
e

t
s
u
r
T
)
2
(

e
r
a
h
s

f
o

t
n
e
m
h
s
i
l
b
a
t
s
E

)
1
(

s
n
o
i
t
a
l
u
g
e
r

y
r
e
v
i
l
e
d

(6) Delivery of Epson
shares and cash
benefits

(3) Epson shares

Mitsubishi UFJ Trust and Banking Corp.

(Joint trustee: The Master Trust Bank of Japan, Ltd.)

Stock market

BIP Trust

Beneficiaries

The Eligible
Officers

(3) Payment of costs

(5) Instruction not to

exercise voting rights

Trust
administrator

1) Epson will establish share delivery regulations related to the content of the Plan.
2) In accordance with the trust agreement, Epson contributes funds on the trustee’s behalf within the scope of

approval by resolution at the General Meeting of Shareholders and establishes a trust with beneficiaries who are
the Officers who satisfy the beneficiary requirements (hereinafter referred to as the “Trust”).

3) According to the trust administrator’s instructions, the Trust uses funds contributed as in 2) above as the source

of funds to acquire Epson shares from Epson (disposal of treasury shares) or in the stock market.

4) The allocation of surplus funds for the Epson shares within the Trust for the Epson shares is handled in the same

manner as for other Epson shares, and is appropriated for necessary expenses for the Plan.

5) Throughout the trust period, voting rights are not to be exercised on Epson shares within the Trust.
6) During the trust period, the Eligible Officers are awarded a specific number of points each year based on their

position and other factors, in accordance with the share delivery regulations established in 1) above. Such points
fluctuate depending on the levels of achievement of the mid- to long-term operating performance targets of
Epson. Furthermore, Epson shares, which correspond to a certain proportion of such points, will be delivered to

133

the Eligible Officers, in principle, after the lapse of three years following the awarding of points. As regards
Epson shares corresponding to the remaining portion of points, the Eligible Officers will receive cash equivalent
to the amounts obtained through the conversion of such shares into cash within the Trust as prescribed in the
trust agreement.

7) If residual shares remain in the Trust at the expiry of the trust period in the event that operating performance

targets are not met during the trust period, Epson may continue to use the Trust by amending the trust
agreement and making additional contribution. Otherwise, Epson will acquire such residual shares, through
gratis transfer, and retire them by resolution of the Board of Directors.

8) Upon the termination of the Trust, residual assets remaining after allocation to beneficiaries are to be attributed
to Epson within the scope of trust expense reserve after subtracting funds for acquiring shares from the trust
money. The portion exceeding the trust expense reserve is planned to be donated to organization(s) having no
interests with Epson and any of its officers.

Note: The Trustor may continue the Plan by contributing additional money as funds for acquiring its own shares
for the Trust within the scope of the funds for acquiring shares, of which the amount is subject to approval
by resolution at the General Meeting of Shareholders.

(2) Overview of the trust agreement
1) Type of Trust

2) Purpose of the Trust
3) Trustor
4) Trustee

5) Beneficiaries
6) Trust administrator
7) Date of trust agreement
8) Trust period
9) Plan launch date
10) Exercise of voting rights
11) Class of shares to be acquired
12) Amount of initial trust money
13) Maximum amount of trust money
14) Method of acquiring shares
15) Period for acquiring shares
16) Vested rightholder
17) Residual assets

Monetary trust other than a designated individually operated
monetary trust (third party benefit trust)
Provide incentives to the Eligible Officers
Epson
Mitsubishi UFJ Trust and Banking Corporation
(Joint trustee: The Master Trust Bank of Japan, Ltd.)
The Eligible Officers who meet the beneficiary requirements
A third-party specialist without relationship with Epson
August 2, 2016
August 2, 2016 through August 31, 2019 (planned)
October 1, 2016
Voting rights not to be exercised
Common stock of Epson
320 million yen (including trust fees and expenses)
500 million yen (including trust fees and expenses)
Acquisition in the stock market
August 4, 2016 through August 31, 2016
Epson
Residual assets that Epson may receive as the vested
rightholder shall be within the scope of trust expense reserve
after subtracting funds for acquiring shares from the trust
money.

(3) Content of trust/stock related business
1) Trust-related business

2) Stock-related business

Mitsubishi UFJ Trust and Banking Corporation and The Master Trust Bank of
Japan, Ltd. handle the trust-related business as trustees of the BIP Trust.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. handles the business
related to the delivery of Epson shares to the beneficiaries in accordance with a
business consignment agreement.

(4) Total number or total amount of shares to be acquired by the Eligible Officers

180,000 shares

(5) Scope of beneficiaries and persons entitled to other rights under the Plan

The Eligible Officers who meet the beneficiary requirements

134

5. Epson stock price

(1) High and low stock prices for the previous five years

Year
Fiscal year

71st year
March 2013

72nd year
March 2014

73rd year
March 2015

74th year
March 2016

75th year
March 2017

High (¥)

Low (¥)

1,183

431

3,390

795

5,970
□2,333

2,752
□2,120

2,357

1,492

2,657

1,543

Notes
1. High and low stock prices noted above are based on Tokyo Stock Exchange (First Section) data.
2. The □ mark indicates the highest and lowest ex-rights prices after a stock split (the 2-for-1 stock split

implemented on April 1, 2015).

(2) High and low stock prices for the previous six months

Month

October 2016

November

December

January 2017

February

March

High (¥)

Low (¥)

Note

2,137

1,912

2,318

1,994

2,511

2,208

2,579

2,282

2,657

2,289

2,594

2,344

High and low stock prices noted above are based on Tokyo Stock Exchange (First Section) data.

135

6. Corporate data and investor information

(1) Company name

Seiko Epson Corporation

(2) Founded

(3) Head office

May 1942

3-5 Owa 3-chome, Suwa, Nagano 392-8502, Japan

Tel: +81-266-52-3131(main)

(4) Tokyo office

JR Shinjuku Miraina Tower, 4-1-6 Shinjuku, Tokyo

160-8801, Japan

Tel: +81 3-5368-0700(main)

(5) Investor information

Closing of accounts

Regular general shareholders’ meeting

Date for confirmation to shareholders of

March 31

June

the cash dividend payment date

March 31

Date for confirmation to shareholders of

the interim cash dividend payment date

September 30

Transfer agent

Mitsubishi UFJ Trust and Banking Corporation

4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo

Agent’s business address

Stock Transfer Agency Department

Mitsubishi UFJ Trust and Banking Corporation

10-11, Higashisuna 7-chome, Koto-ku, Tokyo

Tel: +81-3-6701-5000

http://www.tr.mufg.jp/english/

Intermediary offices

Head Office and Branches of Mitsubishi UFJ Trust and

Banking Corporation

Posting of public notices

Public notices will be posted electronically. In the event of

accidents or other circumstances preventing the electronic

posting of information, such information will be made

available through the Nihon Keizai Shimbun newspaper

(Japanese)

Web address

http://www.pronexus.co.jp/koukoku/6724/6724.html

(Japanese)

136

3-3-5 Owa, Suwa, Nagano 392-8502, Japan
TEL: +81-266-52-3131
http://global.epson.com