Annual Report 2016

PROFILE
KOEI TECMO HOLDINGS CO., LTD. is an entity that was born as a result of a merger between two
companies, Koei and Tecmo. Both companies have roots in different fields of entertainment, with
Koei starting out in PC software development and Tecmo in business related to amusement facilities . Even though both companies have been around for half a century in the same industry, they
have cultivated different cultures and different expertise.
By unifying these differences, Koei Tecmo will vigorously continue its work in the spirit of “Creativity and Contribution” to deliver even newer and higher quality entertainment content that isable to enrich the hearts of users world-wide.

CONTENTS
Profile............................................................. 1
Top Message................................................. 2
Financial Information................................... 3
Corporate Data............................................... 28

1

TOP MESSAGE

ChairmanKeiko Erikawa
President & CEO

Yoichi Erikawa
In the game industry, mobile game downloads continue to increase. Along with that, digital sales in console games havealso been increasing. The game market has shown continuous growth worldwide.
Under our management policy of “IP Creation and Expansion”, our group has implemented a variety of measures within thefive Expansion areas of “Multi-platform,” “Expansion into many genres,” “Collaborative efforts,” “Tie-ups,” and “Global
Expansion.”In the game software field, collaborative titles such as “Attack on Titan,” “Hyrule Warriors Legends,” and “YoukaiSangokushi” have been received extremely well.
Also in the online and mobile area, through our efforts to promote “Multi-platform” and “Collaborative efforts”, we havesucceeded in increasing both sales and profit relative to the previous year. In “Global Expansion”, “Uncharted Waters V” isdoing well in China, Korea, and Taiwan. “DEAD OR ALIVE Xtreme 3 Fortune/Venus” has exceeded our sales forecast not
only in Japan, but also in Asia, and has become a hit title.
As a result, we have achieved increased sales for the third consecutive year and a profit increase for the sixth consecutive
year, with the highest profit ever recorded. We have also substantially increased dividends after taking into consideration the
recent stock split.
We have changed our organization structure, changing from a specialty to a Brand based orientation. We have set up fivebrands: “KOU-SHIBUSAWA,” “ω-Force,” “Team NINJA,” Gust,” and “Ruby Party.” Each brand will actively pursue thecreation of new IPs, collaborations, tie-ups, and media-mix expansion. We aim to achieve further growth through the management of our Brands and IPs.
“Nioh”, which has been in development for 10 years, is finally schedule to be launched this fiscal year. We will back thistitle with all our resources and are certain it will be well received worldwide. Please look forward to it.
We thank you for your support and ask for your continued cooperation in our present and future endeavors.

2

KOEI TECMO HOLDINGS CO.,LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAS OF MARCH 31

Millions of yen

ASSETS
Current assets:
Cash and time deposits (Notes 5 and 7)
Notes and accounts receivable (Note 7)
Marketable securities (Notes 5, 7, and 10)
Merchandise and Finished goods
Work in process
Raw materials
Deferred tax assets (Note 13)
Other current assets
Allowance for bad debts (Note 7)
Total current assets
Property and equipment: (Note 6)
Buildings and structures, net (Notes 8 and 14)
Land (Notes 8 and 14)
Other
Total property and equipment
Intangible assets:
Goodwill
Other
Total Intangible assets
Investments and other assets:
Investment securities (Notes 7 and 10)
Asset for retirement benefits (Note 12)
Deferred tax assets (Note 13)
Other (Note 4)
Total investments and other assets
Total assets
The accompanying notes are an integral part of these statements.

3

Thousands of U.S. dollars

2016

2015

¥ 12,258
10,962
745
156
47
42
791
2,445
(20)
27,430¥ 11,958
9,734
1,924
180
14
84
839
2,283
(11)
27,007$ 108,789
97,287
6,618
1,391
423
374
7,028
21,701(180)
243,435

12,0296,201
625
18,856

13,081
6,345
653
20,080106,757
55,035
5,548
167,341

290
141
432

677
136
813

2,577
1,259
3,836

62,1201,301
785
64,207¥ 110,925

65,893271
268
880
67,313¥ 115,216

551,299
11,547
6,970
569,817$ 984,430

2016

Millions of yen

LIABILITIESCurrent liabilities:
Notes and accounts payable – trade
Accounts payable – other
Income taxes payable
Accrued bonuses to employees
Accrued bonuses to directors
Allowance for sales returns
Allowance for sales discountAllowance for customer‐discount points
Deferred tax liabilities (Note 13)
Other current liabilities
Total current liabilities2015¥ 2,243
1,234
2,900
1,007
234
9
240
19
0
2,695
10,584¥ 2,338
1,014
2,849
1,022
258
18
527
15
0
2,902
10,949$ 19,906
10,95625,741
8,942
2,077
86
2,135
168
0
23,92093,935Long-term liabilities:
Liability for retirement benefits (Note 12)
Deferred tax liabilities (Note 13)
Other long-term liabilities
Total long-term liabilities
Total liabilities

380
526
728
1,634
12,219

2,873
720
3,594
14,543

3,377
4,669
9,839
14,508108,444

2016

NET ASSETS (Note 15)
Shareholders' equity:
Common stock
Authorized: 350,000,000 shares in 2016 and 2015
Issued: 107,723,374 shares in 2016
89,769,479 shares in 2015
Capital surplus
Retained earnings
Treasury stock: 2,543,822 shares at March 31, 2016 and2,230,495 shares at March 31, 2015
Total shareholders' equity

15,00015,000133,120

25,69960,003(1,657)
99,04525,69953,955(1,735)92,919228,071532,515(14,708)
878,998

Accumulated other comprehensive income:Unrealized gains or losses on securities (Note 10)
Unrealized losses on revaluation of the land (Note 14)
Foreign currency translation adjustments
Accumulated adjustments for retirement benefits (Note 12)
Total accumulated other comprehensive income

1,009(3,115)
1,636
(54)
(523)

7,598
(3,099)
2,642
531
7,672

8,955
(27,644)
14,520(481)(4,649)184
98,706¥ 110,925

80
100,672¥ 115,216

1,637
875,986$ 984,430

Share subscription rights (Note 16):
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these statements.

4

Thousands of U.S. dollars

2016

KOEI TECMO HOLDINGS CO.,LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31

Millions of yen

Thousands of U.S. dollars

2016$ 340,190

2016¥ 38,332

2015¥ 37,799

Cost of sales
Gross profit

19,40718,924

20,697
17,102

172,237
167,952

Selling, general and administrative expenses (Note 11)
Operating income（Note 21）

7,855
11,069

7,450
9,652

69,711
98,241Other income (expenses):
Interest income
Dividend income
Gain on sales of investment securities (Note 10)
Gain on redemption of securities (Notes 4 and 10)
Gain on sales of property and equipment
Loss on valuation of securities (Note 10)
Loss on sales of investment securities (Note 10)
Loss on redemption of securities (Note 10)
Foreign exchange gain, net
Loss on impairment of fixed assets (Note 18)
Other, net
Income before income taxes

1,639
3,377
1,488
1,095
(2,560)
(184)
(135)
(349)
(181)
315
15,573

1,811
1,317
2,654
286
147
(1,042)
(980)
(250)
(52)
170
13,715

14,547
29,977
13,206
9,721(22,726)(1,636)(1,202)(3,103)(1,611)
2,797
138,211

4,624
93
4,718
10,855
10,855

4,347
(65)
4,281
9,434
9,434

41,044827
41,872
96,33996,339Net sales（Note 21）

Income taxes (Note 13):
Current
Deferred
Net income
Net income attributable to owners of parent:

Per share (Note 1):
Net income – Basic– Diluted
Cash dividends
The accompanying notes are an integral part of these statements.

Yen¥ 103.27
102.9452.00¥ 90.29
89.83
55.00

U.S. dollars$ 0.91
0.91
0.46

KOEI TECMO HOLDINGS CO.,LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED MARCH 31

Millions of yen

2015¥ 9,434

Other comprehensive income (Note 20)
Unrealized gains on securities
Unrealized losses on revaluation of the land (Note 14)
Foreign currency translation adjustments
Adjustments for retirement benefits (Note 12)
Total other comprehensive income(6,589)(1,006)(585)(8,181)

4,276
0
931
263
5,473

(58,480)(8,929)(5,194)(72,604)

Comprehensive income :2,674

14,90723,734¥ 2,674¥ 14,907$ 23,734

Net income:Comprehensive income attributable to owners of parent:
The accompanying notes are an integral part of these statements.

5

Thousands of U.S. dollars

2016¥ 10,855

2016$ 96,339

KOEI TECMO HOLDINGS CO.,LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFOR THE YEARS ENDED MARCH 31

Millions of yen
Commonstock¥ 15,000

Balance at April 1, 2014
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal oftreasury stock
Net changes during the year
Balance at March 31,¥ 15,000and April 1, 2015
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal oftreasury stockReversal of losses onrevaluation of the land
Net changes during the year
¥ 15,000
Balance at March 31, 2016

Capitalsurplus¥ 25,699(38)
38

Unrealized
gains orRetained Treasury losses on
stock securities
earnings¥ 48,036 (¥ 2,200) ¥ 3,322(3,477)
9,434
(8)
473
(38)
¥ 53,955 (¥ 1,735)(4,814)
10,855(7)
7¥ 25,699

Net assets¥ 88,788(3,477)
9,434
(8)
434
-

0

931

263

¥ 7,598 (¥ 3,099)¥ 2,642

¥ 531

4,276
¥ 25,699

Unrealized
Foreign Accumulated
losses on
currency adjustments
Sharerevaluation translation for retirement subscriptionof the land adjustments
benefits
rights(¥ 3,100)¥ 267¥ 1,710
¥ 53

26

5,500

¥ 80 ¥ 100,672(4,814)
10,855
(13)
84

(13)
91

(7)

-

15

15

¥ 60,003 (¥ 1,657)(15)(6,589)¥ 1,009 (¥ 3,115)(1,006)¥ 1,636(585)(¥ 54)

103¥ 184(8,092)¥ 98,706

Thousands of U.S. dollars
CommonCapitalstock
surplus$ 133,120 $ 228,071

Unrealized Unrealized
Foreign AccumulatedSharegains or losses oncurrency adjustments
Retained Treasury losses on revaluation translation for retirement subscription
rights Net assets
stock securities of the land adjustments
benefits
earnings$ 715 $ 893,434$ 478,836 ($ 15,397) $ 67,436 ($ 27,511) $ 23,450$ 4,712(42,728)(42,728)
96,33996,339
(124)
(124)
747
813

Balance at April 1, 2015
Cash dividends paid
Net income
Purchase of treasury stock
Disposal of treasury stock(65)
Transfer of loss on disposal of(65)
65
treasury stockReversal of losses on
133revaluation of the land
Net changes during the year
Balance at March 31, 2016
$ 133,120 $ 228,071 $ 532,515 ($ 14,708)
The accompanying notes are an integral part of these statements.

6-(58,480)(133)$ 8,955 ($ 27,644)(8,929)$ 14,520(5,194)($ 481)921 (71,816)$ 1,637 $ 875,986

KOEI TECMO HOLDINGS CO.,LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED MARCH 31

Millions of yen

Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Loss on impairment of fixed assets
Amortization of goodwill
Increase (decrease) in allowance for bad debts
Increase (decrease) in accrued bonuses to directors
Increase (decrease) in accrued bonuses to employees
Interest and dividend income
Loss on valuation of securities
Gain on sales of investment securities
Gain on redemption of securities
Gain on sales of property and equipment
Foreign exchange losses
Increase in notes and accounts receivable
Decrease in inventories
Increase (decrease) in notes and accounts payable
Other, net
Sub totalInterest and dividend income received
Interest paid
Income taxes refund
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of short-term and long-term securities
Proceeds from sales and redemption of short-term andlong-term securities
Purchase of property and equipment
Purchase of intangible fixed assets
Proceeds from sales of property and equipment
Proceeds from collection of guarantee deposits
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from disposal of treasury stock
Purchase of treasury stock
Cash dividends paid
Net cash used in financing activities
Effect of exchange rate changes on cash andcash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 5)
The accompanying notes are an integral part of these statements.

7

Thousands of U.S. dollars

2016

2015

2016

¥ 15,573
846
181
387
15
(24)
(8)
(5,017)2,560(1,303)
(959)
(15)
338
(1,290)
27
(52)
(177)
11,082
4,463
(0)
920
(5,529)10,935¥ 13,715
921
413
(31)
66
187
(3,128)1,042(1,674)
(35)
(142)
59
(785)
14
820
356
11,798
2,437
(0)
595
(4,474)
10,357$ 138,211
7,511
1,611
3,436
136
(217)
(75)
(44,524)
22,726(11,569)(8,519)(134)
2,999(11,454)
246(464)(1,572)
98,34939,609(0)
8,166(49,074)
97,050(1,526)
1,258(24,027)(1,308)1,302(23,185)(13,546)
11,167(213,232)

18,494

19,490164,133

(500)
(58)
172
7
41
(6,138)(4,644)
(47)
564
240
8
(7,579)(4,443)
(515)
1,526
67
368
(54,473)73(14)(4,806)(4,746)434(8)(3,471)(3,045)655(125)(42,652)(42,122)

(655)
(604)
11,874¥ 11,270

377
109
11,764¥ 11,874(5,818)(5,363)
105,385$ 100,022

KOEI TECMO HOLDINGS CO.,LTD. AND CONSOLIDATED SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of significant accounting policies:(1) Basis of presentation of consolidated financial statements The accompanying consolidated financial statements of KOEI TECMO HOLDINGS CO., LTD. (“the Company”) have been prepared inaccordance with the provisions set forth in the Financial Instruments and Exchange Act of Japan and its related accounting regulations, andin conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as toapplication and disclosure requirements of International Financial Reporting Standards.
The accounts of consolidated overseas subsidiaries for the years ended March 31, 2016 and 2015 are prepared in accordance with either
International Financial Reporting Standards or U.S. generally accepted accounting principles, with adjustments for the specified four items asapplicable. The accompanying consolidated financial statements have been restructured and translated into English from the consolidated
financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the
Ministry of Finance as required by the Financial Instruments and Exchange Act of Japan. Some supplementary information included in thestatutory Japanese language consolidated financial statements, but not considered necessary for fair presentation, is not presented in theaccompanying consolidated financial statements.
As permitted by the Financial Instruments and Exchange Act of Japan, amounts of less than one million yen have been omitted. Consequently, the totals shown in the accompanying consolidated financial statements (both in yen and U.S. dollars) do not necessarily agree withthe sum of the individual amounts. Certain amounts in the prior year’s financial statements have been reclassified to conform to the current
year’s presentation.
The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers outside Japan, using theprevailing exchange rate at March 31, 2016, which was ¥112.68 to U.S. $1. The convenience translations should not be construed as
representations that the Japanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any
other rate of exchange.
(2) Basis of consolidation and investments in affiliated companies The consolidated financial statements include the accounts of the Company and its subsidiaries, including KOEI TECMO GAMES CO.,LTD., KOEI TECMO NET CO., LTD., KOEI TECMO WAVE CO., LTD., CWS Brains, LTD., KOEI TECMO CAPITAL CO., LTD., KOEITECMO AMERICA Corporation, KOEI TECMO EUROPE LIMITED, KOEI TECMO TAIWAN CO., Ltd., TECMO KOEI CANADA Inc.,
KOEI TECMO TIANJIN SOFTWARE CO., LTD., KOEI TECMO BEIJING SOFTWARE CO., LTD., KOEI TECMO SINGAPORE Pte.
Ltd., and KOEI TECMO LIV CO., LTD. Some small-scale subsidiaries whose total assets, net sales, net income or loss, retained earnings orother items would have no material effect on the financial statements have not been consolidated. All significant intercompany transactions
and accounts have been eliminated in consolidation.
(3) Translation of foreign currency All the assets and liabilities of foreign subsidiaries are translated into Japanese yen at the appropriate year-end rate and all income andexpense accounts are translated at the average rate of exchange for the year. The translation of net assets is made using historical rates. The
resulting translation differences are presented as “Foreign Currency Translation Adjustments” in the accompanying consolidated balance
sheets.
Foreign currency receivables and payables are translated at year-end rates and the resulting translation gains and losses are included inincome currently.
(4) Cash equivalents For the purpose of the consolidated statements of cash flows, the Company and its consolidated subsidiaries have classified time deposits
and other highly liquid investments as cash equivalents if the original maturities of such investments are three months or less.
(5) Financial instruments (a) Derivatives
All derivatives are stated at fair value, with changes in fair value being included in the net profit or loss for the period in which they arise.
(b) Marketable securities and investment securities
Trading securities, held for the purpose of generating profits on short-term differences in prices, are stated at fair value, with changes infair value being included in the net profit or loss for the period in which they arise.
Held-to-maturity securities are stated at amortized cost method (straight line method).
Other securities for which market quotations are available are stated at fair value. Net unrealized gains or losses on these securities arereported as a separate component of net assets, net of applicable taxes.
Other securities for which market quotations are not available are stated at cost or at amortized cost, except as stated in the following
paragraph:
In cases where the fair value of equity securities issued by unconsolidated subsidiaries, or other securities has declined significantly andsuch impairment in value is not deemed temporary, those securities are reduced to fair value and the resulting losses are included in the net
profit or loss for the period.
The net amount of equity included in the Company’s financial statements from investment partnerships and similar investments, iscalculated based on the relevant financial statements for the partnership available as of the reporting date.

8(6) Inventories Inventories of the Company and its consolidated subsidiaries are determined using the moving-average method for merchandise,finished goods and raw materials and the specific identification method for work-in-process (unless market value of inventories
declines significantly and is not expected to recover to cost, in such cases costs are reduced to net realizable values).
(7) Property and equipment The property and equipment of the Company and its domestic subsidiaries is being depreciated using the declining balance method, except
for buildings acquired after the year ended March 31, 1998, which are being depreciated by the straight-line basis. The property and equipment held by foreign consolidated subsidiaries is being depreciated by the straight-line basis, based on the estimated useful lives of theassets.
The range of useful lives for “Buildings and structures” is principally from 3 to 50 years.
(8) Intangible assets The cost of software for sale, other than that related to R&D activities, is capitalized and amortized in the proportion of revenue for theperiod to total estimated ultimate revenue. The costs related to R&D activities are expensed as incurred.
Software costs for internal use are capitalized and amortized over their estimated useful lives on a straight-line basis.
Goodwill is amortized over its estimated useful lives on a straight-line basis. When the amounts are immaterial, the goodwill is amortized as
incurred.
(9) Accrued bonuses to employees Accrued bonuses are stated at the estimated amount of the bonuses to be paid to employees based on their services provided during the
fiscal year.
(10) Accrued bonuses to directors Accrued bonuses are stated at the estimated amount of the bonuses to be paid to directors based on their services for the current fiscal year.
The accounting standard requires that directors' bonuses be accounted for as an expense of the accounting period in which such bonuses
were accrued.
(11) Allowance for bad debts An allowance for bad debts is established at an amount considered to be appropriate based primarily on the past credit loss experience of the Company and its consolidated subsidiaries, plus an additional amount deemed necessary to cover possible losses estimatedon an individual account basis.
(12) Allowance for sales returns An allowance for sales returns is provided for losses due to the return of products at an amount calculated based on historical experience.
(13) Allowance for sales discount An allowance for sales discount is provided for the losses incurred on sales discount of products.
(14) Allowance for customer-discount points An allowance for customer-discount points is provided for the accumulation of points granted to online shopping users. The amount ofallowance is determined based on the past usage of points.
(15) Finance leases For finance lease transactions other than those which transfer ownership to the lessee, the straight-line method is adopted with a residual
value of zero, with the lease period deemed equal to the service life of the asset. For such transactions originating before the first year of
application of Accounting Standard No.13 (Corporate Accounting Standards for Lease Transactions), accounting methods suitable toordinary lease transactions are applied.
(16) Income taxes Provision is currently made for the income taxes applicable to all revenue and expense items reported in income tax returns on the basis ofwhen such items are taxable or deductible. The asset and liability approach is used to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets andliabilities.
(17) Retirement benefits (a) Method for attributing projected benefits to periods
The retirement benefit obligation is calculated by attributing projected benefits to periods until the end of the current fiscal year on abenefit formula basis.
(b) Amortization of prior service cost and actuarial gain or loss
Prior service cost is amortized on a straight-line basis over certain periods (from 9 to 12 years), which are shorter than the averageremaining years of service of the eligible employees. Net actuarial gain or loss is amortized from the following year on a straight-line
basis over certain periods (from 9 to 12 years), which are shorter than the average remaining years of service of the eligible employees.
9(18) Practical solution on unification of accounting policies applied to foreign subsidiaries for consolidated financial statements The Company has applied “Practical solution on unification of accounting policies applied to foreign subsidiaries for consolidated financial
statements” (ASBJ Practical Issues Task Force No. 18, March 26, 2015), and necessary modifications have been made for consolidation.
(19) Net income per share Basic net income per share of common stock (“Basic EPS”) is computed based on the weighted average number of shares of common stock
outstanding during each year. Diluted net income per share of common stock (“Diluted EPS”) further assumes the dilutive effect of warrants.
The basic information for net income per share computations for the years ended March 31, 2016 and 2015 was as follows:

For the year ended March 31, 2016
Basic EPS
Net income
Other
Net income attributable to owners of parent
Effect of Diluted stock shareholders
Warrants
Diluted EPS
Net income attributable to owners of parent
For the year ended March 31, 2015
Basic EPS
Net income
Other
Net income attributable to owners of parent
Effect of Diluted stock shareholders
Warrants

Millions of yen

Thousands of U.S. dollars

Net income

Thousands of shares
Weighted average number of shares

Yen¥ 103.27$ 0.91¥ 102.94$ 0.91¥ 10,855¥ 10,855$ 96,339$ 96,339

105,116--341¥ 10,855$ 96,339

105,457

Millions of yen

Net income¥ 9,434¥ 9,434-

U.S. dollars

EPS

Thousands of shares
Weighted average number of shares

EPS

Yen

104,492¥ 90.29

537

Diluted EPS
Net income attributable to owners of parent¥ 9,434
105,029¥ 89.83
The Company implemented a one point two-for-one stock split on October 1, 2015. Net income per share and diluted net income per share
are calculated by assuming this stock split was executed at the beginning of the fiscal year ended March 31, 2015.

2. Change in accounting policies:

The Company and its domestic subsidiaries have adopted “Revised Accounting Standard for Business Combinations” (ASBJ Statement
No.21, September 13, 2013 (hereinafter, “Statement No.21”)), “Revised Accounting Standard for Consolidated Financial Statements” (ASBJ
Statement No.22, September 13, 2013 (hereinafter, “Statement No.22”)) and “Revised Accounting Standard for Business Divestitures”(ASBJ Statement No.7, September 13, 2013 (hereinafter, “Statement No.7”)) (together, the “Business Combination Accounting Standards”),
from the current fiscal year. As a result, the Company changed its accounting policies to recognize in capital surplus the differences arisingfrom the changes in the Company’s ownership interest of subsidiaries over which the Company continues to maintain control and to record
acquisition related costs as expenses in the fiscal year in which the costs are incurred. In addition, the Company changed its accounting
policy for the reallocation of acquisition costs due to the completion following provisional accounting to reflect such reallocation in the
consolidated financial statements for the fiscal year in which the business combination took place. The Company also changed the presentation of net income. Certain amounts in the prior year comparative information were reclassified to conform to such changes in the current
year presentation.
With regard to the application of the Business Combination Accounting Standards, the Company followed the provisional treatments inarticle 58-2 (4) of Statement No.21, article 44-5 (4) of Statement No.22 and article 57-4 (4) of Statement No.7 with application from the
beginning of the current fiscal year prospectively.
This change has no impact on profit-and-loss for the current fiscal year.

3. Accounting standards issued but not yet effective:“Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016 (hereinafter,“Guidance No.26”)(1) Overview
Following the framework in Auditing Committee Report No. 66 “Audit Treatment regarding the Judgment of Recoverability of Deferred
Tax Assets”, which prescribes estimation of deferred tax assets according to the classification of the entity by one of five types, the following
treatments were changed as necessary:10(a) Treatment for an entity that does not meet any of the criteria in types 1 to 5;(b) Criteria for types 2 and 3;(c) Treatment for deductible temporary differences which an entity classified as type 2 is unable to schedule;(d) Treatment for the period which an entity classified as type 3 is able to reasonably estimate with respect to future taxable income before
consideration of taxable or deductible temporary differences that exist at the end of the current fiscal year; and(e) Treatment when an entity classified as type 4 also meets the criteria for types 2 or 3.
(2) Effective date
Effective from the beginning of the fiscal year ending March 31, 2017(3) Impact of application of the GuidanceThis change has no impact on the consolidated financial statements.

4. Changes in presentation:(1) Consolidated balance sheet“Lease and guarantee deposits”, which was stated as a separate account item in “Investments and other assets” in the previous fiscal year, isincorporated in “Other” for the fiscal year ended March 31, 2016 due to its decreased materiality. As a result, ¥674 million presented as“Lease and guarantee deposits” under “Other” on the consolidated balance sheet for the previous fiscal year has been included in “Other”.
(2) Consolidated statement of income“Gain on redemption of securities”, which was included in “Other, net” under “Other income (expenses)” in the previous fiscal year, ispresented separately for the fiscal year ended March 31, 2016 due to its increased materiality. As a result, ¥286 million included in “Other,
net” under “Other income (expenses)” on the consolidated statement of income for the previous fiscal year has been reclassified as “Gain on
redemption of securities”.

5. Cash flow information:

Reconciliation of cash and cash equivalents
Cash and time deposits at March 31, 2016 and 2015 reconciled to cash and cash equivalents were as follows:
Millions of yen

Cash and time deposits
Time deposits with maturity over three months
Short-term invertments in securities
Total cash and cash equivalents

2016¥ 12,258(987)¥ 11,2702015¥ 11,958(769)
685¥ 11,874

Thousands of U.S. dollars

2016$ 108,789(8,767)$ 100,022

6. Accumulated depreciation of property and equipment:

Accumulated depreciation of property and equipment as of March 31, 2016 and 2015 were as follows:
Millions of yen

Accumulated depreciation of property and equipment

11

2016
¥ 10,666

2015¥ 10,955

Thousands of U.S. dollars

2016$ 94,660

7. Financial instruments:(1) Qualitative information on financial instruments(a) Policies for using financial instruments
The Company and its consolidated subsidiaries procure funds that are required for the planning of capital investment, and short-term
operating funds through bank loans. The surplus funds are invested in the compound financial products that build in the stocks, the debenture, and derivatives aiming to operate it by a high yield.
Derivatives that the Company uses are only the compound financial products that build in derivatives.
(b) Details of financial instruments used and the exposures to risk and how they arise
Notes and accounts receivable are exposed to the credit risks in relation to customers. Some of them are denominated in foreign currencies, which consequently expose the Company and its subsidiaries to the risks of exchange rate fluctuations.
Securities and investment securities, which consist of principally equity securities and debt securities, are exposed to the risk of market
price fluctuations.
The investments in the compound financial instruments that build in derivatives have the risk of the bond market price and the exchange
rate fluctuations.
These investments are executed with credit worthy financial institutions. Given their creditworthiness, management does not expect any
counterparty to fail to meet its obligations.
(c) Policies and processes for managing the risk
① Credit risk management (counterparty risk)
The Company and its consolidated subsidiaries have established internal procedures for receivables under which the related divisions
are primarily responsible for periodically monitoring counterparty status. The department manages amounts and settlement dates bycounterparty and works to quickly identify and mitigate payment risk that may result from situations including deterioration of thefinancial condition of counterparties. Consolidated subsidiaries are subject to the same risk management rules.
② Market risk management (risk of exchange rate and interest rate fluctuations)

Any investments to compound financial instruments that include stocks, bonds, and derivatives as their components are managed withthe established policies and within the specified limit on the amounts of investments allowed. In addition, the Company clearly
separates its transaction division and management division in their functions with the view to securely managing its assets. The Company's management division confirms transactions, manages its current position, and ensures that all derivative transactions are
executed with the established policies so that its internal control functions properly. The Company periodically provides administrative
reports on the status of its position, including market value, to the financial director and treasurer.
Regarding marketable securities and investment securities, the Company periodically examines the financial condition of the issuingentities. The Company also regularly reviews the status of its holdings of bonds, not including those held to maturity, taking into
consideration its relationships with corporate business holders.
③ Management of liquidity risk associated with funds procurement (payment default risk)

The Company and its consolidated subsidiaries manage liquidity risk by creating and updating a capital deployment plan based onreports from each division.
(d) Fair values of financial instruments
Fair values of financial instruments include the values based on market prices, and the values deemed as market prices are reasonably
estimated by the reasonable estimate when market prices are not available. Since certain assumptions and others are adopted for estimating such values, they may differ when adopting different assumptions and others.

12(2) Fair values of financial information
Fair values of financial instruments as of March 31, 2016 and 2015 were summarized as follows:
The financial instruments whose fair values were not available were not included below and were summarized in (b).
(a) Fair values of financial instruments

Cash and time deposits
Notes and accounts receivable
Allowance for bad debts*
Marketable and investment securities
Other securities
Assets Total

Cash and time deposits
Notes and accounts receivable
Allowance for bad debts*
Marketable and investment securities
Other securities
Assets Total

Cash and time deposits
Notes and accounts receivable
Allowance for bad debts*
Marketable and investment securities
Other securities
Assets Total

Acquisition Amount¥ 12,258
10,962(20)
10,942Millions of yen
March 31, 2016

Estimated fair value¥ 12,258

Difference-

10,942-

59,865¥ 83,066-

59,865¥ 83,066

Book value¥ 11,958
9,734
(11)
9,722

Millions of yen
March 31, 2015

Estimated fair valu
¥ 11,958

Difference
-

9,722

-

64,703¥ 86,385-

64,703¥ 86,385

Book value$ 108,789
97,287(180)
97,107

Thousands of U.S.dollars
March 31, 2016

Estimated fair value$ 108,789

Difference-

97,107-531,287$ 737,184-

531,287$ 737,184* The amounts for probable losses calculated by applying a percentage based on collection experience to the remaining accounts areincluded.
Note: Fair values of financial instruments, and matters pertaining to securities and derivative transactions
AssetsCash and time deposits, and Notes and accounts receivable:
The book values approximate the fair values because of short-term maturities of these instruments.
Marketable and investment securities:
The fair value is based on the market prices or the prices quoted by financial institutions.
These securities are described in the Note on "10. Marketable securities and investment securities".
(b) Financial instruments whose fair values were difficult to measure
The financial instruments for which the fair values were not available as of March 31, 2016 and 2015 were summarized as follows:
Millions of yen

Stocks of subsidiaries and affiliates
Non-listed equity securities
Other
Total

2016
¥ 20
121
2,859
¥ 3,000

2015
¥ 20
53
3,040
¥ 3,113

Thousands of U.S. dollars

2016
$ 177
1,074
25,378$ 26,630

It is difficult to measure the fair value of these financial instruments because market prices are not available and it is not efficient tocalculate future cash flow. Therefore, these financial instruments were not included in the marketable and investment securities describedin (a).

13

(c) Maturities of financial instruments
The maturities of the financial instruments at March 31, 2016 and 2015 were as follows:

Within 1 year

Cash and time deposits
Notes and accounts receivable
Marketable and investment securities
Other securities(1)Government bonds and local government bonds(2)Bonds(3)OtherTotal¥ 3,347
10,962¥ 56
729¥ 15,096

Within 1 year

Cash and time deposits
Notes and accounts receivable
Marketable and investment securities
Other securities(1)Government bonds and local government bonds(2)Bonds(3)Other
Total

¥ 769
9,734
¥ 588
633
¥ 11,726

Within 1 year

Cash and time deposits
Notes and accounts receivable
Marketable and investment securities
Other securities(1)Government bonds and local government bonds(2)Bonds(3)OtherTotal

14$ 29,705
97,287$ 501
6,478$ 133,973

Millions of yen
At March 31, 2016
Over 1 year
Over 5 years
within 5 years
within 10 years

Over 10 years

-

-

-

¥ 932
2,430
¥ 3,362¥ 5,992
4,513
628¥ 11,135¥ 6,669
6,039¥ 12,709

Millions of yen
At March 31, 2015
Over 1 year
Over 5 years
within 5 years
within 10 years

Over 10 years

-

-

-

¥ 955
2,993
¥ 3,949¥ 1,933
3,632
1,110¥ 6,676¥ 7,480868¥ 8,348

Thousands of U.S. dollars
At March 31, 2016
Over 1 year
Over 5 years
within 5 years
within 10 years

Over 10 years

-

-

-

$ 8,274
21,567$ 29,841$ 53,182
40,0595,580$ 98,822$ 59,191
53,599$ 112,791

8. Rental property:

The Company and its consolidated subsidiaries own buildings (including land) for leasing in Kanagawa prefecture, other domestic areas,
and foreign countries. The rental income included in net sales was ¥380 million ($3,377 thousand) and ¥237 million for the years ended
March 31, 2016 and 2015, respectively.
Information about fair value of rental property included in the consolidated financial statements at March 31, 2016 and 2015 was as follows:

Millions of yen
Thousands of U.S dollars

Millions of yen

March 31, 2015
¥ 11,054$ 98,101

March 31, 2014
¥ 6,658

At March 31, 2016
Book value (net of depreciation)

Decrease¥ 280$ 2,488

March 31, 2016
¥ 10,773$ 95,613

At March 31, 2015
Book value (net of depreciation)

Increase¥ 4,396

March 31, 2015
¥ 11,054

Fair value

March 31, 2016
¥ 11,368$ 100,890

Fair value

March 31, 2015
¥ 11,071

Book values recorded in the consolidated balance sheets present acquisition cost, net of accumulated depreciation and impairment loss.
Note: The fair value for domestic rental properties was calculated by the Company and its consolidated subsidiaries based on the Real EstateAppraisal Standard. Locally appraised value was used for the fair value of overseas rental properties.

9. Lease:

The future minimum lease receipts for only non-cancelable operating lease contracts as of March 31, 2016 and 2015 were as follows:
Millions of yen

2016
¥ 236
1,385
¥ 1,622

Due within one year
Due after one year
Total

2015
¥ 259
1,783
¥ 2,043

Thousands of U.S. dollars

2016$ 2,096
12,299$ 14,396

10. Marketable securities and investment securities:

Comparisons of the acquisition costs and fair values of “Other securities for which market quotations are available” at March 31, 2016 and 2015
were as follows:

Acquisition cost
Other securities for which market prices are available ¥ 31,294(1)Equity securities
21,456(2)Debt securities
5,733(3)OtherTotal¥ 58,484

Other securities for which market prices are available (1)Equity securities(2)Debt securities(3)Other
Total

15

Millions of yen
At March 31, 2016

Gross unrealized gains

Gross unrealized losses

Fair value¥ 3,460
1,184
2,105¥ 6,750¥ 2,374
2,986
8¥ 5,369¥ 32,380
19,654
7,830¥ 59,865

Millions of yen
At March 31, 2015

Acquisition cost

Gross unrealized gains

Gross unrealized losses

Fair value¥ 23,719
17,425
12,457¥ 53,603¥ 6,819
2,513
3,525¥ 12,858

¥ 405
1,324
27
¥ 1,757¥ 30,133
18,614
15,955¥ 64,703

Other securities for which market prices areavailable (1)Equity securities(2)Debt securities(3)Other
Total

Thousands of U.S. dollars
At March 31, 2016

Acquisition cost

Gross unrealized gains

Gross unrealized losses

Fair value$ 277,728
190,41950,883$ 519,031$ 30,712
10,51018,686$ 59,909$ 21,071
26,50675$ 47,654$ 287,369
174,423
69,494$ 531,287

Impairment loss of ¥2,560 million ($22,726 thousand) and ¥1,043 million was recognized for the years ended March 31, 2016 and 2015,
respectively.
Available-for-sale securities sold for the years ended March 31, 2016 and 2015 were as follows:
Millions of yen

Sales amountGross realized gains
Gross realized losses

2016¥ 11,222
1,488
184

2015
¥ 14,207
2,654
980

Thousands of U.S. dollars

2016$ 99,597
13,2091,639

11. Research and development expenses:

Research and development expenses included in selling, general and administrative expenses for the years ended March 31, 2016 and 2015 was¥650 million ($5,776 thousand) and ¥639 million, respectively.

12. Retirement benefit plan:

For the year ended March 31, 2016
(1) Outline
The Company and its consolidated domestic subsidiaries have a defined benefit corporate pension plan. One of the foreign consolidated subsidiaries has adopted a defined contribution plan.
(2) Defined benefit plan(a) The reconciliation of defined benefit plans are as follows:
Millions of yen

Retirement benefit obligation at the beginning of the period
Service cost
Interest cost
Actuarial loss
Benefits paid
Retirement benefit obligation at the end of the period(b) The reconciliation of plan assets at fair value are as follows:
Plan assets at fair value at the beginning of the period
Expected return on plan assets
Actuarial gain(loss)
Contributions by the employer
Retirement benefits paid
Plan assets at fair value at the end of the period

16

2016
¥ 3,837
333
49
463
(111)
¥ 4,572

Millions of yen

2016¥ 4,108
184
(346)
356
(111)
¥ 4,1912015¥ 3,473
313
45
41
(37)
¥ 3,8372015¥ 3,280
114
435
314
(37)
¥ 4,108

Thousands of U.S. dollars

2016$ 34,052
2,960
442
4,111
(988)
$ 40,579

Thousands of U.S. dollars

2016$ 36,463
1,640(3,076)
3,162(988)$ 37,201

(c) The reconciliation of related to Retirement benefit obligation and Plan assets at fair value at the end of the period and defined
benefit liability and defined asset recorded on the consolidated balance sheets are as follows:
Millions of yen

Retirement benefit obligations of the funding plan
Plan assets at fair value
Retirement benefit obligations of the non-funding plan
Net amount of liabilities and assets recognized in the consolidated balance sheets
Liability for retirement benefits
Asset for retirement benefits
Net amount of liabilities and assets recognized in the consolidated balance sheets(d) Retirement benefit expenses and their breakdown:
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Amortization of prior service costs
Retirement benefit expenses

2016¥ 4,572(4,191)
380
380
380
¥ 380

2015
¥ 3,837(4,108)
(271)
(271)
(271)
¥ (271)Millions of yen

2016
¥ 333
49
(184)
(72)
10
¥ 136

2015
¥ 313
45
(114)
(26)
10
¥ 228

Thousands of U.S. dollars

2016$ 40,579(37,201)
3,377
3,377
3,377
$ 3,377

Thousands of U.S. dollars

2016$ 2,960
442(1,640)(647)
92$ 1,207(e) The breakdown of prior service cost and actuarial gain recognized in other comprehensive income before deduction of tax benefit
is as follows:
Millions of yen

Prior service costs
Actuarial gain (loss)
Total

2016
¥ 10
(882)
¥ (872)

2015
¥ 10
367
¥ 378

Thousands of U.S. dollars

2016
$ 92
(7,835)$ (7,742)(f) The breakdown of prior service cost and actuarial gain recognized in accumulated other comprehensive income before deductionof tax benefit is as follows:
Millions of yen

Unrecognized prior service cost
Unrecognized actuarial gain
Total(g) The breakdown of plan assets by major category is as follows:
Bonds
Equities
Other
Total

2016
¥ 153
(73)
¥ 79

2015
¥ 163
(956)
¥ (792)

2016
47.1%
49.1
3.8
100.0

Thousands of U.S. dollars

2016$ 1,360
(654)
$ 705

2015
39.5%
56.3
4.2
100.0

The expected long-term rate of return on plan assets is determined as a result of consideration of both the portfolio allocation at present andin the future, and long-term rate expected to earn the profit from multiple plan assets at present and in the future.
(h) The assumptions used in accounting for the above plans are as follows:
Discount rate
Expected rate of return on plan assets

2016
0.5%
4.5%

2015
1.3%
3.5%

(3) Defined contribution plan
The required contributions to the defined contribution plans of one of the foreign consolidated subsidiaries are ¥3 million ($26
thousand) and ¥2 million for the years ended March 31, 2016 and 2015, respectively.
1713. Income taxes:
The reconciliation of differences between the statutory tax rate and the effective tax rate for the year ended March 31, 2016 and 2015 wereas follows:
Statutory tax rate
Increase (decrease) in taxes resulting from:Amortization of goodwill
Special tax credit for research and development expenses and otherTax rate difference in certain subsidiaries
Valuation allowance
Adjustment on deferred tax assets due to change in income tax rate
Reserved profit of foreign subsidiaries
Other, net
Effective tax rate

2016
33.0%

2015
35.6%

0.8
(6.0)
(0.8)
(0.9)
0.6
3.0
0.6
30.3%

1.1
(4.5)
(0.8)
(0.8)
0.4
0.2
31.2%

The significant components of deferred tax assets and liabilities included in the balance sheets were as follows:
Millions of yen

Deferred tax :(1) Current assets
Tax loss carryforwards
Accrued bonuses to employees
Unrealized loss on inventory valuation
Provision for enterprise tax
Allowance for sales discount
Other
Offset to deferred tax liabilities (current)
Net deferred tax current assets(2) Non-current assets
Loss on investment securities
Tax loss carryforwards
Software development expense depreciation
Impairment loss on fixed assets
Net defined benefit liability
Other
Valuation allowance
Offset to deferred tax liabilities (non-current)
Net deferred tax non-current assets

2015

¥ 29
282
87
257
77
65
(8)
¥ 791

¥ 16
300
75
238
145
113
(49)
¥ 839

$ 261
2,506
779
2,289
691
577
(77)
$ 7,028

¥ 957
262
137
57
131
267
(243)
(270)
¥ 1,301

¥ 514
596
207
210
(518)
(741)
¥ 268

$ 8,500
2,327
1,216
511
1,170
2,378
(2,158)(2,398)$ 11,547

Millions of yen

Deferred tax :(1) Current liabilities
Unrealized gains on securities
Offset to deferred tax assets (current)
Net deferred tax current liabilities(2) Non-current liabilities
Unrealized gain on investment securities
Asset for retirement benefits
Reserved profit of foreign subsidiaries
Other
Offset to deferred tax assets (non-current)
Net deferred tax non-current liabilities

18

Thousands of U.S. dollars

2016

2016

Thousands of U.S. dollars

2016

2015

¥ (8)
8
¥ (0)

¥ (50)49¥ (0)$ (77)77$ (0)¥ (266)
(472)
(56)
270
¥ (526)¥ (3,488)
(96)
(30)
741
¥ (2,873)$ (2,369)
4,193
504
2,398
$ (4,669)

2016

Note:As “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 15 of 2016) and “Act for Partial Amendment of the Council Tax
Act, etc.” (Act No. 13 of 2016) were enacted by the Diet on March 29, 2016, the effective statutory tax rate used to measure deferred
tax assets and liabilities was changed from 32.2% to 30.8% for temporary differences expected to be eliminated in the fiscal year beginning on April 1, 2016 and on April 1, 2017 and to 30.6% for temporary differences expected to be eliminated in the fiscal year beginning on and after April 1, 2018.
The impact of this change on deferred tax assets and deferred tax liabilities is immaterial.

14. Assets pledged and revaluation of the land:(1) Assets pledged
Buildings and structures
Land
Total

Millions of yen

2016
¥ 258
306
¥ 564

2015
¥ 264
306
¥ 570

Thousands of U.S. dollars

2016$ 2,296
2,715$ 5,011(2) Revaluation of the land
The Company revalued land for its business in accordance with the Land Revaluation Law. The Company recorded the entire
difference between the carrying amount and revalued amount as unrealized losses on revaluation of the land as a separate componentof net assets.
Revaluation of land was performed by making a reasonable adjustment to the land based on the market value estimated in accordance with relevant provisions of the Land Revaluation Law.
Date of revaluation: March 31, 2000.
Fair value of the revalued land as of March 31, 2016 is ¥290 million ($2,578 thousand) less than the book value as of March 31,
2016.

15. Net assets:
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common stock. However,a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of the price of the new sharesas additional paid-in capital, which is included in capital surplus.
Under the Japanese Corporate Law (“the Law”), in cases where a dividend distribution of surplus is made, the smaller of an amountequal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capital and legal
earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained
earnings in the accompanying consolidated balance sheets.
Under the Law, legal earning reserve and additional paid-in capital could be used to eliminate or reduce a deficit or could becapitalized by resolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. However, all additional paid-in capital andall legal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentiallyavailable for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statementsof the Company in accordance with the Law.
At the annual shareholders’ meeting held on June 22, 2016, the shareholders resolved cash dividends amounting to ¥5,469 million($48,538 thousand). Such appropriations have not been accrued in the consolidated financial statements as of March 31, 2016. Suchappropriations will be recognized in the period when they are resolved.
Note: The Company implemented a one point two-for-one stock split on October 1, 2015. Number of increase in shares by stock split
is as follows:(1)Total number of issued shares before stock split
89,769,479 shares(2)Number of increase in shares by stock split
17,953,895 shares(3)Total number of issued shares after stock split
107,723,374 shares(4)Total number of authorized shares before stock split
350,000,000 shares

1916. Share subscription rights:
The summarized contents of share subscription rights as of March 31, 2016 are as follows:
Date of the annual shareholders' meeting
Position and number of grantee

Date of grantClass and number of stock
Exercised period

Share subscription rights #5
June 23, 2010

Share subscription rights #6
June 26, 2012

Share subscription rights #7
June 25, 2014

5 directors and
19 employees of theCompany and308 executive officer or
employees of thesubsidiaries

6 directors and24 employees of theCompany and349 executive officer or
employees of thesubsidiaries

7 directors and21 employees of theCompany and
380 executive officer or
employees of thesubsidiaries

October 25, 2010

October 22, 2012

September 22, 2014

Common Stock582,480

Common Stock871,560

Common Stock960,840

From October 26, 2012
to October 23, 2015

From October 23, 2014 From September 23, 2016
to October 20, 2017
to September 20, 2019

The Company implemented a one point two-for-one stock split on October 1, 2015. Number of stock is adjusted amounts after the stock split.
The following table summarizes scale and movement of share subscription rights as of March 31, 2016
Non‐exercisable (number of shares)
Outstanding at April 1, 2015
GrantedForfeited
VestedOutstanding at March 31, 2016

Share subscription rights #5

Share subscription rights #6

Share subscription rights #7--

954,000
8,640
945,360

54,60033,72020,880¥ 482$ 4.27¥ 1,940$ 17.21¥ 83$ 0.73

270,720
107,040
163,680¥ 547$ 4.85¥ 2,053$ 18.21¥74$ 0.65¥ 1,468$ 13.02¥ 290$ 2.57

Exercisable (number of shares)
Outstanding at April 1, 2015
VestedExercised
Forfeited
Outstanding at March 31, 2016
Exercise price

Average stock price at exercise
Fair value price at grant date

The Company implemented a one point two-for-one stock split on October 1, 2015. Exercise price is adjusted amounts after the stock split. Averagestock price at exercise has been calculated by assuming this stock split was executed at the beginning of the fiscal year ended March 31, 2015.

17. Asset retirement obligations:(1) Summary of applicable asset retirement obligations include the duty of restoration arising from contractual requirements set forthin real estate leases for amusement facility arcades.
(2) Instead of posting liabilities for asset retirement obligations, the Company and its consolidated subsidiaries use the method of
estimating the reasonable amount that cannot be finally recovered from the deposit related to a real estate lease contract and posting
the part of that amount belonging to the current term under costs.
(3) Changes to aggregate asset retirement obligations applicable to the fiscal years ended March 31, 2016 and 2015 were as follows:
Millions of yen

Beginning balance
Expense belonging to the burden of thisconsolidated fiscal year
Decrease due to fulfillment of asset retirement
obligations
Ending balance
20

Thousands of U.S. dollars

2016

2016

2015
¥ 84

$ 656

4

3

38

(15)

(13)

(133)

¥ 63

¥ 73

$ 561

¥ 73

18. Loss on impairment of fixed assets:
The Company and its consolidated subsidiaries recorded losses on impairment of fixed assets for the following asset groups.
Use
Idle asset
Amusement facilities
Total

Type of assets
Land and buildings,etc
Buildings,etc

Millions of yen

Thousands of U.S. dollars

¥ 123
58
¥ 181

$ 1,096515$ 1,611

2016

2016

RegionChiba
Osaka, etc.

The grouping of assets is based on the minimum unit that independently generates cash inflow.
In the fiscal year ended March 31, 2016, as to idle assets, the amount of ¥123 million ($1,096 thousand) is recorded as “Loss on
impairment of fixed assets” in “Other income (expenses)”, due to decline of their fair value. As to amusement facilities which havecontinuously resulted in operating losses, the amount of ¥58 million ($515 thousand) is recorded as “Loss on impairment of fixed
assets” in “Other income (expenses)” as well.
The recoverable value of the idle assets is the net sale value. It is estimated by appraisal values based on the assessment values ofproperty tax. The recoverable value of the amusement facilities is the value in use. It is valued as zero, as its discounted future cash
flows are negative.

19. Related party transactions:(1) Related party transactions between the Company and its related parties.
There is no significant transaction.
(2) Related party transactions between the Company’s consolidated subsidiaries and its related parties.
Principal transactions between the Company’s consolidated subsidiaries and its related parties are as follows:
For the year ended March 31, 2016
Type

Company
with a majority of thevoting rights
held by an
executive or
close relative

Name

KankyokagakuCo.,Ltd

Location

Chiyodaku,
tokyo

Capital orinvestments¥ 40 million($ 354 thousand)Business or
profession

Real estateleasing

Voting rights
held(%)

Relationshipwith the related parties

Transactions

AmountReal estateleasing

Real estateleasing(Note 1)

¥ 152 million($ 1,354
thousand)

Pledge ofcollateral

Pledge ofcollateral(Note 2)¥ 564 million($ 5,011
thousand)

Relationshipwith the related parties

Transactions

AmountReal estateleasing

Real estateleasing(Note 1)

¥ 153 million

Pledge ofcollateral

Pledge ofcollateral(Note 2)

¥ 570 million

7.45

Account
nameDeposit
Prepaid
expenseBalance¥ 146 million($ 1,300
thousand)¥ 12 million($ 112 thousand)Election of

For the year ended March 31, 2015
Type

Company
with a majority of thevoting rights
held by an
executive or
close relative

Name

KankyokagakuCo.,Ltd

Location

Chiyodaku,
tokyo

Capital orinvestments¥ 40 million

Business or
profession

Real estateleasing

Voting rights
held(%)

7.45

Account
nameDeposit
Prepaid
expenseBalance¥ 146 million¥ 12 million

Election ofNote 1: The subsidiary, KOEI TECMO GAMES CO., LTD., leases a joint ownership building of the related party, Kankyokagaku
Co.,Ltd, and the subsidiary, KOEI TECMO LIV CO., LTD.,.
The lease fee and other transaction terms are determined by price negotiations based on the current status of transactions in theneighborhood.
Note 2: A land and building which the subsidiary, KOEI TECMO LIV CO., LTD., owns are pledged as collateral for the borrowing therelated party, Kankyokagaku Co.,Ltd, required for a construction expense.
The amount is equal to book value of the land and building which our subsidiary, KOEI TECMO LIV CO., LTD., owns.
2120. Comprehensive income:The components of other comprehensive income including reclassification adjustments and income tax effect were as follows.
Millions of yen

Unrealized gains or losses on securities:
Increase during the year
Reclassification adjustments
Amount before income tax effect
Income tax effectTotal unrealized gains on securities
Unrealized losses on revaluation of the land:
Increase during the year
Reclassification adjustments
Amount before income tax effect
Income tax effectTotal unrealized losses on revaluation of the land
Foreign currency translation adjustments:
Increase during the year
Adjustments for retirement benefits:
Increase during the year
Reclassification adjustments
Amount before income tax effect
Income tax effectTotal changes in adjustments for retirement benefits
Total other comprehensive income

22

Thousands of U.S. dollars

2016

2015

2016

¥ (10,034)
297(9,737)
3,147(6,589)¥ 6,704(668)
6,036(1,759)4,276$ (89,054)
2,637(86,417)27,936(58,480)

-

0
0

-

(1,006)931(8,929)

(809)
(62)
(872)
287
(585)

394
(15)
378
(114)
263

(7,188)(554)(7,742)
2,548(5,194)¥ (8,181)¥ 5,473$ (72,604)

21. Segment information:(1) Outline of reportable segment
Reportable segments, the Company reports are the business unit for which the Company is able to obtain individual financial
information separately in order for the board of directors to conduct periodic investigation to determine the distribution ofmanagement resource and evaluate their business performance.
The Company operates principally in the following reportable segments:(a) Game Software: Design, development, manufacture and sale of game software for personal computers (PCs) and home video
game systems.
(b) Online & Mobile: Design, development, and management of software for online game and mobile phone.
(c) Media & Rights: Design, development, manufacture and sale of game software related products such as books, music CDs andpicture Blue-Ray & DVDs and management of game software product licenses.
(d) SP: Entrusted development of commercial amusement.
(e) Amusement Facilities: Management of amusement arcade.
(f) Real estate: Operation and management of real estate for leasing.
(2) Method of calculating sales and income (loss), and other items by reportable segment
Income (loss) of the reportable segment is operating income. Transfers among segments are based on market prices.
(3) Information on sales and income (loss), and other items by reportable segment

I. Net sales and segment income:Net sales(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment income
II. Other items:
Depreciation and amortization

I. Net sales and segment income:Net sales(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment income
II. Other items:
Depreciation and amortization

23

Millions of yen
For the year ended March 31, 2016
Reportable segment

Game
Software

Online&MobileMedia&
RightsSP

Amusement
Facilities

Realestate

Sub
Total

Other

Total

¥ 24,935
301
25,237¥ 8,655¥ 6,565559
7,124¥ 1,491¥ 2,894
1
2,895
¥ 271

¥ 1,786
1
1,788
¥ 755

¥ 1,286
1,286¥ 63¥ 830 ¥ 38,299
863
830
39,162¥ 322 ¥ 11,560

¥ 33
103
137
¥ 42

¥ 38,332
967
39,299¥ 11,602

¥ 314

¥ 110

¥ 4

¥ 2

¥ 119

¥ 269

¥ 821

¥ 24

¥ 846

Millions of yen
For the year ended March 31, 2015
Reportable segment

Game
Software

Online&MobileMedia&
RightsSP

Amusement
Facilities

Realestate

Sub
Total

Other

Total

¥ 24,525
337
24,863¥ 7,795¥ 6,273459
6,733¥ 1,128¥ 2,738
5
2,744
¥ 294

¥ 2,007
12
2,020
¥ 718

¥ 1,584
0
1,584
¥5

¥ 646
646
¥ 168

¥ 37,776
815
38,592¥ 10,110

¥ 22
104
127
¥ (12)¥ 37,799
920
38,719¥ 10,098

¥ 342

¥ 157

¥7

¥6

¥ 146

¥ 237

¥ 898

¥ 23

¥ 921

I. Net sales and segment income:Net sales(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment income
II. Other items:
Depreciation and amortization

Game
Software

Online&Mobile$ 221,298
2,678
223,977$ 76,815$ 2,789

Thousands of U.S. dollars
For the year ended March 31, 2016
Reportable segment

Amusement
Facilities

Realestate$ 58,264 $ 25,863 $ 15,856
13
11
4,961
15,86925,69563,225$ 13,236 $ 2,413 $ 6,708$ 11,419
11,419$ 560$ 7,370 $ 339,892
7,665
7,370 347,557$ 2,858 $ 102,592$ 298 $ 340,190
918
8,584
1,216
348,774$ 376 $ 102,969$ 26$ 1,057$ 2,394

$ 219

$ 979

Media&
Rights

$ 42

SP

Sub
Total

Other

$ 7,290

Total$7,509Note 1: ”Other” is an operating segment not included in reportable segment, venture capital, etc.
Note 2: The Company’s administrative expenses for the Company’s indirect departments which do not belong to the reportable segment
are allocated to each reportable segment in accordance with reasonable allocation standards.
(4) Reconciliation between the reportable segments above and the corresponding amount reported in the consolidated financial statements
was as follows:(a) Reconciliation of net sales
Reportable segment Total
Sales of Other segment
Elimination of intersegment transactions
Total(b) Reconciliation of segment income
Business segment reported Total
Profit of Other segment
Amortization of goodwill
Transfer to non operating profit
Total

Millions of yen

2016¥ 39,162
137(967)¥ 38,332

Millions of yen

2016¥ 11,560
42
(387)
(145)
¥ 11,069

Note: For management reporting purposes, goodwill and assets are not allocated to the segments.

2015¥ 38,592
127(920)¥ 37,799

2015¥ 10,110
(12)
(413)
(32)
¥ 9,652

Thousands of U.S. dollars

2016$ 347,557
1,216(8,584)$ 340,190

Thousands of U.S. dollars

2016$ 102,592
376(3,436)(1,291)$ 98,241(5) Items related to change in reportable segments, etc.
Effective from the current fiscal year, the “Real estate,” which was previously included in “Other,” has been classified as a separate
reportable segment due to an increase in materiality.
Segment information for the previous fiscal year has been adjusted to reflect this change in reportable segments.

24

(Segment related information)
Information by country or region
The following tables present sales and assets information by geographic area for the years ended March 31, 2016 and 2015.
(1) Sales

Millions of yen
For the year ended March 31, 2016

Japan
Net sales to outside customers:¥ 28,582

North
America¥ 3,408

EuropeAsia, etc.

¥ 2,108¥ 4,233

Millions of yen
For the year ended March 31, 2015

Japan
Net sales to outside customers:¥ 29,876

North
America¥ 3,728

EuropeAsia, etc.

¥ 2,431¥ 1,763

Thousands of U.S. dollars
For the year ended March 31, 2016

Japan
Net sales to outside customers:$ 253,658

North
America$ 30,250

Note: The sales amounts are classified by country or region where customers are located.
(2) Tangible fixed assets
Millions of yen
For the year ended March 31, 2016

Japan

Asia

UK

Other

¥ 13,979¥ 1,697¥ 3,178¥ 0Millions of yen
For the year ended March 31, 2015

Japan

Asia

UK

Other

¥ 14,622¥ 1,837¥ 3,617¥3

Thousands of U.S. dollars
For the year ended March 31, 2016

25

Japan

Asia

UK

Other

$ 124,067$ 15,063$ 28,208$1

Consolidated
Total¥ 18,856

Consolidated
Total¥ 20,080

Consolidated
Total$ 167,341

EuropeAsia, etc.

$ 18,711$ 37,570

Consolidated
Total¥ 38,332

Consolidated
Total¥ 37,799

Consolidated
Total$ 340,190

22. Subsequent events:(1) Changes in segmentation
Under our vision “The world’s No.1 Entertainment Content Provider” and through our strategy “IP Creation and Expansion”, wehave been striving to enhance growth and profitability. Previously, we implemented the organizational structure based on businessareas such as “Game Software,” “Online & Mobile,” and “Media & Rights”, however, for the purpose of focusing on and maximizing
our brand value and IP, which will enhance the corporate value as a whole, we reorganized the structure at KOEI TECMO GAMESCO., LTD. on April 1, 2016.
Due to the reorganization, we will change our reportable segments from “Game Software,” “Online & Mobile,” “Media & Rights,”“SP,” “Amusement Facilities,” and “Real Estate” to “Entertainment,” “SP,” “Amusement Facilities,” and “Real Estate” from the next
fiscal year.
Information regarding net sales and income for the current fiscal year based on the segments after the change is as follows;(2) Information on sales and income (loss), and other items by reportable segment

I. Net sales and segment income:Net sales(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment income
II. Other items:
Depreciation and amortization

I. Net sales and segment income:Net sales(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment income
II. Other items:
Depreciation and amortization

Millions of yen
For the year ended March 31, 2016
Reportable segment

SP

Amusement
Facilities

Realestate

Sub
Total

Other

Total

¥ 34,395
318
34,713¥ 10,419¥ 1,786
1
1,788
¥ 755

¥ 1,286
1,286
¥ 63

¥ 830
830
¥ 322

¥ 38,299
319
38,618¥ 11,560

¥ 33
103
137
¥ 42

¥ 38,332
423
38,755¥ 11,602

¥ 429

¥ 2

¥ 119

¥ 269

¥ 821

¥ 24

¥ 846

Entertain
ment

Thousands of U.S. dollars
For the year ended March 31, 2016
Reportable segment

SP

Amusement
Facilities

Realestate

Sub
Total

Other

Total

$ 305,246
2,822
308,068$ 92,465$ 15,856
13
15,869$ 6,708$ 11,419
11,419$ 560$ 7,370
7,370$ 2,858$ 339,892
2,835
342,727$ 102,592

$ 298
918
1,216
$ 376

$ 340,190
3,754
343,944$ 102,969$ 3,812$ 26$ 1,057$ 2,394$ 7,290$ 219$ 7,509

Entertain
ment

Note: The Company’s administrative expenses for the Company’s indirect departments which do not belong to the reportable segment areallocated to each reportable segment in accordance with reasonable allocation standards.

26

27

BOARD OF DIRECTORS AND
AUDIT & SUPERVISORY
BOARD MEMBERSCORPORATE DATA

Chairman

KOEI TECMO HOLDINGS CO., LTD.

Keiko Erikawa*
President & CEO

Yoichi Erikawa*Director

Hisashi Koinuma
Director

Kazuyoshi Sakaguchi
Director

Shintaro Kobayashi
Director

Mei Erikawa
Director & Advisor

Yasuharu Kakihara
Director(Outside)

Masao Tejima
Director(Outside)

Hiroshi Kobayashi
Audit & Supervisory Board Member (Full-time)

Satoru Morishima
Audit & Supervisory Board Member (Full-time, Outside)

Masaki Kimura
Audit & Supervisory Board Member (Outside)

Chiomi Yamamoto
Audit & Supervisory Board Member (Outside)

Toshikazu Kitamura
Senior Executive Officer & CFO

Kenjiro Asano
Executive Officers

Takeshi Hara
Seinosuke Fukui*Representative Director（As of September 30, 2016）28

Head Office
1-18-12 Minowa-cho, Kouhoku-ku,
Yokohama, Kanagawa 223-8503 Japan
Tel : +81-45-562-8111
http://www.koeitecmo.co.jp/

Date Established :April 1, 2009

Paid-in Capital :¥15 Billion ( As of March 31, 2016)

Number of Employees :1,570(As of March 31, 2016: Consolidated Basis)

Account Settlement :March 31Transfer Agent of Common Stock :Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi, Chiyoda-ku, Tokyo
100-8233 Japan

Independent Auditor :KPMG AZSA LLC

MAJOR SUBSIDIARIESKOEI TECMO GAMES CO., LTD.
1-18-12 Minowa-cho, Kouhoku-ku,
Yokohama, Kanagawa 223-8503 Japan
Tel : +81-45-561-6888
https://www.gamecity.ne.jp/

KOEI TECMO WAVE CO., LTD.
KUDANMEIZENDO Bldg.
4-1-34 Kudankita, Chiyoda-ku,
Tokyo 102-0073 Japan
Tel : +81-3-3222-8333
http://www.wave.koeitecmo.co.jp/

KOEI TECMO NET CO., LTD.
1-23-3 Minowa-cho, Kouhoku-ku,
Yokohama, Kanagawa 223-8527 Japan
Tel : +81-45-565-3123
https://shop.gamecity.ne.jp/

CWS Brains, LTD.
KUDANMEIZENDO Bldg.
4-1-34 Kudankita, Chiyoda-ku,
Tokyo 102-8230 Japan
Tel : +81-3-3222-7605
http://web.ultra-soccer.jp/

KOEI TECMOAMERICA Corporation1818 GILBRETH RD. Suite 211,BURLINGAME, California 94010 U.S.A
Tel : +1-650-692-9080
http://www.koeitecmoamerica.com/

KOEI TECMO EUROPE LIMITED
Unit 209A The Spirella Building, Bridge
Road, Letchworth Garden City,
Hertfordshire, SG6 4ET, UK
Tel : +44-1462-476130
http://www.koeitecmoeurope.com/

KOEI TECMO TAIWAN CO., LTD.
11F, No.323, Fu-Hsing S.Road, Sec. 1,
Daan Chiu, Taipei 106, Taiwan
Tel : +886-2-2325-0111
http://www.gamecity.com.tw/

KOEI TECMO SINGAPORE Pte. Ltd.
8 Kallang Avenue, Aperia tower1,#12-01/04, Singapore 3395093
Tel : +65-6220-7581
http://www.koeitecmo.com.sg/

KOEI TECMO TIANJINSOFTWARE CO., LTD.
21〜22F, Global Center, No.309 Nanjin Road,
Nankai District, Tianjin , P.R.China
Tel : +86-22-8328-0781
http://www.gamecity.net.cn/

KOEI TECMO BEIJINGSOFTWARE CO., LTD.
RM.701 Beijing Inn
No.6 South ZhuGan HuTong,
Chaoyang men Nei, Dongcheng District,
Beijing China
Tel :+86-10-6588-3571
http://www.gamecity.net.cn/

KOEI TECMO SOFTWAREVIETNAM CO., LTD.
12th Floor, Ladeco Building, No.266, Doi Can
Street, Lieu Giai Ward, Ba Dinh District,Hanoi, Vietnam
Tel : +84-4-3232-1287