1 NOTICE OF THE 43 RD ORDINARY GENERAL MEETING OF SHAREHOLDERS Stock Code Number: 9766 June 4, 2015 Dear Shareholder, You are cordially invited to attend the 43rd Ordinary General Meeting of Shareholders of KONAMI CORPORATION (the “Company”). The meeting will be held as described hereunder. If you are unable to attend the meeting, you may exercise your voting right in writing or via the Internet, etc. Please review the reference materials for the General Meeting of Shareholders contained herein and exercise your voting right in the manner described hereafter by 6:00 p.m. on Thursday, June 25, 2015. Sincerely yours, Kagemasa Kozuki Representative Director KONAMI CORPORATION 7-2, Akasaka 9-chome, Minato-ku, Tokyo
Transcript
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NOTICE OF THE 43RD ORDINARY GENERAL MEETING OF SHAREHOLDERS
Stock Code Number: 9766 June 4, 2015
Dear Shareholder, You are cordially invited to attend the 43rd Ordinary General Meeting of Shareholders of KONAMI CORPORATION (the “Company”). The meeting will be held as described hereunder.
If you are unable to attend the meeting, you may exercise your voting right in writing or via the Internet, etc. Please review the reference materials for the General Meeting of Shareholders contained herein and exercise your voting right in the manner described hereafter by 6:00 p.m. on Thursday, June 25, 2015.
Sincerely yours,
Kagemasa Kozuki
Representative Director
KONAMI CORPORATION
7-2, Akasaka 9-chome, Minato-ku, Tokyo
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MEETING AGENDA
1. Date and time: 10:00 a.m., Friday, June 26, 2015
2. Venue: “Arena”, Main Office of Konami Sports Club, 10-1, Higashi Shinagawa 4-chome, Shinagawa-ku, Tokyo
3. Agenda:
Reports 1. Business Report, Consolidated Financial Statements for the 43rd fiscal year (from April 1, 2014 to March 31, 2015); and on the Reports of the accounting auditor and of the Audit & Supervisory Board regarding Consolidated Financial Statements for the 43rd fiscal year
2. Financial Statements for the 43rd fiscal year (from April 1, 2014 to March 31, 2015)
Proposals
Proposal 1 Amendments to the Articles of Incorporation
Proposal 2 Election of nine members to the Board of Directors
Proposal 3 Election of three members to the Audit & Supervisory Board
Proposal 4 Election of Accounting Auditor
･ In case any amendments or changes are made to the reference materials for the General Meeting of Shareholders, Business Report, consolidated financial statements and financial statements prior to the date of the meeting, the Company shall notify its shareholders via the Company’s website.
･ Notification of Business Conducted at the 43rd Ordinary General Meeting of Shareholders that provides the results of resolutions will be posted on the Company’s website instead of being distributed in writing.
･ Institutional investors may use the electronic voting platform operated by ICJ, Inc., as a method of exercising their voting rights for the General Meeting of Shareholders of the Company.
There are three ways to exercise your voting rights.
1) Attendance at the meeting in person
Please remember to bring the voting form enclosed and hand it to the receptionist.*1
Date and time of the 43rd Ordinary General Meeting of Shareholders: 10:00 a.m., Friday, June 26, 2015
2) Voting by mail (in writing)
To vote by mail, please complete the voting form enclosed indicating “for” or “against” for the agenda items, and return the completed form to us. *2
Exercise deadline: No later than 6:00 p.m., Thursday, June 25, 2015
3) Voting via the Internet, etc.
Please access the website for exercise of voting rights designated by the Company (http://www.web54.net) and enter “for” or “against” for the agenda items.
Exercise deadline: By 6:00 p.m. on Thursday, June 25, 2015.
For details, please see the next page.
*1 Please be informed that any persons other than a shareholder entitled to exercise the voting right such as any proxy or person accompanying a shareholder, who is not a shareholder of the Company may not attend the meeting.
*2 When there is no indication of “for” or “against” for each agenda item on the voting form, the Company shall treat it as an indication of “for”.
[This is an English translation of the Report for the 43rd Fiscal Year (the “Report”) of the Company provided for your reference and convenience. This translation includes a translation of the auditors’ report of KPMG AZSA LLC, the Company’s accounting auditor, of the financial statements included in the original Japanese language Report.]
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Instructions for the Exercise of Voting Rights via the Internet, etc.
If you are unable to attend the meeting, you may exercise your voting right by following one of the procedures described below. ADR holders cannot vote in this manner. Please contact the ADR Depositary if you wish to vote.
1. Exercise of your voting rights via the Internet
Shareholders may only exercise their voting rights online through the dedicated voting website designated by the Company.
Voting website URL: http://www.web54.net
2. Handling of your voting rights
1) Shareholders choosing to exercise their voting rights online need to use the voting code and password specified on the enclosed voting form. Once you have entered the site, please vote for or against the resolution by following the instructions on screen.
2) If you duplicate your vote, i.e., if you exercise your voting rights both by voting forms and via the Internet, we will consider only the Internet vote to be valid. Also, if you vote a number of times over the Internet, or both by a personal computer and a mobile phone, we will consider the final vote to be the valid one.
3) Any connection fees to the Internet providers or time charges (telephone charges, etc.) incurred by shareholders in exercising votes online are to be borne by such shareholders.
3. Handling of password and voting code
1) If you incorrectly enter your password more than a certain number of times, you will be locked out. Please follow the instructions on the screen to have your password reissued.
2) The voting code indicated on the voting rights exercise form is valid for this General Meeting of Shareholders only.
4. System requirements
You may not be able to use the website for exercise of voting rights depending on the system environment and services/models used for your PC, smartphone and mobile phone.
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(Attached documents)
Business Report
(April 1, 2014 – March 31, 2015)
1. Business Performance
(1) Konami Group Business Conditions and Results
The business environment surrounding the Konami Group showed signs of slow recovery, including
rises in stock prices and improvement in a segment of corporate earnings in Japan, supported by the
economic and financial policies of the government and the additional monetary easing policies
implemented by the Bank of Japan. On the one hand, the economic environment remained uncertain, as
shown in signs such as a slowdown in personal consumption after the hike in the Japanese consumption
tax and rising prices accompanied by a weakening yen. In terms of the global economy, the economic
environment for growth remained uncertain. While personal consumption continued to recover in the
U.S., the growth rate in emerging markets, including China, has slowed down. Meanwhile, Western
economies have continued to show signs of slowing and the Russian economy has worsened.
In the entertainment market, along with improving performance in mobile devices due to the rapid
spread of smartphones and tablet PCs and the development of information and telecommunications
infrastructure, the selection of game platform continues to diversify as new game consoles are spread,
and business opportunities in the game industry are increasing. In the gaming industry, the development
of resources related to tourism continues to help spread the casino market worldwide. In Japan, gaming
business is expected to continue to grow, including the anticipated Diet deliberations of a draft bill for
Integrated Resort (IR) Promotion.
In connection with the health and fitness industry, there is a growing health consciousness throughout
society, especially among senior citizens and women, who year after year have shown an increasing
tendency to focus their leisure activities on improving health and physical strength. We continue to see
growing health-consciousness, a preference for sports and an interest in preventing the need for nursing
care in old age.
Against this background, in the Digital Entertainment segment of the Konami Group, mobile games,
including JIKKYOU PAWAFURU PUROYAKYU and the WORLD SOCCER COLLECTION series,
continued to enjoy steady sales. Also, we released video game titles, PROFESSIONAL BASEBALL
SPIRITS 2015, etc.
In our Health & Fitness segment, we continued to develop our pricing and membership plans. These
plans enable customers to select a pricing plan based on the number of times they use our facilities and
to use more than one facility. We intend to promote and spread services supporting the concept of
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“sustainable fitness.”
In our Gaming & Systems segment, sales of the Podium video slot machine continued to be favorable,
mainly in the U.S. and European markets.
In the Pachislot and Pachinko Machines segment, we released 5 new pachislot machines, including
MAH-JONG FIGHT CLUB, Dororon Enma-kun Meeramera, and SENGOKU COLLECTION 2, each of
which has continued to operate steadily at pachinko parlors. We also released the first pachinko machine
developed by the Konami Group, CR PACHINKO MAGICAL HALLOWEEN, which was converted from
our popular original series of pachislot machines, MAGICAL HALLOWEEN.
In terms of the consolidated results for the year ended March 31, 2015, net revenues amounted to
¥218,157 million (a year-on-year increase of 0.3%), operating income was ¥14,451 million (a
year-on-year increase of 87.8%), income before income taxes and equity in net income of affiliated
company was ¥15,947 million (a year-on-year increase of 72.8%), and net income attributable to
KONAMI CORPORATION was ¥9,479 million (a year-on-year increase of 147.3%).
Performance by business segment
Digital Entertainment
As for mobile games, JIKKYOU PAWAFURU PUROYAKYU has surpassed eight million downloads in
the four months since its distribution started in December, 2014. This performance was the result of
integration of the game system developed through a series of home video game devices, with expertise
in the operation of mobile games. This has driven a steady and continuous increase of revenue. In
addition, the Professional Baseball Dream Nine series, WORLD SOCCER COLLECTION series, the
CROWS×WORST series, and DRAGON COLLECTION, continued to enjoy steady sales. In overseas
markets, STAR WARS™: FORCE COLLECTION, based on the Star Wars™ film series and PES
COLLECTION (former PES MANAGER) (known in Japan as WORLD SOCCER COLLECTION S),
earned stable income.
As for computer and video games, we released the latest title in the WORLD SOCCER Winning Eleven
series, WORLD SOCCER Winning Eleven 2015 (known in the U.S. and Europe as PRO EVOLUTION
SOCCER 2015), and the item payment system on its new game mode, myClub, has performed well.
Even though we also released other games including PROFESSIONAL BASEBALL SPIRITS 2015, the
number of sold titles decreased in the fiscal year ended March 31, 2015, based on a policy of selection
and concentration due to diversifying consumer preferences.
In regards to arcade games, our e-AMUSEMENT Participation system titles, centered on MAH-JONG
FIGHT CLUB and music genre games, continued to operate steadily. Meanwhile, Disney TSUM TSUM,
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a smartphone application converted into an arcade game, received favorable reviews. The kids’ card
game machine, Monster Retsuden ORECA BATTLE, continued to be extremely popular, especially
among elementary school age boys.
The Yu-Gi-Oh! TRADING CARD GAME series continued to perform strongly in the global market.
In terms of financial performance, consolidated net revenues for the year ended March 31, 2015 in this
segment amounted to ¥96,975 million (a year-on-year decrease of 7.1%) and consolidated operating
income the year ended March 31, 2015 in this segment amounted to ¥13,272 million (a year-on-year
increase of 13.1%).
Health & Fitness
With respect to the management of facilities that we operate directly, we refurbished the facilities and
services at our top brand facilities, GRANCISE OTEMACHI and GRANCISE AOYAMA, both in
Tokyo. Konami Sports Club OSAKA STATION CITY, which is directly connected to JR Osaka station
in Osaka Prefecture, was also renovated and relaunched. In addition, we opened a new facility, Konami
Sports Club TSUDANUMA KANADE no MORI, in Chiba Prefecture, in October 2014. We intend to
set the tone and offer our services aiming to support customers’ “sustainable fitness,” including, at the
Konami Sports Club, fitness concierges who suggest the most suitable program to customers. These
measures have helped to increase the rate of member retention at our fitness clubs. Although we
continued to endeavor to increase profitability by closing unprofitable outlets which were not expected
to grow, sales from this business decreased mainly due to the closing of large‐scale facilities in the fiscal
year ended March 31, 2015. In regard to “lifestyle-related disease prevention 6WEEKS (continuation
version)” offered at Konami Sports Club FUNABASHI, we received service quality certification as
“active leisure providers” promoted by the Ministry of Economy, Trade and Industry.
Meanwhile, we launched and expanded swimming and gymnastics lesson program series, including the
Dancing STARS program, one of sports lesson program series for children. For adults, we introduced
new swimming classes for the maintenance of health, targeting those over fifty years old. We also
launched the OyZ exercise school program which mainly targets individuals age 60 and older. It is a
“brain activation course” aimed at preventing senile dementia.
With respect to the management of facilities outsourced to Konami Group, using the know-how and
accomplishments in operation and guidance accumulated over the years, we commenced management of
more than 30 facilities. We are working on promoting the health of residents in local communities
through the operation of public facilities.
As for healthcare related products, we developed a series of healthcare applications for smartphones.
This series includes the diet support application calorie-cise, and the walking support application Dr.
Walk. We also released the home fitness bike S-BODY. S-BODY is the first hands-free model in the
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AEROBIKE series, and enables users to “exercise while doing something else,” including watching
television. Each of these developments was part of our efforts to provide convenient opportunities for
physical training other than sports clubs, thereby providing support for exercise and health promotion in
a variety of settings.
In terms of financial performance, consolidated net revenues for the year ended March 31, 2015 in this
segment amounted to ¥73,340 million (a year-on-year decrease of 4.1%) and consolidated operating loss
for the year ended March 31, 2015 in this segment amounted to 913 million (a year-on-year decrease of
77.3%) mainly due to a recognition of impairment charges for property and equipment, and other
intangible assets.
Gaming & Systems
In the North American market, the Podium video slot machine, which has become a staple product,
continued to enjoy favorable sales, including introduction into the Central and South American market.
Although we have accelerated the development of products which precisely meet each market’s needs,
the market environment was affected by the entry of European manufacturers into the market and the
resulting intensified competition. We expanded our lineup of premium products, which raised higher
expectations from players, by introducing products such as Podium Goliath, a larger size version of
Podium, a product that is subject to a participation agreement (in which profits are shared with casino
operators). The SYNKROS casino management system has received positive reviews in each state in
North America.
In the Oceania market, we continued to distribute Podium. In addition, we rolled out a richly diverse
product lineup, including Podium Stack series which maintains a high rate of operation. Full-scale
marketing is also in progress in Asia, Central and South America and Europe, where we are working on
building distribution networks.
In addition, we exhibited our products at the largest gaming industry trade expo in Europe, International
Casino Exhibition 2015 (ICE 2015), held in London, the U.K. The titles we exhibited included Podium
Monument, which was unveiled for the first time in the richly diverse European market. These rich
products and new lineup received high acclaim from operators.
Income of this segment for the fiscal year ended March 31, 2015, however, decreased mainly due to
advance investments in the North American market, including increases in product approval fees and
personnel expenses for product development and maintenance resulting from expansion of the product
lineup and enhancement of the services.
In terms of financial performance, consolidated net revenues for the year ended March 31, 2015 in this
segment amounted to ¥33,825 million (a year-on-year increase of 7.0%) and consolidated operating
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income for the year ended March 31, 2015 in this segment amounted to 6,329 million (a year-on-year
decrease of 13.6%).
Pachislot & Pachinko Machines We placed 5 new pachislot machines on the market for the fiscal year ended March 31, 2015. We released MAH-JONG FIGHT CLUB, which integrated the online mah-jong games operating with favorable reviews at amusement arcades and the features of pachislot machines. This received a favorable reception from users and business operators. Against the backdrop of solid operation, sales volume has increased, including SENRITSU NO STRATUS, which was next introduced, and a product utilizing original content from the Konami Group, Dororon Enma-kun Meeramera, which was derived from the popular animation series, and SENGOKU COLLECTION 2, which was the latest title converted from our popular original series of mobile games. These developments have spurred a recovery trend in our business performance. As for pachinko machines, we also launched CR PACHINKO MAGICAL HALLOWEEN, the first pachinko machine developed by our group. This product embodies the basic concepts of our pachislot machine series MAGICAL HALLOWEEN as well as the typical features of pachinko machines and stores original music.
In terms of financial performance, consolidated net revenues for the year ended March 31, 2015 in this
segment amounted to ¥14,691 million (a year-on-year increase of 153.8%) and consolidated operating
income for the year ended March 31, 2015 in this segment amounted to 322 million (for the year ended
March 31, 2014, consolidated operating loss amounted to 1,911 million).
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(2) Capital Expenditures and Financing Activities
Capital expenditures in the consolidated fiscal year ended March 31, 2015 totaled ¥10,615 million. During
the fiscal year under review, the Company made investments mainly for plant facilities and sports and
fitness club facilities as well as for production and manufacturing equipment.
With respect to financing, funding requirements for the above capital expenditures and so forth were
mainly financed by cash deposits on hand and cash flows from operating activities as well as by unsecured
corporate bonds worth a total of ¥15,000 million issued in September 2013. The Company established a
three-year commitment line (¥25,000 million) in November 2014 for the purpose of securing liquidity
on hand to flexibly meet financing needs in the future and maintaining stability of management in the
medium- and long-term. The Company will continue to endeavor to secure adequate short-term liquidity
and credit lines for fund raising to finance dynamic business development.
(3) Trend of Assets and Business Results
1. Financial and business results of the Konami Group (U.S. GAAP)
(Millions of yen, except per share data)
Years ended March 31 2012 2013 2014 2015
Net revenues 265,758 225,995 217,595 218,157
Operating income 40,950 21,875 7,696 14,451
Net income attributable to KONAMI
CORPORATION
23,012 13,174 3,834 9,479
Basic net income attributable to
KONAMI CORPORATION per share
(yen)
166.23 95.04 27.66 68.38
Total assets 328,006 322,948 320,251 329,760
KONAMI CORPORATION stockholders’
equity
215,458 225,425 225,133 234,310
Note: Financial and business results of the Group is prepared in conformity with the accounting principles and procedures and indication methods which are required for the issue of American Depository Receipts (ADR), namely, U.S. generally accepted accounting principles (U.S. GAAP).
2. Financial and business results of the Company (Japanese GAAP)
(Millions of yen, except per share data)
Years ended March 31 2012 2013 2014 2015
Operating income 18,348 28,469 15,995 14,560
Ordinary income 13,869 23,959 12,534 11,951
Net income 13,488 23,900 12,170 11,259
Basic net income per share (yen) 97.44 172.42 87.80 81.23
Total assets 220,601 218,170 222,893 242,053
Total net assets 175,870 192,906 199,293 207,051
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(4) Issues for the Konami Group
Build a powerful organization that can respond to rapid changes in the global economy
While the structure of the global economy is shifting away from China and other emerging countries as
the leaders, and a global economy in which the prices of crude oil and other resources continue to
increase, and returning to one in which the U.S. takes the leading role, it can be said that there is a
gradual trend toward recovery, despite the presence of various risks. The business environment
surrounding our businesses – Digital Entertainment, Health & Fitness, Gaming & Systems and Pachislot
& Pachinko Machines – requires the ability to adapt to changes in consumer confidence and consumer
behavior resulting from national economic trends. On the other hand, progress has been made in
developing a network environment in the business environment in which we operate. In the process,
users have begun sharing a variety of information, and communities are starting to emerge, each with
distinct tastes.
Konami Group has a holding company structure so that it may respond appropriately to this rapidly
changing market environment and evolve into a flexible and sustainable entity. As such, there is now a
clear separation between the management of the Konami Group and the execution of duties for each
business segment. This is to enable on-target response to the needs of each market and changes of users
as well as promote the agile development of each business, and we also intend to promote the
competitiveness and the sustainable growth of each group company. We believe that this will allow the
Konami Group as a whole to make a leap forward.
Enhance profitability and channel managerial resources to growth areas
In the Digital Entertainment segment, with the spread of smartphones and tablet PCs worldwide and the
development of an online environment, we expect to increase size of the population of users who seek
new modes of play that emphasize network connectivity. The needs of such users are expected to
become increasingly diverse. Given that we expect such diversity and globalization to be sought by
users, Konami Group intends to channel appropriate managerial resources to respond in a selective and
focused manner.
In the Health & Fitness segment, against the backdrop of higher health consciousness and an increase in
people with more leisure time due to the retirement of baby boomers, it is anticipated that health
consciousness will become even higher in the future while preferences and lifestyles will diversify. In
order to achieve further growth, we will take proactive steps to create value-added Konami Sports Clubs
that meet the diversifying consumer needs and offer a new lifestyle. We are promoting a new corporate
vision, “Total Health Partner,” with the aim of establishing ourselves as a leading provider of new
health-themed services, not only providing places for exercise but also becoming the most reliable
provider of a wide range of health and body services for all of our customers, from children to senior
citizens.
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In the Gaming & Systems segment, as for the casino market where Konami Group operates, the
legalization of gambling is progressing in various countries and regions around the world, and the
number of casinos is increasing each year. Business opportunities are continuously increasing for
Konami Group, which manufactures and markets slot machines and offers participation agreements and
the casino management system that secure stable revenues for Konami Group. We will endeavor to
expand our business in the future with strategic alliances with other companies.
In the Pachislot & Pachinko Machines segment, Konami Group will strive to increase its market share
by providing products leveraging the Group’s extensive entertainment expertise in step with market
developments such as changes in how games are played and user preferences.
Konami Group plans to allocate appropriate managerial resources not only to the existing Digital
Entertainment, Health & Fitness, Gaming & Systems, and Pachislot & Pachinko Machines but also to
new business fields where growth is anticipated in the medium to long-term.
(5) Principal Business (as of March 31, 2015)
The principal businesses of the Konami Group are as shown below:
1. Digital Entertainment
Business
Production, manufacture and sale of digital content and related
products including mobile games, computer & video games, arcade
games and card games
2. Health & Fitness Business Operation of health and fitness clubs, and production, manufacture
and sale of health and fitness-related goods
3. Gaming & Systems Business Development, manufacture, sale and service of gaming machines
and casino management systems
4. Pachislot & Pachinko
Machines Business
Production, manufacture and sale of pachislot machines and
pachinko machines
(6) Main Konami Group Offices (as of March 31, 2015)
Holding company
KONAMI CORPORATION Minato-ku, Tokyo
Operating companies in Japan
Konami Digital Entertainment Co., Ltd. Minato-ku, Tokyo
Konami Sports & Life Co., Ltd. Shinagawa-ku, Tokyo
KPE, Inc. Minato-ku, Tokyo
TAKASAGO ELECTRIC INDUSTRY CO., LTD. Ichinomiya-shi, Aichi
Internet Revolution, Inc. Minato-ku, Tokyo
Operating companies overseas
Konami Digital Entertainment, Inc. USA
Konami Gaming, Inc. USA
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Konami Australia Pty Ltd Australia
Konami Digital Entertainment B.V. UK
Konami Digital Entertainment Limited Hong Kong
(7) Employees (as of March 31, 2015)
1. Konami Group
Business segment Number of employees Change from end of previous term
Digital Entertainment Business 2,510 (393)
Health & Fitness Business 1,232 26
Gaming & Systems Business 570 33
Pachislot & Pachinko Machines
Business
451 (64)
Entire Company (corporate staff) 285 (7)
Total 5,048 (405) Notes: 1. Employees include all persons on the Konami Group payroll.
2. Employees classified as corporate staff for the entire Company are administrative staff not assigned to any particular business segment.
2. The Company
Number of employees Change from end of previous term
71 (20)
Note: Employees include all persons on the Company payroll.
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(8) Major Subsidiaries (as of March 31, 2015)
Company Capital Equity ratio
(%) Major businesses
Konami Digital Entertainment Co., Ltd. ¥100 million 100.0 Planning, production, manufacture and sale of mobile games, computer & video games, arcade games, card games etc.
Konami Sports & Life Co., Ltd. ¥100 million 100.0 Operation of sports clubs; planning, production, and sale of health and fitness-related goods and services
KPE, Inc. ¥1,000 million
100.0 Production, manufacture and sale of pachislot machines
TAKASAGO ELECTRIC INDUSTRY CO., LTD.
¥100 million 100.0 Production, manufacture and sale of pachislot machines and pachinko machines
Internet Revolution Inc. ¥100 million (70.0)70.0
Development and operation of online infrastructures
Konami Corporation of America US$35,500 thousand
100.0 Holding company in the United States
Konami Digital Entertainment, Inc. US$23,870 thousand
(100.0)100.0
Production, manufacture and sale of computer & video games, card game products, etc. in U.S.A.
Konami Gaming, Inc. US$25,000 thousand
(100.0)100.0
Production, manufacture and sale of gaming machines in U.S.A.
Konami Digital Entertainment B.V. Eur 9,019 thousand
100.0
Production, manufacture and sale of computer & video games , card game products, etc. in Europe
Konami Digital Entertainment Limited HK$19,500thousand
100.0 Manufacture and sale of products in Asia
Konami Australia Pty Ltd A$30,000thousand
100.0 Production, manufacture and sale of gaming machines in Australia
Notes: 1. Percentage of Equity ratio shown in parentheses is indirect ownership percentages, and is included in the percentage indicated in the second line.
2. The Company consolidates 21 companies, including the major subsidiaries listed above, and applies the equity method to one affiliated company.
3. Konami Digital Entertainment Co., Ltd. merged with Konami Manufacturing and Service, Inc. in April 2014.
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(9) Major Lenders (as of March 31, 2015)
(Millions of yen)
Lender Amount of loans
Sumitomo Mitsui Banking Corporation 3,605
The Bank of Tokyo-Mitsubishi UFJ, Ltd. 2,404
2. Status of shares of the Company
Status of Shares (as of March 31, 2015)
1. Number of shares authorized: 450,000,000
2. Number of shares issued: 143,500,000
3. Number of shareholders: 48,242
4. The 10 largest shareholders:
Number of shares (Thousands)
Shareholding Ratio (%)
Kozuki Foundation 16,600 11.98
Kozuki Holding 15,700 11.33
The Master Trust Bank of Japan, Ltd. (Trust Account) 14,443 10.42
Japan Trustee Services Bank, Ltd. (Trust Account) 8,663 6.25
Kozuki Capital Corporation 7,048 5.09
Sumitomo Mitsui Banking Corporation 4,017 2.90
BNP Paribas Securities (Japan) Ltd. 3,380 2.44
Trust & Custody Services Bank, Ltd. (Securities
Investment Trust Account) 2,166 1.56
CHASE MANHATTAN BANK GTS CLIENTS
ACCOUNT ESCROW 1,884 1.36
KONAMI SHAIN MOCHIKABUKAI 1,430 1.03
Note: The above shareholding ratios are calculated after the deduction of treasury shares (4,890 thousand shares).
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3. Officers of the Company
(1) Directors and Audit & Supervisory Board Members (as of March 31, 2015)
Position Name Areas of responsibility and primary duties at the Company, and significant concurrent
positions outside the Company
Representative Director, Chairman
Kagemasa Kozuki Chairman of the Board of Directors, Kozuki Foundation
Representative Director, President Takuya Kozuki Director, Chairman, Konami Corporation of America
Director Kimihiko Higashio Division Director, Human Resources Division Director, Kanto IT Software Health Insurance Association Outside Director, RESORT SOLUTION Co., Ltd.
Director Fumiaki Tanaka Division Director, Business Management Division
Director Satoshi Sakamoto Chief Executive Officer and President, Konami Gaming, Inc. Managing Director, Konami Australia Pty Ltd.
Director Tomokazu Godai Representative Director, Chairman, KPE, Inc. Representative Director, Chairman, MAYATEC Co., Ltd.
Director Akira Gemma Advisor, SHISEIDO Co., Ltd. (Former Representative Director and President, SHISEIDO Co., Ltd.)
Director Kaori Yamaguchi Associate Professor, Faculty of Health and Sport Sciences, University of Tsukuba Committee Member, Tokyo Metropolitan Board of Education Executive Board Member, Japanese Olympic Committee
Audit & Supervisory Board Member (Full-time)
Shinichi Furukawa
Audit & Supervisory Board Member (Full-time)
Minoru Maruoka
Audit & Supervisory Board Member
Nobuaki Usui Outside Director, ORIX Corporation (Former Administrative Vice Minister, Ministry of Finance; Former Commissioner of the National Tax Agency)
Hisamitsu Arai Outside Audit & Supervisory Board Member, Soken Chemical & Engineering Co., Ltd. (Former Vice Minister for International Affairs, Ministry of International Trade and Industry; Former Commissioner of the Japan Patent Office)
Notes: 1. Mr. Akira Gemma and Ms. Kaori Yamaguchi, Director, are the Outside Director provided in Item 15 of Article 2 of the Corporate Law.
2. Messrs. Minoru Maruoka, Nobuaki Usui, Setsuo Tanaka and Hisamitsu Arai, Audit & Supervisory Board Member, are the Outside Audit & Supervisory Board Member provided in Item 16 of Article 2 of the Corporate Law.
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3. Audit & Supervisory Board Member (Full-time) Mr. Minoru Maruoka has experience of managing finance & accounting division of a global company and possesses a keen insight in the areas of financial and accounting.
4. Audit & Supervisory Board Member Mr. Nobuaki Usui served as Administrative Vice Minister of the Ministry of Finance and Commissioner of the National Tax Agency and possesses a keen insight in the areas of finance and accounting.
5. Assignment changes of Directors in the fiscal year under review were as follows: (Retirement) Director and Senior Corporate Advisor Noriaki Yamaguchi (Retired due to expiration of the term of office on June 27, 2014) Director Hiroyuki Mizuno (Retired due to expiration of the term of office on June 27, 2014) (New appointment) Director Fumiaki Tanaka (Assumed office on June 27, 2014) Director Satoshi Sakamoto (Assumed office on June 27, 2014) Director Kaori Yamaguchi (Assumed office on June 27, 2014)
6. The Company has appointed six individuals, Directors Akira Gemma and Kaori Yamaguchi and Audit & Supervisory Board Members Minoru Maruoka, Nobuaki Usui, Setsuo Tanaka and Hisamitsu Arai as Independent Officers as provided for in the regulations of the Tokyo Stock Exchange, Inc. and notified them to the Exchange.
7. There are no special relationships between the Company and the companies in which the Outside Directors and Outside Audit & Supervisory Board Members of the Company hold significant concurrent positions.
(2) Total Amount of Remuneration, etc. Paid to Directors and Audit & Supervisory Board
Members
Category Number of paid officers Amount of payment
Director 9 ¥382 million
Audit & Supervisory Board Member 5 ¥54 million
Total 14 ¥436 million
Note: The above total amount of remuneration, etc. paid includes the amounts paid to Directors retired during the fiscal year under review.
(3) Outside Officers
1. Major activities in the fiscal year under review
Category Name Major activities
Director
Akira Gemma
Attended all 11 meetings of the Board of Directors held during the fiscal year under review and, based on his abundant experience and achievements as a corporate executive, made necessary statements concerning deliberations on propositions, etc., from an objective and neutral perspective.
Kaori Yamaguchi
After her appointment on June 27, 2014, she attended 7 of the 9 meetings of the Board of Directors held during the fiscal year under review and based on her abundant experience and achievements in the field of education and sports, made necessary statements concerning deliberations on propositions, etc., from an objective and neutral perspective.
Audit & Supervisory
Board Member
Minoru Maruoka
Attended all the 11 meetings of the Board of Directors and all the 11 meetings of the Audit & Supervisory Board held during the fiscal year under review and based on his abundant experience and achievements at a global company, made necessary statements concerning deliberations on propositions, etc., from an objective and neutral perspective.
18
Category Name Major activities
Nobuaki Usui
Attended 10 of the 11 meetings of the Board of Directors and all the 11 meetings of theAudit & Supervisory Board held during the fiscal year under review and based on his abundant experience and achievements in finance and tax affairs, made necessary statements concerning deliberations on propositions, etc., from an objective and neutral perspective.
Setsuo Tanaka
Attended 9 of the 11 meetings of the Board of Directors and 10 of the 11 meetings of the Audit & Supervisory Board held during the fiscal year under review and based on his abundant experience and achievements at government agencies, made necessary statements concerning deliberations on propositions, etc., from an objective and neutral perspective.
Hisamitsu Arai
Attended all the 11 meetings of the Board of Directors and all the 11 meetings of the Audit & Supervisory Board held during the fiscal year under review and based on his abundant experience and achievements in the field of intellectual property and others, made necessary statements concerning deliberations on propositions, etc., from an objective and neutral perspective.
Note: In addition to the above, a resolution in writing was passed once by the Board of Directors based on Article 370 of the Corporate Law.
19
2. Outline of the limit liability agreement
The Company entered into the agreement with each Outside Director and each Outside Audit &
Supervisory Board Member to limit their liabilities as provided in Paragraph 1 of Article 423 of the
Corporate Law subject to a limit which is the total of the amounts provided in all Items of Paragraph 1 of
Article 425 of the Corporate Law.
3. Total amount of remuneration, etc. paid to Outside Officers Category Number of paid officers Amount of payment
Total amount of remuneration, etc. paid to Outside Officers
7 ¥75 million
Note: The above total amount of remuneration, etc. paid to Outside Officers is included in “3. (2) Total Amount of Remuneration, etc. Paid to Directors and Audit & Supervisory Board Members.”
20
4. Status of Accounting Auditor (1) Name of Accounting Auditor: KPMG AZSA LLC
(2) Amount of Remuneration, etc.
1. Amount of remuneration, etc. paid to the accounting auditor during the fiscal
year under review ¥256 million
2. Total of money and other financial benefits to be paid by the Company and its
subsidiaries to the accounting auditor ¥335 million
Notes: 1. The amounts of remuneration, etc. for the audit based on the Corporate Law and the audit based on the Financial Instruments and Exchange Law are not clearly divided, and cannot be divided substantially, based on the auditing agreement between the Company and the accounting auditor. Therefore, the total of these amounts is shown in the amount of remuneration, etc. shown in 1. The Company also underwent an audit based on the Sarbanes-Oxley Act of the United States (the SOX Act), and its total amount stated.
2. The Company pays fees to the accounting auditor for non-audit services, mainly for the advisory service. 3. Of the important subsidiaries of the Company, overseas subsidiaries underwent an audit by a certified public
accountant or an audit firm other than the accounting auditor of the Company.
(3) Policy on Decision about the Dismissal or Non-reappointment of an Accounting Auditor
When it is acknowledged that an accounting auditor is subject to one of the Items of Paragraph 1 of
Article 340 of the Corporate Law, the Audit & Supervisory Board will dismiss the accounting auditor
with the approval of all Audit & Supervisory Board Members.
Besides the foregoing, when it is deemed appropriate to dismiss or not reappoint the accounting auditor
due to such reasons as difficulties for the accounting auditor to perform its duties, the Audit &
Supervisory Board decides details of a proposal on the dismissal or non-reappointment of the accounting
auditor to be presented to the General Meeting of Shareholders.
Note: Due to the enforcement of the “Act for Partial Amendment of the Corporate Law” (Act No. 90 of
2014) on May 1, 2015, the organ in charge of deciding details of a proposal on the dismissal or
non-reappointment of the accounting auditor has been changed from the Board of Directors to the
Audit & Supervisory Board.
21
5. Systems to Ensure Appropriate Operations
An outline of matters resolved at a meeting of the Board of Directors as a system for the Company to ensure
appropriate business operations is shown below:
(1) Systems to ensure that the execution of the duties of directors conform to laws and ordinances and
the Articles of Incorporation
The Company’s Compliance Committee plays a leading role in ensuring the appropriateness of the
fulfillment of the duties of directors through the establishment of operational procedures and regulations
and the reinforcement of evaluation and monitoring systems. The Company effectuates measures to
prevent problems through the establishment of a system to report ethical issues and other matters as a
checks-and-balance function against illegal activities, and a system is put in place to eliminate anti-social
influences.
(2) Systems to store and control information on the fulfillment of the duties of directors
The Company establishes an information control regulation and a document control regulation, and a
system to properly store and control the information on the fulfillment of the duties of directors by
specifying important documents and clarifying the form of storage.
(3) Regulation and other systems for the management of the risk of loss
To identify and control the risks that surround the Company, we establish a risk management regulation.
The Risk Management Committee plays a leading role in establishing and strengthening the systems
necessary for risk management.
(4) Systems to secure the effective fulfillment of the duties of directors
The Company endeavors to secure the effective fulfillment of the duties of directors by establishing a
regulation concerning the division of duties and official authority to clarify the details of duties in which
each division is in charge and official authority.
(5) Systems to ensure that the fulfillment of the duties of employees conforms to laws and ordinances
and the Articles of Incorporation
The Company is committed to compliance in its corporate philosophy, conduct charter and code of
business and ethics which are made known to all staff without exception through the information system.
The Compliance Committee plays a leading role in strengthening systems.
(6) Systems to ensure the appropriateness of business as a corporate group consisting of a joint stock
company, its parent company and its subsidiaries
As a holding company, the Company manages the operations of the entire Group through means such as
the proper exercise of voting rights, to ensure the proper and balanced conduct of business of each
company in the Group. In addition, the Company precedes the establishment of an internal control system
22
for each company in the Group. All Group companies act in unison in such areas as information storage
management, risk management and compliance, to ensure the establishment of integrated group
management. With respect to the audit system by the Audit & Supervisory Board, we establish a group
audit system that centers on the holding company, and seek to strengthen it further.
(7) When an Audit & Supervisory Board Member asks for the assigning of an employee to assist in the
duties of the Audit & Supervisory Board Member, matters concerning the employee
When the Audit & Supervisory Board judges that a person is required to assist in the fulfillment of its
duties, the Audit & Supervisory Board may ask for a person with sufficient expertise, such as a member of
the internal audit office, to assist in the fulfillment of the duties.
(8) Matters concerning the independence from directors of the employee set out in the preceding Item
The Audit & Supervisory Board may express opinions about the appointment, etc. of a person requested
by the Audit & Supervisory Board for assistance in the fulfillment of duties. A member of the internal
audit office to whom assistance is requested should not receive any instruction from directors concerning
this assistance.
(9) System for a director and an employee to report to an Audit & Supervisory Board Member and
other systems concerning reports to Audit & Supervisory Board Members
We will establish a regulation providing for matters to be reported by a director or employee to the Audit
& Supervisory Board so that any important matter influencing the management and business results may
be immediately reported to the Audit & Supervisory Board. A system to report ethical issues and other
matters is in place to enable the Audit & Supervisory Board to obtain the reports from employees directly.
(10) Other systems to ensure the effective execution of audits by Audit & Supervisory Board Members
When the Audit & Supervisory Board Member deems it necessary for the fulfillment of duties, the Audit
& Supervisory Board Member may request experts such as lawyers and certified public accountant to
provide opinions and advice.
23
6. Basic Policy on Control of the Company
The basic policies of the Company concerning managerial control are as follows:
(1) Basic policy regarding the persons who control the decisions on the Company’s financial and
business policies
The Company believes that the persons who control decisions on the Company’s financial and business
policies need to fully understand the Company’s financial and business operations and the sources of its
corporate value, and must be able to ensure and enhance the corporate value of the Group and the common
interests of its shareholders on an ongoing basis.
The Company will not unconditionally reject a large-scale acquisition of its shares if it would contribute to
the corporate value of the Group and the common interests of shareholders. The Company believes that the
final decision on acceptance of a large-scale acquisition should ultimately be made by its shareholders as a
whole.
Nevertheless, in many cases, large-scale acquisitions do not contribute to the corporate value of the target
company and the common interests of shareholders. This is the case, for example, with acquisitions
conducted with a purpose that would obviously harm the corporate value and the common interests of its
shareholders, those that may effectively force shareholders to sell their shares, those that do not provide
sufficient time and information for the Board of Directors or shareholders of the target company to consider
the terms of the acquisition, or for the target company’s Board of Directors to offer an alternative proposal,
and those that require negotiation with the acquirer in order to procure conditions more favorable than those
originally proposed by the acquirer.
If a large-scale acquirer is not able to understand the Company’s financial and business operations, or if it is
not able to ensure and enhance the sources of corporate value (stated below) in the mid-to-long term based on
an understanding of said sources, then the corporate value of the Company and the common interests of its
shareholders would be harmed. The Company believes that in order to ensure the corporate value of the
Company and the common interests of its shareholders it must take necessary and reasonable
countermeasures against large-scale acquisitions that may harm the corporate value of the Company and the
common interests of its shareholders.
(2) Special efforts to advance the realization of basic policy
In order to enable shareholders and investors to invest in the Company on a long term and ongoing basis, we
will implement the measures stated in section 2. below, based completely on the corporate goal of the
Company and its sources of corporate value stated in section 1. below, as initiatives to ensure and enhance the
corporate value of the Company and the common interests of shareholders. We believe that this will
contribute to the realization of the basic policy stated in (1) above.
24
1. Corporate Goal and the Sources of the Company’s Corporate Value
(i) Corporate goal
We, the Konami Group, aim to be an enterprise that will continue to keep our stakeholders always looking
forward with anticipation as we create and provide our current and future customers with products and
services that offer "Valuable Time".
Our fundamental management policies are to maintain a shareholder-focused approach, and maintain a sound
relationship with all stakeholders and contribute to development of a sustainable society as a good corporate
citizen.
In order to realize open and transparent management, which is essential for holding fast to these fundamental
management policies, we will endeavor to ensure and enhance the corporate value and the common interests
of shareholders by promoting the management that keeps in mind at all times enhancement of the corporate
governance system and work toward continuous and stable growth and expansion of the sources of corporate
value stated in sub-section (ii) below.
(ii) Sources of corporate value
In the steadily evolving field of “entertainment,” the Company has continued to move with the times and take
on new challenges. Founded in 1969, we have been manufacturing and marketing arcade games since 1973.
Subsequently, we expanded our business to production of computer & video games. In 1997, we entered the
gaming machine market. Furthermore, since 2001, in preparation of the arrival of aging society, the Company
entered the field of “health,” in which the rise of demand and interest is expected, and have been developing
our Health & Service Business.
Over the past 40-odd years, the Company has cultivated its sources of corporate value in the business areas of
“entertainment” and “health”. In the field of entertainment, as a leading digital entertainment company, we
have developed creative ways of thinking, technology and production know-how and, in this way, we have
accumulated digital content assets. In the field of health, we have gained expertise from operating one of
Japan’s largest fitness club networks, and our capabilities as a manufacturer enable us to develop and
manufacture original fitness machines that utilize the Group’s production expertise, as well as plan and
develop, in-house, various supplements and other products. We continue to strive for further grow and expand
our sources of corporate value in the areas of entertainment and health.
2. Specific initiatives taken
The Company moved to a holding company structure on March 31, 2006, with management and executive
functions clearly separated, in order to maximize the products and services that the Company produces in the
areas of entertainment and health. We endeavor to enhance corporate value by establishing a corporate
structure that can respond quickly to changes in users’ demands.
In addition to the existing Digital Entertainment Business, Health & Fitness Business, Gaming & Systems
Business and Pachislot & Pachinko Machines Business, the Group aims to provide the most appropriate
management resources, with a view to new fields of expected growth in the mid-to-long term.
25
It is essential for the Company to ensure open and transparent management in order to achieve the corporate
goal and the management policies mentioned above and, as set forth below, we are striving to further
strengthen the business management structure and effectively utilize this structure in our daily operations.
With respect to our governance structure, the Company has several Outside Directors. Furthermore, we have
set a one year term of office for directors.
The Company also works to maintain and enhance its internal control system in response to the
Sarbanes-Oxley Act of the United States (the SOX Act). Moreover, with regard to compliance, we have
established our Konami Group Conduct Charter and the Konami Group Code of Business and Ethics, and we
encourage the use of an internal notification system group-wide to prevent corporate corruption, while also
rigorously protecting the privacy of informants. From the perspective also of maintaining the license in the
United States for the manufacture and sale of gaming machines, the Company strives to maintain strict
compliance on an ongoing basis.
(3) Efforts to prevent the control over financial and operational decisions to fall under inappropriate
parties based on the basic policy
The Company’s Board of Directors considers that the decision on whether or not to accept any proposed
Large-scale Acquisition of shares in the Company should be made by the shareholders. However, as
described in the basic policy, the Company considers that a party that conducts a Large-scale Acquisition of
shares in the Company which does not contribute to the corporate value of the Company and the common
interests of shareholders is inappropriate as a party to control the decisions on the Company’s financial and
business policies.
The Company henceforth has introduced Countermeasures Against Large-Scale Acquisition of the
Company’s shares (Takeover Defense Measures) based on a resolution at the 38th Ordinary General Meeting
of Shareholders on June 29, 2010. Given the completion of the three-year effective period, the Company
renewed the plan after making partial amendments, based on a resolution at the 41st Ordinary General
Meeting of Shareholders on June 27, 2013. (The revised Takeover Defense Measures shall be hereinafter
referred to as “the Plan.”)
The Plan in outline is that the Company’s Board of Directors shall, with respect to a party intending to
conduct a Large-scale Acquisition (such party, hereinafter, a “Large-scale Acquirer”) (i) prior to the
acquisition, request provision of Large-scale Acquisition information, including the purpose, method and
terms of the Acquisition, and the basis for calculating the purchase price, (ii) fully evaluate and review the
Large-scale Acquisition information during the acquisition evaluation period, which shall be a 60-day or
90-day period depending on the type of Large-scale Acquisition, (iii) disclose its opinion and present an
alternative plan etc., to the shareholders, and conduct negotiations with the Large-scale Acquirer and after
these specific procedures of evaluation, review and negotiation, it may be possible for the Large-scale
Acquirer to conduct the Large-scale Acquisition (the above (i) to (iii) are the “Large-scale Acquisition
Rules”).
After which, the Company’s Board of Directors shall, if the Large-scale Acquirer does not comply with the
Large-scale Acquisition Rules, implement the appropriate measures to resist the Large-scale Acquirer, as
26
provided for in the Corporate Law or any other laws and the Articles of Incorporation of the Company, such
as a gratis allotment of Stock Acquisition Rights with conditions for exercise that are discriminatory with
respect to the Large-scale Acquirer. If the Large-scale Acquirer does comply with the Large-scale Acquisition
Rule, in principle, the Company’s Board of Directors shall not take countermeasures against the Large-scale
Acquirer; although, in exceptional circumstances, if it is determined that the proposed Large-scale
Acquisition would have a materially adverse effect on the corporate value of the Company and the common
interests of its shareholders, the Company’s Board of Directors may take countermeasures. In either case, the
Company shall, when taking countermeasures, not provide any economic benefit such as monetary payments
etc., to the Large-scale Acquirer.
In order to prevent arbitrary decisions by the directors with respect to the propriety of the countermeasures
and specific methods etc., the Company shall establish an independent committee composed solely of
Outside Directors and others who are independent of the Company’s management in order to obtain their
objective judgment, and the Company’s Board of Directors will respect the recommendation of the
Independent Committee to the maximum extent possible.
In addition, if the necessary conditions for the specific countermeasures in this Plan are satisfied, a General
Meeting of Shareholders shall be held to confirm the intent of the shareholders. The Plan shall be effective
for a period of three (3) years from the end of the Ordinary General Meeting of Shareholders on June 27,
2013 to the end of the Ordinary General Meeting of Shareholders for the fiscal year ending March 2016.
(4) Determination of Board of Directors and underlying reasons for which the Plan complies with the
basic policy, does not adversely affect the common interests of the shareholders
For the following reasons, the Board of Directors believes that the Plan reflects the basic policy, and does not
adversely affect the corporate value and the common interests of the shareholders, nor aims to maintain the
position of the directors or officers of the Company.
(i) Establishment of the Independent Committee
In order to eliminate arbitrary triggering of the countermeasures by the Board of Directors of the Company
and to ensure the fairness and reasonableness of the procedures and decisions, the Company will establish the
Independent Committee which consists of Outside Directors and others who are independent from the
directors and officers of the Company. The Independent Committee, as an advisory body to the Board of
Directors, will check whether the Large-scale Acquisition Rule is complied with, consider details of
acquisition and countermeasures and recommend to the Board of Directors whether the countermeasures
should be triggered.
(ii) Emphasis on the intention of shareholders
The Plan was introduced subject to approval by the shareholders at the Ordinary General Meeting of
Shareholders, in order to reflect the opinions of shareholders with respect to the Plan. Since the Plan includes
a sunset clause which, in this case, specifies an effective period of three (3) years, even after the approval at
the said Ordinary General Meeting of Shareholders, or before expiration of the effective period of such clause,
27
all shareholders may indicate their intention with respect to the Plan through the selection of directors. If a
resolution to amend or abolish the Plan passes at a subsequent General Meeting of Shareholders of the
Company, the Plan will be amended or abolished in accordance with such resolutions.
In addition, the Company’s Board of Directors may, in certain cases, convene a meeting of shareholders and
confirm the intent of shareholders as to whether the Plan should be triggered.
(iii) Advice of outside experts
The Board of Directors, Audit & Supervisory Board Members and the Independent Committee of the
Company may obtain advice from independent experts such as financial advisors, certified public accountants,
lawyers, consultants, etc. in order to enhance the fairness and reasonableness of the considerations and
decisions by the Board of Directors, Audit & Supervisory Board Members and the Independent Committee.
(iv) Establishment of reasonable objective requirements
The countermeasures under the Plan are designed such that they will not be triggered unless certain
predetermined reasonable objective requirements have been satisfied and that maximum value shall be placed
on the recommendation of the Independent Committee, and ensure that a system is in place to prevent
arbitrary triggering by the Board of Directors of the Company.
(v) Fulfillment of the requirements of the Guidelines Regarding Takeover Defense
The Plan fully complies with the three principles set out in the “Guidelines Regarding Takeover Defense for
the Purposes of Protection and Enhancement of Corporate Value and Shareholders’ Common Interests”
released by the Ministry of Economy, Trade and Industry and the Ministry of Justice on May 27, 2005 (the
“Principle of Securing and Enhancement in the Corporate Value and the Common Interests of the
Shareholders,” “Principle of Prior Disclosure and Shareholders’ Will” and “Principle of Need and
Reasonableness”), and it has been developed in line with the report entitled “Takeover Defense Measures in
Light of Recent Environmental Changes,” released by the Corporate Value Study Group on June 30, 2008.
Also, the Plan has been developed in line with the rules and regulations on introduction of the Takeover
Defense stipulated by the Tokyo Stock Exchange.
(vi) No dead-hand or slow-hand takeover defense measures
The Plan is not a dead-hand takeover defense measure (a takeover defense measure in which even if a
majority of the members of the Board of Directors are replaced, the triggering of the measure cannot be
stopped) due to the fact that the Large-scale Acquirer may elect, at a General Meeting of Shareholders of the
Company, directors nominated by that person and, through a resolution of the Board of Directors of the
Company attended by the so-elected directors, that person may abolish the Plan.
Also, the Company has not adopted a staggered board and nor is the Plan a slow-hand takeover defense
measure (a takeover defense measure in which triggering takes more time to stop due to the fact that the
directors cannot be replaced all at once).
28
The full text of the Plan is available on the Company’s website:
7. Policy on Decisions About Dividends from Retained Earnings, etc.
The Company believes that the provision of dividends and the enhancement of corporate value are important
ways to return profits to our shareholders. As for dividends, we have set a consolidated dividend payout ratio
target of over 30 percent and are striving to further increase dividend levels. It is our policy to use retained
earnings for investments focused on business fields with good future possibility in order to continually
reinforce the Company’s growth potential and competitiveness.
We paid an interim dividend of ¥8.50 per share on November 28, 2014. Combined with a final dividend of
¥12.50 per share, we shall distribute an annual dividend of ¥21 per share for the fiscal year under review.
29
Consolidated Balance Sheet
(As of March 31, 2015)
(Millions of yen)
ASSETS: LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current assets ¥150,973 Current liabilities ¥48,741
Cash and cash equivalents
Trade notes and accounts receivable, net of allowance for doubtful accounts of ¥227 million at March 31, 2015
Inventories
Deferred income taxes, net
Prepaid expenses and other current assets
Property and equipment, net
Investments and other assets
Investments in marketable securities
Investments in affiliate
Identifiable intangible assets
Goodwill
Lease deposits
Deferred income taxes, net
Other assets
64,654
30,878
32,847
14,755
7,839
¥82,084
¥96,703
606
2,370
37,375
20,032
25,897
1,970
8,453
Short-term borrowings 6,009
Current portion of capital lease and financing obligations 1,996
Trade notes and accounts payable 10,966
Accrued income taxes 1,248
Accrued expenses 17,252
Deferred revenue 8,076
Other current liabilities 3,194
Long-term liabilities ¥45,999
Long-term debt, less current portion 15,000
Capital lease and financing obligations, less current portion 18,448
Accrued pension and severance costs 1,301
Deferred income taxes, net 1,840
Other long-term liabilities 9,410
Total liabilities ¥94,740
EQUITY:
KONAMI CORPORATION stockholders’ equity 234,310
Common stock 47,399
Additional paid-in capital 74,175
Legal reserve 284
Retained earnings 117,764
Accumulated other comprehensive income (loss) 5,959
Treasury stock, at cost (11,271)
Noncontrolling interest ¥710
Total equity ¥235,020
Total assets ¥329,760 Total liabilities and equity ¥329,760
30
Consolidated Statement of Income
(Year ended March 31, 2015)
(Millions of yen)
Net revenues ¥218,157
Costs and expenses 203,706
Costs of products sold and services rendered 150,808
Selling, general and administrative expenses 50,615
Impairment charges for property and equipment, and other intangible assets
2,283
Operating income 14,451
Other income (expenses) 1,496
Interest income 293
Interest expense (1,029)
Foreign currency exchange gain (loss), net 2,295
Other, net (63)
Income before income taxes and equity in net income of affiliated companies
15,947
Income taxes 6,571
Equity in net income of affiliated company 154
Net income 9,530
Net income attributable to the noncontrolling interest 51
Net income attributable to KONAMI CORPORATION ¥9,479
31
Consolidated Statement of Stockholders’ Equity (Year ended March 31, 2015)
(Millions of yen)
Stockholders’ equity Total KONAMI
CORPORATION
stockholders’
equity
Non
controlling
interest
Total equity
Common
stock
Additional
paid-in capital
Legal
reserve
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Treasury
stock,
at cost
Balance at March 31, 2014 ¥47,399 ¥74,175 ¥284 ¥111,820 ¥2,719 ¥(11,264) ¥225,133 ¥659 ¥225,792
Cash dividends attributable to
KONAMI CORPORATION (3,535) (3,535)
(3,535)
Purchase of treasury stock (8) (8) (8)
Reissuance of treasury stock 0 1 1 1
Comprehensive income
Net income 9,479 9,479 51 9,530
Other comprehensive income 3,240 3,240 3,240
Total comprehensive income for
the year 12,719 51 12,770
Balance at March 31, 2015 ¥47,399 ¥74,175 ¥284 ¥117,764 ¥5,959 ¥(11,271) ¥234,310 ¥710 ¥235,020
32
Assumptions underlying preparation of consolidated financial statements
Scope of Consolidation
1. Number of consolidated subsidiaries: 21
2. Name of principal consolidated subsidiaries
Konami Digital Entertainment Co., Ltd.
Konami Sports & Life Co., Ltd.
KPE, Inc.
TAKASAGO ELECTRIC INDUSTRY CO., LTD.
Konami Real Estate, Inc.
Internet Revolution Inc.
Konami Corporation of America
Konami Digital Entertainment, Inc.
Konami Gaming, Inc.
Konami Digital Entertainment B.V.
Konami Digital Entertainment Limited
Konami Australia Pty Ltd
Application of the Equity Method
1. Number of equity-method affiliate: 1
2. Name of the equity-method affiliate: RESORT SOLUTION Co., Ltd.
Summary of Significant Accounting Policies
1. Basis of presentation for consolidated financial statements The consolidated financial statements of the Company have been prepared in accordance with the terminology, format and preparation method used in the accounting principles generally accepted in the United States of America (“U.S. GAAP”), in compliance with Article 120-2, Paragraph 1 of the Corporate Accounting Rules of Japan. However, in compliance with the second sentence of such paragraph, certain disclosure that is required on the basis of U.S. GAAP is omitted.
2. Methods and standards for the valuation of assets
(1) Securities
Marketable securities and securities held for trading purposes are stated at fair value when readily determinable. Held-to-maturity debt securities are stated at amortized cost after adjustment for any premium or discount. Realized gains and losses from the sale of available-for-sale securities are determined based on the average cost method.
33
(2) Inventories
Resalable products, finished products, work-in-process, raw materials and supplies are stated at the lower of cost or market. Cost is determined by the identified-cost method for software, and by averaging for all other items.
3. Depreciation methods
Tangible fixed assets Depreciated mainly using the straight-line method.
In-house software Amortized mainly using the straight-line method.
4. Accounting standards for reserves
Allowance for doubtful accounts
Generally, allowance for doubtful accounts is calculated based on the actual ratio of bad debt losses incurred. For specific accounts with higher possibility of bad debt loss, the allowance is determined by respective judgment.
5. Goodwill and identifiable intangible assets
Goodwill represents the difference between the cost of acquired companies and amounts allocated to the estimated fair value of their net assets. Identifiable intangible assets represent intangible assets related to trademarks, membership lists, gaming licenses, membership, patent and franchise contracts, etc. mainly acquired in connection with acquisitions of subsidiaries. Reviews are conducted at least once annually to identify any impairment against fair value for goodwill and intangible assets subject to amortization with indefinite useful lives, and a test for any impairment loss is mainly conducted at the end of each consolidated fiscal period. Intangible assets subject to amortization with definite useful lives are amortized over a period of mainly 8–20 years corresponding to the estimated useful life.
6. Impairment or disposal of long-lived assets
The Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the carrying amount of assets exceeds the estimated future cash flows (undiscounted) for the assets, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
7. Consumption tax
Consumption tax is excluded from the stated amount of revenue and expenses.
8. Rounding policy
Amounts of less than one million yen are rounded to the nearest unit.
34
Notes to Consolidated Balance Sheet 1. Accumulated depreciation of property and equipment ¥67,807 million 2. Accumulated other comprehensive income (loss)
A breakdown of accumulated other comprehensive income (loss) as of March 31, 2015 is as follows.
Foreign currency translation adjustments ¥5,865 million
Net unrealized gains on available-for-sale securities ¥139 million
Pension liability adjustment ¥ (45) million
Accumulated other comprehensive income (loss) ¥5,959 million
Notes to Consolidated Statement of Stockholders’ Equity
1. Type and number of shares issued at the end of the consolidated fiscal year under review
Common stock: 143,500,000 shares
2. Dividends
(1) Dividend payment
Resolution Type of shares Total amount of
dividends (Millions of yen)
Dividend per share (Yen)
Record date Effective date
Board of Directors meeting held on May 28, 2014
Common stock 2,356 17.00 March 31, 2014 June 13, 2014
Board of Directors meeting held on
November 6, 2014 Common stock 1,179 8.50
September 30, 2014
November 28, 2014
Total 3,535
35
(2) Of dividends whose record date belongs to the consolidated fiscal year under review, those dividends whose effective date is in the subsequent fiscal year
Resolution Type of shares Fund of
dividends
Total amount of dividends
(Millions of yen)
Dividend per share (Yen)
Record date Effective date
Board of Directors meeting held on
May 8, 2015 Common stock
Retained earnings
1,733 12.50March 31,
2015 June 5, 2015
Total 1,733
Notes on Financial Instruments 1. Matters concerning financial instruments
The Company and its subsidiaries limit their fund management activities to short-term deposits and the like, and funds are procured primarily through bank loans and issuance of corporate bonds. With respect to derivative transactions, although forward exchange contracts are used primarily to mitigate FX fluctuation risks related in part to operating receivables and payables, derivatives are not executed for speculative purposes. The Company and its subsidiaries strive to mitigate customers’ credit risk associated with trade notes and accounts receivable, which are operating receivables through management of due dates and outstanding balances by customer, and periodical monitoring of the conditions of principal customers in an effort to promptly detect any doubtful collectibles caused by deterioration in the financial conditions of customers and other factors. Investment securities are primarily stocks of corporate customers with which the Company has business alliances and relationships, and the market price and financial conditions of each issuing entity (corporate customer) are periodically monitored in the course of continuously reviewing the holding status in consideration of the relationships with customers. With respect to trade notes and accounts payable which are operating payables and accrued expenses, the majority of them are due for payment within a year. Debt obligations are primarily required funds procured for the purpose of operating transactions and capital investment. Derivative transactions are forward exchange contracts executed for mitigating FX fluctuation risks associated primarily with foreign currency-based operating receivables and payables. The Company and its subsidiaries manage derivative transactions in accordance with the transaction authorization rules defined in financial regulations and other rules. Furthermore, in utilizing derivatives, the Company and its subsidiaries execute transactions only with highly rated financial institutions in order to mitigate credit risk. Although operating payables and debt obligations are exposed to liquidity risk, that risk is managed by monthly preparing and updating the funding plan of each Group company and implementing other controls.
36
2. Matters concerning the market value of financial instruments
Amount on the consolidated balance sheet, market value (projected fair value) and the variance as of
March 31, 2015 (the financial closing date of the consolidated fiscal year under review) are as
follows.
Amount on consolidated balance
sheet (*1) (millions of yen)
Market value (projected fair value) (*1)
(millions of yen)
Variance (millions of yen)
Cash and cash equivalents 64,654 64,654 -
Trade notes and accounts receivable
31,105
Allowance for doubtful accounts (*2) (227)
30,878 30,878 -
Investments in marketable securities 606 606 -
Short-term borrowings (6,009) (6,009) -
Trade notes and accounts payable (10,966) (10,966) -
Accrued expenses (17,252) (17,252) -
Long-term debt (15,000) (14,743) (257)
(*1) Items posted under liabilities are presented in a bracket of “( )”.
(*2) General allowance for doubtful accounts and specific allowance for doubtful accounts that
correspond to trade notes and accounts receivable have been deducted.
(Notes) Calculation method for the market value of financial instruments
(Cash and cash equivalents, trade notes and accounts receivable, short-term borrowings, trade notes
and accounts payable and accrued expenses)
These items are presented in book values, as they are due for payment in a short period of time and
the market value is close to the book value.
(Investments in marketable securities)
The market value is based on prices on the stock market.
(Investments in non-marketable securities)
For investments in non-marketable securities for which there are no quoted markets prices, a
reasonable estimate of fair value could not be made without incurring excessive costs. It was not
practicable to estimate the fair value of the common stock of a company that is not publicly listed.
Therefore, investments in such stocks are posted at cost. Investments in non-marketable securities
(¥613 million on the consolidated balance sheet) are not included in “Investments in marketable
securities”.
37
(Long-term debt)
The market value of long-term debt of the Company and its subsidiaries is based on the quoted price
in the most active market or the present value of future cash flows associated with each instrument
discounted using the Company’s current borrowing rate for similar debt instruments of comparable
maturity.
Other notes
As the “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 9 of 2015) and the “Act for
Partial Amendment of the Local Tax Act, etc.” (Act No. 2 of 2015) were enacted on March 31, 2015, the
corporate income tax rate is lowered for a consolidated fiscal year that starts on April 1, 2015 or after. In
addition, as the pro forma standard taxation is no longer applied to some domestic subsidiaries from the
fiscal year under review, the corporate enterprise tax rate is changed.
In conjunction with this amendment, the statutory effective tax rate of the Company used in the fiscal
year that started on April 1, 2015 is changed to 33.1%, and the rate used in the fiscal year which starts on
April 1, 2016 or after is changed to 32.3%. The Company and its subsidiaries calculate deferred tax
assets and deferred tax liabilities based on the tax rate used in the fiscal year when the temporary
differences are expected to be reversed. The effect of this change in the tax rate is minimal.
Notes on Per Share Data KONAMI CORPORATION stockholders’ equity per share: ¥1,690.44
Net income attributable to KONAMI CORPORATION per share: ¥68.38
Notes on Significant Subsequent Events
There is no applicable item.
38
Balance Sheet
(As of March 31, 2015)
(Millions of yen)
ASSETS: LIABILITIES:
Current assets ¥76,927 Current liabilities ¥18,687
Cash and deposits 57,446 Short-term borrowings 16,603
Trade accounts receivable 1,796 Other accounts payable 1,422
Prepaid expenses 201 Accrued expenses 334
Deferred income taxes, net 201 Income taxes payable 272
Short-term loans 15,275 Deposits received 24
Other 2,005 Other 30
Long-term liabilities ¥16,314
Straight bonds 15,000
Deferred income taxes, net 124
Asset retirement obligations 134
Fixed assets ¥165,125 Other 1,055
Property and equipment, net 150
Buildings improvement 74 Total liabilities ¥35,001
Total assets ¥242,053 Total liabilities and net assets ¥242,053
39
Statement of Income
(Year ended March 31, 2015) (Millions of yen)
I Operating revenues ¥14,560 Management fee revenue 4,042 Dividend income 10,517 II Costs and expenses 4,767 Selling, general and administrative expenses 4,767 Operating income 9,792 III Non-operating income 2,319 Interest income 332 Foreign currency exchange gain (loss), net 1,875 Other 111 IV Non-operating expense 159 Interest expenses 36 Bond interest expenses 82 Commitment fee 18 Other 22 Ordinary income 11,951 V Extraordinary gain 68 Gain on sales of subsidiaries’ and affiliates’ stocks 68 VI Extraordinary Loss 77 Loss on sales of subsidiaries’ and affiliates’ stocks 77 Income before income taxes 11,943Income taxes 683Current 751 Deferred (68)Net income 11,259
1. Methods and standards for the valuation of assets Securities Shares in subsidiaries and affiliates: Stated at cost based on the moving average method.
Other investment securities: Quoted securities: The market value method is applied, based on the market value as of
the fiscal year-end. The entire positive or negative valuation difference with the acquisition price is booked directly as net assets, and the cost of securities sold is calculated using the moving average method.
Unquoted securities: Valued at cost using the moving average method.
2. Depreciation and amortization methods of fixed assets Tangible fixed assets: Depreciated mainly using the straight-line method. Intangible fixed assets: Amortized mainly using the straight-line method. For in-house
software, amortization is computed using the straight-line method based on the estimated useful life of within 5 years.
3. Accounting standards for reserves
Allowance for doubtful accounts Generally, allowance for doubtful accounts is calculated based on the actual ratio of bad debt losses incurred. For specific accounts with higher possibility of bad debt loss, the allowance is determined by respective judgment.
4. Consumption tax Consumption tax is excluded from the stated amount of revenue and expenses.
5. Adoption of the consolidated tax payment system The Company adopts the consolidated tax payment system.
6. Rounding policy
Amounts of less than one million yen are rounded to the nearest unit.
42
Changes in Method of Presentation
(Statement of Income)
“Commitment fee”, which had been included in “Other” under Non-operating expense up till the
previous fiscal year, is reported as items of accounts in the fiscal year under review because the amount
is of more importance.
The amount of “Commitment fee” in the previous fiscal year was ¥18 million.
Notes to Balance Sheet 1. Monetary assets and liabilities in relation to subsidiaries and affiliates
(Millions of yen)
Short-term assets 18,413
Short-term liabilities 17,837
Long-term assets 22,653
2. Accumulated depreciation of property and equipment 934
3. Guarantee obligation
The Company extends guarantees to the following consolidated subsidiaries for bank loans.
(Millions of yen)
Konami Gaming, Inc. 6,008
Notes to Statement of Income
Transactions with subsidiaries and affiliates
(Millions of yen)
Operating revenues 14,531
Selling, general and administrative expenses 1,971
Non-operating transactions 854
43
Notes to Statement of Changes in Stockholders’ Equity
Type and number of treasury shares
(Thousand shares)
Number of shares
as of April 1, 2014
Number of shares
increased during
the period
Number of shares
decreased during
the period
Number of shares
as of March 31,
2015
Common stock 4,887 3 0 4,890
Total 4,887 3 0 4,890
Notes: 1. The increase of 3 thousand shares of treasury shares of common stock is due to the purchase of shares constituting less than one unit.
2. The decrease of 0 thousand shares of treasury shares of common stock is due to the sale of shares constituting less than one unit.
Notes on Tax Effect Accounting
1. Breakdown by major cause for the occurrence of deferred tax assets and deferred tax liabilities
(Millions of yen)
Deferred tax assets
Investments and other 1,705
Long-term other accounts payable 341
Accrued expenses, etc. 109
Others 440
Deferred tax assets subtotal 2,597
Valuation allowance (2,347)
Total deferred tax assets 249
Deferred tax liabilities
Investments and other (159)
Others (13)
Total deferred tax liabilities (172)
Net deferred tax assets 77
2. Amendments to the amounts of deferred tax assets and deferred tax liabilities due to changes in the rates of income tax, etc.
As the “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 9 of 2015) and the “Act for
Partial Amendment of the Local Tax Act, etc.” (Act No. 2 of 2015) were enacted on March 31, 2015, the
corporate income tax rate is lowered for a consolidated fiscal year that starts on April 1, 2015 or after.
In conjunction with this amendment, the statutory effective tax rate of the Company used in the fiscal
year that started on April 1, 2015 is changed to 33.1%, and the rate used in the fiscal year which starts on
April 1, 2016 or after is changed to 32.3%. The Company and its subsidiaries calculate deferred tax
assets and deferred tax liabilities based on the tax rate used in the fiscal year when the temporary
44
differences are expected to be reversed. The effect of this change in the tax rate is minimal.
Notes on Transactions with Related Parties
Subsidiaries and affiliates, etc.
Attributes Company name Percentage of voting
rights
Relationship with the related
party Transactions
Amount of transactions (Millions of
yen)
Account title
Ending balance
(Millions of yen)
Subsidiary
Konami Digital Entertainment Co., Ltd.
Direct
100%
Lending and borrowing of
funds, etc. Interlocking of
directors
Receipt of business
management fees3,162
Trade accounts
receivable 893
Lending and borrowing of
funds 9,673
Short-term borrowings
9,673Interest income 0
Interest expense 16
Konami Sports & Life Co., Ltd.
Direct
100%
Lending and borrowing of
funds, etc. Interlocking of
directors
Lending and borrowing of
funds 167
Short-term borrowings
167Interest income 73
Interest expense 0
Underwriting of capital increase
20,000 - -
KPE, Inc. Direct
100%
Lending and borrowing of
funds, etc. Interlocking of
directors
Lending of funds 4,580
Short-term loans
4,580Interest income 25
TAKASAGO ELECTRIC INDUSTRY CO., LTD.
Direct
100%
Lending and borrowing of
funds, etc.
Lending and borrowing of
funds 7,809
Short-term loans
7,809Interest income 26
Interest expense 0
Konami Real Estate, Inc.
Direct
100%
Real estate leasing, etc.
Interlocking of directors
Payment of office rent
1,291
Prepaid expenses 116
Lease deposits 283
Lending of funds 22,370 Long-term loans
22,370Interest income 145
Konami Digital Entertainment, Inc.
Indirect 100%
Lending and borrowing of
funds, etc.
Borrowing of funds 3,105 Short-term
borrowings 3,105
Interest expense 6
Notes: Transaction terms and the policy, etc. of deciding transaction terms 1. The receipt of business management fees is determined through negotiations, considering the running costs, etc. of the
Company as a pure holding company. 2. The lending and borrowing of funds include funds that the Company provides to companies in the Konami Group through
the cash management system, and their net ending balance is posted. The interest rates are determined based on the market interest rates and others.
3. For underwriting of capital increase, the Company underwrites 40 million shares with 500 yen per share. 4. Payment of office rent, etc. is determined based on actual prices in the neighboring areas. 5. Consumption taxes are not included in the amount of transactions but are included in the ending balance.
Notes on Per Share Data
Net assets per share: ¥1,493.78
Net income per share: ¥81.23
45
Notes on Significant Subsequent Events
There is no applicable item.
46
(English Translation of the Accounting Auditors’ Report Originally Issued in the Japanese Language)
Independent Auditors’ Report
May 7, 2015 The Board of Directors KONAMI CORPORATION:
We have audited the Consolidated Balance Sheet, Consolidated Statement of Income, Consolidated Statement of Stockholders’ Equity, Assumptions underlying preparation consolidated financial statements and the related notes of KONAMI CORPORATION and its consolidated subsidiaries for the fiscal year from April 1, 2014 to March 31, 2015, in accordance with Article 444, Paragraph 4 of the Corporate Law. Management’s responsibility for the consolidated financial statements, etc. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the provision of the second sentence of Article 120-2, Paragraph 1 of the Corporate Accounting Regulations of Japan, which permits the omission of some disclosure items required under the accounting principles generally accepted in the United States of America (hereinafter “U.S. GAAP”); this includes the development, implementation, and maintenance of internal control deemed necessary by management for the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Independent auditors’ responsibility Our responsibility is to express an opinion on the consolidated financial statements based on our audits as independent auditors. We conducted our audits in accordance with auditing standards generally accepted in Japan. Those auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The audit procedures selected and applied depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. The purpose of an audit is not to express an opinion on the effectiveness of the entity’s internal control. However, in making those risk assessment, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used, the method of their application, and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Audit opinion In our opinion, the consolidated financial statements referred to above, which omit some disclosure items
47
required under U.S. GAAP in accordance with the provision of second sentence of Article 120-2, Paragraph 1 of the Corporate Accounting Regulations of Japan, presents fairly, in all material respects, the financial position and the results of operations of KONAMI CORPORATION and its consolidated subsidiaries for the period for which the consolidated financial statements were prepared. Interest Relationships There are no interest relationships either between the Company and our audit corporation or between the Company and the Designated Employees and Engagement Partners that are required to be reported by the Certified Public Accountant Law.
48
(English Translation of the Accounting Auditors’ Report Originally Issued in the Japanese Language)
We have audited the non-consolidated Balance Sheet, Statement of Income, Statement of Changes in Stockholders’ Equity, Summary of Significant Accounting Policies and the related notes, and detailed statements of KONAMI CORPORATION for the 43rd business year from April 1, 2014 to March 31, 2015, in accordance with Article 436, Pragraph 2, Item 1 of the Corporate Law.
Management’s responsibility for the non-consolidated financial statements, etc. Management is responsible for the preparation and fair presentation of these non-consolidated financial statements and detailed statements in accordance with business accounting standards generally accepted in Japan; this includes the development, implementation, and maintenance of internal control deemed necessary by management for the preparation and fair presentation of non-consolidated financial statements and detailed statements that are free from material misstatement, whether due to fraud or error. Independent auditors’ responsibility Our responsibility is to express an opinion on the non-consolidated financial statements and detailed statements based on our audits as independent auditors. We conducted our audits in accordance with auditing standards generally accepted in Japan. Those auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the non-consolidated financial statements and detailed statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the non-consolidated financial statements and detailed statements. The audit procedures selected and applied depend on our judgment, including the assessment of the risks of material misstatement of the non-consolidated financial statements and detailed statements, whether due to fraud or error. The purpose of an audit is not to express an opinion on the effectiveness of the entity’s internal control. However, in making those risk assessment, we consider internal control relevant to the entity’s preparation and fair presentation of the non-consolidated financial statements and detailed statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used, the method of their application, and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the non-consolidated financial statements and detailed statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
49
Audit opinion In our opinion, the non-consolidated financial statements and detailed statements referred to above present fairly, in all material respects, the financial position and the results of operations of KONAMI CORPORATION for the period for which the non-consolidated financial statements and detailed statements were prepared in accordance with business accounting standards generally accepted in Japan. Interest Relationships There are no interest relationships either between the Company and our audit corporation or between the Company and the Designated Employees and Engagement Partners that are required to be reported by the Certified Public Accountant Law.
50
(English Translation of the Audit Report of the Audit & Supervisory Board Originally Issued in the Japanese Language)
AUDIT REPORT
Regarding the performance of duties by the Directors for the 43rd fiscal year from April 1, 2014 to March 31,
2015, the Audit & Supervisory Board hereby submits its audit report, which has been prepared through
discussions based on the audit report prepared by each Audit & Supervisory Board Member.
1. Auditing Methods and Details of Such Methods
The Audit & Supervisory Board established auditing policies, allocation of duties and other relevant matters
and received reports from each Audit & Supervisory Board Member regarding his or her audits and results
thereof, as well as received reports from the Directors, other relevant personnel, and the accounting auditors
regarding performance of their duties, and sought explanations as necessary.
Each Audit & Supervisory Board Member complied with the auditing standards of Audit & Supervisory
Board Members, followed auditing policies, allocation of duties, and other relevant matters established by the
Audit & Supervisory Board, communicated with the Directors, the internal audit department, other
employees, and any other relevant personnel, and made efforts to optimize the environment for information
collection and audit, and participated in meetings of the Board of Directors and other important meetings,
received reports from the Directors, employees, and other relevant personnel regarding performance of their
duties, sought explanations as necessary, examined important authorized documents and associated
information, and studied the operations and financial positions at the head office and principal place of
business. In addition, as for the details of the resolution of the Board of Directors related to the establishment
of the systems as indicated in the Business Report to ensure that the execution of the duties of Directors
conform to laws and regulations and the Articles of Incorporation and the systems necessary to ensure
appropriate operations of corporations as stipulated in Paragraphs 1 and 3 of Article 100 of the Ordinance of
Enforcement of the Corporate Law, and the condition of the systems put in place in accordance with the
aforesaid resolution (internal control system), we received periodical reporting from Directors and employees,
sought explanations as necessary, and provided our recommendations. We reviewed the contents of the basic
policy stipulated in Item 3(a) and actions stipulated in Item 3(b) of Article 118 of the Ordinance of
Enforcement of the Corporate Law in consideration of the status of discussions held by the Board of
Directors, etc. With respect to subsidiaries, we communicated and exchanged information with directors,
Audit & Supervisory Board Members, and other relevant personnel of the subsidiaries, and received business
reports from subsidiaries as necessary. Based on the above methods, we examined the Business Report and its
supporting schedules related to the fiscal year under review.
Also, we received audit reports from accounting auditors, monitored and verified whether the accounting
auditors maintained their independence and implemented appropriate audits, and we received reports from
the accounting auditors regarding the performance of their duties and sought explanations as necessary. In
51
addition, we received notice from the accounting auditors that “the system for ensuring that duties are
performed properly” (matters set forth in each Item of Article 131 of the Corporate Accounting Rules) is
organized in accordance with the “product quality management standards regarding audits” (Business
Accounting Council, October 28, 2005) and other relevant standards, and sought explanations as necessary.
Based on the above methods, we examined non-consolidated financial statements and their supporting
schedules (Balance Sheet, Statement of Income, Statement of Changes in Stockholders’ Equity and Summary
of Significant Accounting Policies and the related notes), as well as consolidated financial statements
(Consolidated Balance Sheet, Consolidated Statement of Income, Consolidated Statement of Stockholders’
Equity, Assumptions underlying preparation of consolidated financial statements and the related notes)
related to the fiscal year under review.
2. Results of Audit
(1) Results of audit of Business Report
(a) In our opinion, the Business Report and its supporting schedules are in accordance with the related
laws and regulations and the Articles of Incorporation, and fairly represent the Company’s condition.
(b) With regard to the performance of duties by the Directors, we have found no evidence of wrongful
action or material violation of related laws and regulations, nor of any violation with respect to the
Articles of Incorporation.
(c) In our opinion, the contents of the resolutions of the Board of Directors regarding the internal control
system are fair and reasonable. In addition, we have found no matters on which to remark in regard
to the content of the Business Report and the performance of duties of the Directors regarding the
internal control system.
(d) With regard to the basic policy regarding the persons who control the decisions on the Company’s
financial and business policies in the Business Report, we have found no item worthy of special
mention. We recognize that the actions stipulated in Article 118, Item 3(b) of the Ordinance for
Enforcement of the Corporate Law mentioned in the Business Report are in line with the basic policy,
are not detrimental to the common interests of shareholders and do not support the position of the
executive officers of the Company.
(2) Results of audit of non-consolidated financial statements and their supporting schedules
In our opinion, the methods and results of audit employed and rendered by KPMG AZSA LLC,
accounting auditors, are fair and reasonable.
52
(3) Results of audit of consolidated financial statements
In our opinion, the methods and results of audit employed and rendered by KPMG AZSA LLC,
accounting auditors, are fair and reasonable.
May 7, 2015
Audit & Supervisory Board KONAMI CORPORATION
Audit & Supervisory Board Member (Full-time) Shinichi Furukawa (Seal)
Audit & Supervisory Board Member (Full-time) Minoru Maruoka (Seal)
Audit & Supervisory Board Member Nobuaki Usui (Seal)
Audit & Supervisory Board Member Setsuo Tanaka (Seal)
Audit & Supervisory Board Member Hisamitsu Arai (Seal)
Note: Audit & Supervisory Board Members (Full-time) Mr. Minoru Maruoka; Audit & Supervisory Board
Members Messrs. Nobuaki Usui, Setsuo Tanaka and Hisamitsu Arai are Outside Audit & Supervisory Board
Members as provided for in Article 2, Item 16 and Article 335, Paragraph 3 of the Corporate Law.
53
Reference Materials Concerning the Exercise of Voting Rights
Proposal 1 Amendments to the Articles of Incorporation
(1) Reason for the proposal
Ever since the Company shifted to a pure holding company structure on March 31, 2006, the
Company has managed the operation of four primary businesses – Digital Entertainment, Health
& Fitness, Gaming & Systems, and Pachislot & Pachinko Machines – as its group companies
engaged in the aforementioned businesses.
As the Company enters the 10th year under the pure holding company structure in March next
year, the Company aims to once again promote a clear understanding of its position among
stakeholders by changing the trade name to Konami Holdings Kabushiki Kaisha (English Trade
Name: KONAMI HOLDINGS CORPORATION).
Effective date of the amended Articles of Incorporation shall be October 1, 2015.
(2) Details of the amendments
The details of the amendments are as follows:
(Proposed amendments are underlined.)
Current Articles of Incorporation Proposed Amendments
Article 1 (Trade Name) Article 1 (Trade Name)
The name of the Company is Konami Kabushiki
Kaisha, being expressed as "KONAMI
CORPORATION" in English.
The name of the Company is Konami Holdings
Kabushiki Kaisha, being expressed as "KONAMI
HOLDINGS CORPORATION" in English.
(Newly Established)
Supplementary Provision
The amendments to Article 1 (Trade Name) shall come into effect as of October 1, 2015, and this Supplementary Provision shall be deleted on the date of the entry into force of the amendments.
54
Proposal 2: Election of nine members to the Board of Directors
The terms of office of all eight Directors expire at the conclusion of this General Meeting of
Shareholders. This proposal requests the election of nine Directors, including the addition of one
Director to strengthen the management system.
Candidates for the new Board are as follows:
Name
(Date of birth)
Resume, position and areas of responsibility at the Company, and
significant concurrent positions outside the Company
Shares of the
Company’s stock
owned
1 Kagemasa
Kozuki
(Nov. 12, 1940)
Mar. 1973 Established Konami Industries Co., Ltd (current
Resume, position and areas of responsibility at the Company, and
significant concurrent positions outside the Company
Shares of the
Company’s stock
owned
9 Kaori
Yamaguchi
(Dec. 28, 1964)
Apr. 2007 Professor, Faculty of Humanities, Musashi
University
Apr. 2008 Associate Professor, Graduate School of
Comprehensive Human Sciences, University of
Tsukuba
Oct. 2011 Associate Professor, Faculty of Health and Sport
Sciences, University of Tsukuba (to present)
Jun. 2014 Director of the Company (to present)
Significant concurrent positions:
Committee Member, Tokyo Metropolitan Board of Education
Executive Board Member, Japanese Olympic Committee
1,167
Notes: 1. No special conflicts of interest exist between the Company and the proposed candidates for director. 2. An asterisk * signifies a new candidate for director. 3. Shares of the Company’s stock owned by each candidate include the candidate’s holdings in the KONAMI officers’
stock ownership plan. 4. Mr. Akira Gemma and Ms. Kaori Yamaguchi are the candidates for Outside Directors. 5. Mr. Akira Gemma is expected to assume the position of Outside Director (Audit and Supervisory Committee Member)
of TV Asahi Holdings Corporation as of June 26, 2015. 6. The Company registers Mr. Akira Gemma and Ms. Kaori Yamaguchi as Independent Officers with Tokyo Stock
Exchange, Inc. If the election of these two persons is approved, the Company plans to continue appointing these two persons as Independent Officers.
7. Matters concerning the candidates for Outside Directors are as follows: (1) Reasons for appointing them as the candidates for Outside Directors
We have decided to appoint Mr. Akira Gemma as candidates for Outside Directors based on our judgment that each would make a significant contribution to the management of the Company as Outside Directors, given their considerable experience, achievements and insight as managers of business enterprises and given that they are in an objective position, independent of the executive management of the Company. Ms. Kaori Yamaguchi, as a pioneer of women’s judo, has accomplished a multitude of achievements in past international competitions. She currently teaches at a national university and acts as an advisor in the field of sports and education. Given her considerable experience and extensive knowledge, the Company decided to appoint Ms. Yamaguchi as a candidate for an Outside Director based on our judgment that she would make a significant contribution to the management of the Company’s Board of Directors that requires a variety of perspectives.
(2) Number of years since assuming the post of Outside Director of the Company (until the conclusion of this General Meeting of Shareholders) Akira Gemma: 11 years Kaori Yamaguchi: 1 year
(3) Overview of the Limited Liability Contract The Company has entered into a limited liability contract with Mr. Akira Gemma and Ms. Kaori Yamaguchi with respect to their liabilities provided for in Article 423, Paragraph 1 of the Corporate Law. Under this contract, the liabilities of the two persons shall be limited to the aggregate total of the amounts stipulated in Article 425, Paragraph 1 of the said law. If these two persons are elected, the Company will renew the contract with each of them.
57
Proposal 3 Election of three members to the Audit & Supervisory Board
Because the terms of office of three Audit & Supervisory Board Members, Messrs. Nobuaki Usui, Setsuo
Tanaka and Hisamitsu Arai expire at the conclusion of this General Meeting of Shareholders, this
proposal requests the election of three Audit & Supervisory Board Members.
The Company has obtained prior approval of the Audit & Supervisory Board for submission of this
proposal.
The candidates for the post of Audit & Supervisory Board Member are as follows:
Name
(Date of birth)
Resume, position and areas of responsibility at the Company, and
significant concurrent positions outside the Company
Shares of the
Company’s stock
owned
1 Nobuaki Usui
(Jan. 1, 1941)
May 1995 Director-General of the Tax Bureau, Ministry of
Finance
Jan. 1998 Commissioner, National Tax Agency
Jul. 1999 Administrative Vice Minister, Ministry of Finance
Jan. 2003 Governor & CEO, National Life Finance
Corporation (current Japan Finance Corporation)
Dec. 2008 Chairman, The Japan Research Institute, Limited
Jun. 2011 Audit & Supervisory Board Member of the
Company (to present)
Significant concurrent positions:
Outside Director, ORIX Corporation
627
2 Setsuo Tanaka
(Apr. 29, 1943)
Aug. 1993 Director of Traffic Bureau, National Police Agency
Jan. 2000 Commissioner-General, National Police Agency
Jun. 2006 President, Japan Automobile Federation
Jun. 2011 Audit & Supervisory Board Member of the
Company (to present)
Significant concurrent positions:
Outside Audit & Supervisory Board Member, NGK
INSULATORS, LTD.
627
58
Name
(Date of birth)
Resume, position and areas of responsibility at the Company, and
significant concurrent positions outside the Company
Shares of the
Company’s stock
owned
3 Hisamitsu Arai
(Jan. 10, 1944)
Jul. 1996 Commissioner, Japan Patent Office
Jun. 1998 Vice Minister for International Affairs, Ministry of
International Trade and Industry
Apr. 2001 Chairman, Nippon Export and Investment
Insurance
Mar. 2003 Secretary-General of Intellectual Property Strategy
Headquarters, Cabinet Secretariat
Jun. 2007 President, Tokyo Small and Medium Business
Investment & Consultation Co., Ltd.
Jun. 2011 Audit & Supervisory Board Member of the
Company (to present)
Significant concurrent positions:
Outside Audit & Supervisory Board Member, Soken Chemical &
Engineering Co., Ltd.
1,046
Notes: 1. No special conflicts of interest exist between the Company and the proposed candidates for Audit & Supervisory Board Members.
2. Shares of the Company’s stock owned by each candidate include the candidate’s holdings in the KONAMI officers’ stock ownership plan.
3. Messrs. Nobuaki Usui, Setsuo Tanaka and Hisamitsu Arai are the candidates for Outside Audit & Supervisory Board Members.
4. Mr. Hisamitsu Arai is expected to assume the position of Outside Director of Soken Chemical & Engineering Co., Ltd. as of June 24, 2015.
5. The Company registers Messrs. Nobuaki Usui, Setsuo Tanaka and Hisamitsu Arai as Independent Officers with Tokyo Stock Exchange, Inc. If the election of these three persons is approved, the Company plans to continue appointing these three persons as Independent Officers.
6. Matters concerning the candidates for Outside Audit & Supervisory Board Members are as follows: (1) Reasons for appointing them as the candidates for Outside Audit & Supervisory Board Members
Mr. Nobuaki Usui served as Administrative Vice Minister of the Ministry of Finance and Commissioner of the National Tax Agency. Given his considerable experience and extensive knowledge, which are required for auditing, the Company decided to appoint Mr. Nobuaki Usui as a candidate for an Outside Audit & Supervisory Board Member based on our judgment that he would make a significant contribution to enhancing the corporate governance of the Company by fair, just and accurate auditing. Mr. Setsuo Tanaka served as Commissioner-General of the National Police Agency. Given his considerable experience and extensive knowledge, which are required for auditing, the Company decided to appoint Mr. Setsuo Tanaka as a candidate for an Outside Audit & Supervisory Board Member based on our judgment that he would make a significant contribution to enhancing the corporate governance of the Company by fair, just and accurate auditing. Mr. Hisamitsu Arai served as Vice Minister for International Affairs of the Ministry of International Trade and Industry and Commissioner of the Japan Patent Office. Given his considerable experience and extensive knowledge, which are required for auditing, the Company decided to appoint Mr. Hisamitsu Arai as a candidate for an Outside Audit & Supervisory Board Member based on our judgment that he would make a significant contribution to enhancing the corporate governance of the Company by fair, just and accurate auditing.
(2) Number of years since assuming the post of Outside Audit & Supervisory Board Member of the Company (until the conclusion of this General Meeting of Shareholders) Nobuaki Usui: 4 years Setsuo Tanaka: 4 years Hisamitsu Arai 4 years
(3) Overview of the Limited Liability Contract The Company has entered into a limited liability contract with Messrs. Nobuaki Usui, Setsuo Tanaka and Hisamitsu Arai with respect to their liabilities provided for in Article 423, Paragraph 1 of the Corporate Law. Under this contract, the liabilities of the three persons shall be limited to the aggregate total of the amounts stipulated in Article 425, Paragraph 1 of the said law. If these three persons are elected, the Company will renew the contract with each of them.
59
Proposal 4 Election of Accounting Auditor
The contract of the accounting auditor of the Company, KPMG AZSA LLC, will expire upon
completion of its term of office at the close of this Ordinary General Meeting of Shareholders.
Accordingly, based on the resolution of the Audit & Supervisory Board, we ask for approval of newly
electing PricewaterhouseCoopers Aarata as the Company’s accounting auditor.
The reasons for the Audit & Supervisory Board to nominate PricewaterhouseCoopers Aarata as the
independent registered public accounting firm are that PricewaterhouseCoopers Aarata is considered to
secure required expertise, independence and eligibility for the Company's accounting auditor. This led to
its decision that PricewaterhouseCoopers Aarata has established a system to perform the Company's
accounting audit appropriately and adequately.
Overview of the candidate for the accounting auditor is as follows:
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