BRIEF STATEMENT OF ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED
MARCH 2014 AND FORECASTS FOR THE YEAR ENDING MARCH 2015
This is an English translation of summarized consolidated financial results prepared
for the convenience of non-resident shareholders. Should there be any inconsistency
between the translation and the official Japanese text, the latter shall prevail.

May 14, 2014
Faith, Inc. (Stock code 4295, Listed on TSE 1st section)(URL http://www.faith.co.jp/)
Representative; Hajime Hirasawa, CEO/President
Contact; Jiro Saeki, CFO/Director Tel: +81-03-5464-7633
Date of General Meeting of Shareholders: June 27, 2014
Date of Submission of Annual Security Report: June 30, 2014
Starting Date of the Dividend Payment: June 30, 2014
Preparation of Supplementary Materials for Financial Results: Applicable
Information Meeting for Financial Results to be Held: Applicable (for Institutional Investors
and Analysts)
Amounts are rounded down to the nearest JPY 1 million.

1. Results for the Fiscal Year Ending March 2014 (From April 1, 2013 to March 31, 2014)(1) Consolidated Operating Results(Percentages indicate changes compared with the previous fiscal year.)

Net SalesYear ending
March 2014
March 2013

Millions of yen

6,340
6,732

Operating Income

%
△5.8
△79.9

Millions of yen

Ordinary Income
Millions of yen

%
△49.8
△35.7

508
1,013

586
1,119

Net Income

%
△47.6
△36.4

Millions of yen

403
1,111

%
△63.7
△83.3

(Note) Comprehensive income: fiscal year ending March 2015: ¥357 million (68.9%); fiscal year ending March 2014: ¥1,148 million (△83.5%)

Net Income per
Share

Year ending
March 2014
March 2013

Diluted Net
Income per Share

Return on Equity
CapitalOrdinary Incomeon Total Assets

Operating Income
on Net Sales

Yen
—
—

%
2.0
5.5

%
2.2
4.9

%
8.0
15.1

Yen
35.44
96.95

(Reference) Equity in earnings of associated companies: fiscal year ending March 2014: ¥15 million/fiscal year ending March 2013: ¥52
million(Note)
With effect from October 1, 2013, the Company carried out a stock split of its common shares at a ratio of 10 shares per share.
For this reason, the net income per share is calculated under the supposition that the stock split had taken place at the beginningof the previous consolidated fiscal year.

(2) Consolidated Financial Position
Total Assets

Year ending
March 2014
March 2013

Net Assets

Millions of yen

Millions of yen

29,887
22,611

22,34020,552

Ratio of Equity Capital

Net Assets per Share

%
69.6
90.9

Yen
1,825.44
1,803.89(Reference) Equity capital: fiscal year ending March 2014: ¥20,792 million; fiscal year ending March 2013: ¥20,552 million(Note)
With effect from October 1, 2013, the Company carried out a stock split of its common shares at a ratio of 10 shares per share.
For this reason, the net asset value per share is calculated under the supposition that the stock split had taken place at the
beginning of the previous consolidated fiscal year.

(3) Consolidated Cash Flow Results
Cash
Flow
from
Operating Activities

Year ending
March 2014
March 2013

Cash Flow from
Investing Activities

Cash
Flow
from
Financing Activities

Cash and Cash
Equivalents at Year End

Millions of yen

Millions of yen

Millions of yen

Millions of yen

1,715
△644

4,093
△1,569△521△608

11,415
6,125

1

2. Dividends
Dividends per Share
(Record dates)

Year ending
March 2014
March 2013
March 2015
(Forecast)(Note)

1st
Quarter
Yen

Interim―――

Total Dividend
Payment

Year-end

Yen

3rd
Quarter
Yen

Yen

Total
(Annual)
Yen

50.00
50.00
5.00

―
―
―

50.00
50.00
5.00

100.00—
10.00

Payout Ratio

Dividend on Net
Assets(Consolidated)(Annual)(Consolidated)

Millions of yen

%
10.3
28.2
113.9

114
113

%
0.6
0.6

With effect from October 1, 2013, the Company carried out a stock split of its common shares at a ratio of 10 shares per share.

3. Forecast for the Consolidated Results for the Year Ending March 2015
（from April 1，2014 to March 31，2015）(Percentages indicate changes compared with the previous fiscal year and the previous interim result.)

Net Sales

First
half
(cumulative)
Full year

Operating Income

Ordinary Income

Net Income

Net Income
per Share

Millions ofyen%Millionsof yen%Millionsof yen%Millionsof yen%Yen

10,000

215.2

△160

—

△170

—

△250

—

△21.9421,500

239.1

450

△11.5

430

△26.7

100

△75.2

8.77

※ Notes(1) Changes in significant subsidiaries (accompanying changes in scope of consolidation): Applicable
Newly added subsidiaries: 1 company (subsidiary’s name: Nippon Columbia Co., Ltd.)For details, please refer to 4. Consolidated Financial Statements, (5) Notes Concerning theConsolidated Financial Statements, (Significant Matters That Constitute the Basis for Preparation of
the Consolidated Financial Statements) on page 17 of the accompanying material.
(2) Changes in accounting policy, changes in accounting estimates, and restatements(2)-1. Changes accompanying revisions of accounting standards, etc.: None(2)-2. Changes other than the above: None(2)-3. Changes in accounting estimates: None(2)-4. Restatements: None

(3) Outstanding shares (common shares)(3)-1. Outstanding shares at the end of the fiscal years (including treasury stock):
The fiscal year ending March 2014: 11,960,000 shares
The fiscal year ending March 2013: 11,960,000 shares(3)-2. Treasury stock at the end of the fiscal year:
The fiscal year ending March 2014: 569,670 shares
The fiscal year ending March 2013: 566,570 shares(3)-3. Average number of shares at the accounting period
The fiscal year ending March 2014: 11,392,053 shares
The fiscal year ending March 2013: 11,465,990 shares(Note) With effect from October 1, 2013, the Company carried out a stock split of its common shares at a ratio of 10 shares per share.
For this reason, the numbers of shares listed above are calculated under the supposition that the stock split had taken place atthe beginning of the previous consolidated fiscal year.

2

(Reference) Overview of Non-Consolidated Results
Results for the Fiscal Year Ending March 2014 (From April 1, 2013 to March 31, 2014)(1) Non-Consolidated Operating Results(Percentages indicate changes compared with the previous fiscal year.)

Net SalesYear ending
March 2014

Millions of yen

March 2013

3,185

2,622

Operating Income
%

%

△335

—

△19

—

△17.7
△15.2

Net Income per ShareYear ending
March 2014
March 2013

Ordinary Income

Millions of yen

Net Income

Millions of yen%

Millions of yen

%

—

△466

—

△223
25

△49.2

△136

—

Diluted Net Income per
Share

Yen
△40.91△11.93

Yen——(Note) With effect from October 1, 2013, the Company carried out a stock split of its common shares at a ratio of 10 shares per share. For
this reason, the net income per share is calculated under the supposition that the stock split had taken place at the beginning of theprevious consolidated fiscal year.

(2) Non-Consolidated Financial Position
Total Assets

Year ending
March 2014
March 2013

Net Assets

Ratio of Equity
CapitalNet Assets per Share

Millions of yen

Millions of yen%

Yen

19,985
20,95318,921
19,56094.7
93.4

1,661.22
1,716.84(Reference) Equity capital: fiscal year ending March 2014: ¥18,921 million; fiscal year ending March 2013: ¥19,560 million(Note) With effect from October 1, 2013, the Company carried out a stock split of its common shares at a ratio of 10 shares per share. For
this reason, the net asset value per share is calculated under the supposition that the stock split had taken place at the beginning of
the previous consolidated fiscal year.

* Indication of auditing procedures implementation status
This financial results report is exempt from review procedures under Japan’s Financial Instruments and Exchange Law. As of
the time of disclosure of this report, the auditing procedure based on the Financial Instruments and Exchange Law has notbeen completed.
* Statement regarding the proper use of financial forecasts and other special remarks(Notice regarding statements concerning the future)
Statements concerning the future, such as performance forecasts, etc., described in the present material are based on
information currently available to the Company and on certain assumptions judged as reasonable by the Company. The
Company’s actual performance may differ substantially from these forecasts as a result of various factors beyond theCompany’s control. For details of cautions, etc., employed in making performance forecasts and the assumptions underlying
performance forecasts, please refer to 1. (1) Analysis of Operating Results on page 2 of the accompanying material.
(To obtain supplemental documents relating to financial results)
Supplemental Materials for Financial Results were posted on the company website on March 21, 2014.

3

Accompanying Material Contents
1. Analysis of Operating Results and Financial Position………………………………………………… 2(1) Analysis of Operating Results…………………………………………………………………… 2(2) Analysis of Financial Position…………………………………………………………………… 4(3) Basic Policy on Profit Allocation and Current Term/Next Term Dividend Distribution………… 5
2. Overview of the Faith Group…………………………………………………………….…………. 5
3. Management Policies ………………………………………………………………………………… 6(1) The Faith Group’s Basic Management Policy…………………………………………………… 6(2) Medium- and Long-Term Business Strategy………………………………………….…………. 7(3) Challenges the Company Should Address ……………………………………………………… 7
4. Consolidated Financial Statements…………………………………………………………………… 9(1) Consolidated Balance Sheet…………………………………………………………………..... 9(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income … 11
(Consolidated Statement of Income) …………………………………………………………… 11(Consolidated Statement of Comprehensive Income) ………………………………………… 12(3) Consolidated Statement of Changes in Shareholders’ Equity………………………………… 13(4) Consolidated Statement of Cash Flows………………………………………………………
15(5) Notes Concerning the Consolidated Financial Statements……………………………………… 17(Notes Concerning the Premise of a Going Concern)……………………………………………… 17(Significant Matters That Constitute the Basis for Preparation of the Consolidated Financial
Statements)………….………….………….………….………….………….………….………… 17(Not Yet Applied Accounting Standards, etc.)……………………………………………………… 20(Changes in Presentation Methods)……………………………………………………………… 21(Additional Information)………………………………………………………………………… 21(Consolidated Balance Sheet Related) …………………………………………………………… 21(Consolidated Statement of Income Related)……………………………………………………… 22(Consolidated Statement of Comprehensive Income Related) …………………………………… 23(Consolidated Statement of Changes in Shareholders’ Equity Related)…………………………… 23(Consolidated Statement of Cash Flows Related) ………………………………………………… 25(Business Combination Related) ………………………………………………………………… 26(Segment Information, etc.) ……………………………………………………………………… 29(Per Share Information)…………………………………………………………………………… 32(Significant Subsequent Events) ………………………………………………………………… 33(Omission of Disclosure) …………………………………………………………………………… 33

1

1. Analysis of Operating Results and Financial Position(1) Analysis of Operating Results
During the fiscal year under review, the Japanese domestic internet and mobile service markets
exhibited firm expansion overall, and the number of smartphone users increased rapidly. During the
one-year period from April 2013 to March 2014, while the number of users accessing the internet froma PC was 53,670,000, a decrease of approx. 6%, the number of users accessing the internet from asmartphone (including both app users and website visitors) was 39,780,000, an increase of approx. 38%(*1).
Regarding the sales composition ratio of music distribution, in 2012 the PC/smartphone vs. featurephone distribution ratio was 35:65, but in 2013 this reversed to 60:40 (*2), as PC/smartphone
distribution came to dominate the music distribution market for the first time.
Moreover, the diffusion rate of SNS (Social Network Services) among internet users is expected toincrease from 52% at the end of 2012 to over 65% three years later at the end of 2015 (*3)(*1) Research by Nielsen Co., Ltd.
(*2) Research by the Recording Industry Association of Japan(*3) Research by ICT Research & Consulting

In this market environment, based on its Multi-Content and Multi-Platform Strategy of creating anenvironment that allows people to enjoy a wide diversity of contents whenever and wherever theychoose, the Faith Group is moving ahead with the production of new content including music and video
in order to be able to bring excellent high-value-added content to the market promptly. At the same time,
the Company is proceeding with the provision of highly convenient services including new services forusers of smartphones, for which popularization is accelerating.
Also, the Company has been carrying out various approaches in order to promote its “New 360°
Strategy”, which encompasses making the most of various opportunities for encouraging contact
between artists and fans, expanding their contact points, and striving to monetizing this as a business.
In the music market, in addition to traditional media, SNS are becoming more familiar. Following its
acquisition in January 2014 of OK LIFE, Inc., which operates Japan’s largest-scale music SNS platform“OK Music”, as a consolidated subsidiary, the Company entered into a capital and business partnershipin February with Revolver, Inc., operator of “Revolver”, an SNS platform for companies and creators.
Also, in March, in order to establish a business model that can respond to the drastically changing
market environment and to further strengthen our competitiveness and our response in fields of growthby boosting mutual cooperation, the Company made its equity-method affiliate Nippon Columbia, Co.,
Ltd., into a consolidated subsidiary by raising its shareholding through a tender offer.
The Faith Group’s net sales for the fiscal year ending March 2014 decreased by 5.8% compared withthe previous fiscal year to ¥6,340 million, operating income decreased by 49.8% year on year to ¥508
million, and ordinary income decreased by 47.6% year on year to ¥586 million, and the Group recorded
a net income for the fiscal year under review of ¥403 million, a decrease of 63.7% year on year.
In addition, with effect from October 1, 2013, the Company carried out a stock split of its commonshares at a ratio of 10 shares per share, and in conjunction with this, the share trading unit in which theCompany’s stock can be traded on the stock exchange has been changed from 1 share to 100 shares.

Information on each business segment is as follows.
<Content Business>
In both the Japanese domestic and international markets, the Faith Group is further strengthening its
efforts to develop smartphone-use services centered on music, education, etc.
FaRaoTM, Japan’s first internet-based radio service equipped with a recommendation function, is also
standard equipped with HIKARI BOX+ HB-1000, provided by NTT West Corporation. In addition, weare striving to realize an environment in which listeners can enjoy a wide variety of music services thatmatch their diverse lifestyles, and towards this end, we began partnerships with Clarion Co., Ltd., andPioneer Corporation in March 2014 toward the incorporation of FaRaoTM in car navigation equipment.
2Moreover, in October 2013, the Company newly launched ARTIST CROWD®, a crowd-sourcing
service specialized for music production that allows people to use the internet to place orders
concerning work to an indefinite number of others in a competition-style process and to advertise forcontractors, etc.
In August 2013, the Company started an artist cultivation and development project, the Pop Icon Project
Tokyo, with Nicola Formichetti, the well-known fashion director who collaborates with Lady Gaga. In
order to discover girl vocal units that can represent Japan and enchant the world, we held auditions andfollowing the final review we selected three successful candidates. In future, the Company intends todevelop this project making maximum use of the Faith Group’s diverse services and functions
beginning with giving these new artists debuts from Nippon Columbia Co., Ltd.
In Kidzapplanet®, a worldwide intellectual training application brand for pre-school children that began
service in February 2013, is offering a steadily increasing lineup of titles and has achieved growth as apopular intellectual application brand both in Japan and internationally. For example, seven titles
including Sukusuku Rhythmic! Sawatte Asobo! Wonder Rhythm, have recorded a combined total of
800,000 downloads worldwide, and in November 2013, we released an app in collaboration the popularchildren’s TV animation Gambare! Ruru Roro.
Also, in the Pick Mix Letter series, which allows users to make original video letters with ease, we havelaunched several new services that make use of popular characters. For instance, we newly released a
Kitty-chan no Nuigurumi set menu in June 2013, and followed this up with the release of Doraemon no
Oiwai Video Letter, in which the animation character Doraemon calls the recipient’s name andcelebrates their birthday, in March 2014, etc.
In addition, in March 2014, we released a photo SNS Smile Log®. The concept behind this service isthat people can store memories of their relatives and close friends by sharing photos. This “smile log” isequipped with functions that help boost in-group communication such as allowing comments or “like!”
recommendations to be attached to photos, decoration of photos using over 500 types of stamp, video
addition, etc., and we are also planning to introduce a real album printing service.
In future, the Company will continue realize its “New 360° Strategy” by making maximum use of thediverse distribution services that reach the Faith Group’s more than 10 million users and platforms thatconnect artists and fans.
As a result of the above, the Group recorded net sales in the Content Business for the fiscal year ending
March 2014 of ¥5,007 million, a decrease of 5.6% compared with the previous fiscal year, in line withdeclining sales mainly in the ringtone business, while operating income decreased by 44.6% year on
year to ¥467 million.
<Point Service Business>
In the Point Service Business, despite strengthened sales promotion at existing affiliated stores, etc., aswell as an increase in revenue from new business ventures, the end of the government-administered
reconstruction support home appliance eco-point system had a negative impact, resulting in net sales forthis business of ¥1,332 million, a decline of 6.8% year on year. However, due to an increase in sales
promotion expenses and an increase in new project expenses, this business recorded an operating
income of ¥40 million, a decline of 76.1% year on year.
The business performance forecasts for next fiscal year (FY 2014) are as follows. As a consequence ofacquiring Nippon Columbia Co., Ltd., as a consolidated subsidiary, etc., the Faith Group is currently
forecasting net sales of ¥21,500 million (up 239.1% year-on-year). Also, in accordance with the decline
in income in the Content Business and the effects of amortization for the goodwill, trademark purchases,
etc. in connection with the acquisition of Nippon Columbia Co., Ltd., the Group is forecasting an
operating income of ¥450 million (down 11.5% year-on-year), a ordinary income of ¥430 million (down
26.7% year-on-year), and a net income of ¥100 million (down 75.2% compared with FY 2013).

3

(Unit: millions of yen)

Net sales
Operating income
Ordinary income
Net income

FY2013 (Result)
(a)
6,340
508
586
403

FY2014 (Forecast)(b)
21,500450
430100

Change(b) - (a)15,159
△58
△156
△303

(2) Analysis of Financial Position① Assets, Liabilities and Net Assets
Total assets as of the end of the consolidated fiscal year ended March 31, 2014 increased by ¥7,276
million from the end of the previous consolidated fiscal year to ¥29,887 million. This result was mainly
due to increases in goodwill, cash and deposits, and notes and accounts receivable - trade in line withthe acquisition of Nippon Columbia as a consolidated subsidiary despite a decrease in investment
securities.
Total liabilities increased by ¥5,488 million compared with the end of the previous consolidated fiscal
year to ¥7,547 million. This result was mainly due to increases in liabilities such as bills and tradeaccounts payable, accrued expenses payable and employee retirement benefits in line with theacquisition of Nippon Columbia Co., Ltd. as a consolidated subsidiary despite a decrease in liabilities
following the repayment of long-term debt.
Net assets increased by ¥1,787 million compared with the end of the previous consolidated fiscal year to¥22,340 million. This was mainly the result of an increase in minority interests in line with theacquisition of Nippon Columbia Co., Ltd. as a consolidated subsidiary, and of an increase in retained
earnings due to the recording of net income for the current consolidated fiscal year. Also, the FaithGroup’s capital adequacy ratio decreased by 21.3 percentage points compared with the end of theprevious consolidated fiscal year to 69.6%.
② Cash Flow
Cash and cash equivalents at the end of the consolidated fiscal year ended March 31, 2014 increased by¥5,290 million (an 86.4% increase) from the end of the previous consolidated fiscal year to ¥11,415
million.
Details of cash flow during this fiscal year and its main contributory factors were as follows:(Cash flow from operating activities)
Cash flow from operating activities amounted to an inflow of ¥1,715 million (compared with outflow of¥644 million during the previous consolidated fiscal year), due mainly to the addition of depreciation
expenses of ¥244 million and a loss on revaluation of investments in securities of ¥205 million to theGroup’s net income before taxes and other adjustments of ¥537 million, and also to the addition of ¥698
million in respect of a refunds on corporation tax paid.
(Cash flow from investing activities)
Cash flow from investing activities amounted to an inflow of ¥4,093 million (compared with an outflow
of ¥1,569 compared during the previous consolidated fiscal year), due mainly to the posting of ¥7,192
million in income from withdrawals of existing term deposits and ¥1,913 million in income from theacquisition of shares in a subsidiary through a change in the scope of consolidation, despite the postingof ¥4,023 million in expenditure in respect of opening new term deposits.
(Cash flow from financing activities)
Cash flow from financing activities amounted to an outflow of ¥521 million (a decrease of 14.2%
compared with the previous consolidated fiscal year), due mainly to posting of ¥399 million in
expenditure in respect of repayment of long-term debt and of ¥112 million in respect of dividend
payments.
4

(Reference) Movements in Cash Flow Associated Indicators
Capital-to-asset ratio (%)
Market value-based capital-to-asset ratio (%)
Ratio of interest on interest-bearing debt to cash flow
(years)Interest coverage ratio (multiple)

FY 2011
83.3
48.9
0.35

FY 2012
90.9
53.6
△1.18

FY 2013
69.6
40.2
0.65

202.1

△90.4

336.0

Capital-to-asset ratio: Equity capital/total assets
Market value-based capital-to-asset ratio: Market capitalization/total assets
Ratio of interest on interest-bearing debt to cash flow： interest-bearing debt/cash flow from operating
activities
Interest coverage ratio: Cash flow from operating activities/interest payment(Note 1) All the above ratios are calculated based on the consolidated financial figures.
(Note 2) Market capitalization is calculated based on the number of shares issued excluding treasury
shares.
(Note 3) Interest-bearing debt includes all debt on which interest is being paid among the liabilities
reported in the Consolidated Balance Sheet.
(Note 4) For cash flow from operating activities and interest payment, the figures for “cash flow fromoperating activities” and “interest amount paid” reported in the Consolidated Statement of
Cash Flows are used.

(3) Basic Policy on Profit Allocation and Current Term/Next Term Dividend Distribution
The Company continues its policy of giving priority to securing the funds necessary for strengthening
its business structure and making aggressive business investments. At the same time, it also recognizes
return of profit to shareholders to be an important management issue. For this reason, the Company willconsider payment of dividends, taking into account its operating results and financial position.
Based on its fundamental policy of paying continued stable dividends, the Company plans to pay a
dividend of ¥10 per share, including an interim dividend of ¥5, in the next fiscal year.

2. Overview of the Faith GroupThe Faith Group (the Company and its associated companies) consists of Faith, Inc. (the Company), 16
subsidiaries and 6 affiliates, and is engaged mainly in the Content Business, the Point Service Business,and the Columbia Business.
The Faith Group’s businesses and the relationship between the Company and the other group companies
with regard to business operations are as follows. In addition, the following business segments are thesame as the segments referred to in 4. Consolidated Financial Statements, (5) Notes Concerning theConsolidated Financial Statements, (Segment Information, etc.). The Group has changed its reportablesegment classification with effect from the fiscal year under review. The details are given in 4.
Consolidated Financial Statements, (5) Notes Concerning the Consolidated Financial Statements,(Segment Information, etc.) on page 29.

(1) Content BusinessIn the diversifying content market, the Group is promoting multi-platform-compatible multi-content
distribution to users regardless of the network or terminal device used with the aim of creating a newcontent distribution framework for the emerging new market. As a comprehensive service provider, theGroup is promoting one-stop solutions ranging from the construction of distribution systems andoperation of services for end-users to the planning and production of digital contents. This business isconducted by Faith, Inc., Faith Wonderworks, Inc., and 13 other affiliates.
(2) Point Service Business
The Group is engaged in the Point Service Business, which is aimed at the retail industry. This businessis conducted by GoodyPoint Co., Ltd.
5

(3) Columbia Business
The Columbia Business encompasses the sound source, video, etc., planning, production and sales
business, the music rights acquisition and management business, the contracted production and sales
business, etc. The businesses in question are conducted by Nippon Columbia Co., Ltd., Columbia
Marketing Co., Ltd., Columbia Songs, Inc., Omagatoki Co., Ltd., C2 design Inc., and two otheraffiliated companies.
[Business System Diagram]
The following diagram shows the Faith Group’s business system as described above.

The FaithGroup(Faith Inc.
and its
group
companies)

Content BusinessJapan
The Company (Faith, Inc.)
Faith Wonderworks, Inc.
Rightsscale, Inc.
Future RECORDS, Inc.
ENTERMEDIA INC.
OK LIFE, Inc.
Plus 1 other company*2. Japan Rights Clearance Inc.
*2. Lync-Entertainments*2. FlyingPenguins Inc.
*2, *3. Plus 2 other companies
Overseas *1. Rightsscale USA, Inc.
*1, *3. Plus 2 other companies

Point Service BusinessJapan
GoodyPoint Co., Ltd.

Content distribution service
provision==================>
Distribution platform
development
Content production services

Ourcustomersandclients

Point service provision===================>

Columbia BusinessJapan

Overseas

Nippon Columbia Co., Ltd.
Columbia Marketing Co., Ltd.
Columbia Songs, Inc.
Omagatoki Co., Ltd.
C2 Design, Inc.
CME, Inc. (USA)
SLG, LLC. (USA)===================>
Production, advertising andsales of audio, video andgame software, etc., andmusic artist management(Notes)No mark: Consolidated subsidiaries*1:
Non-consolidated subsidiary to which the equity method is not applied*2:
Affiliates to which the equity method is applied*3:
Affiliates to which the equity method is not applied

3. Management Policies(1) The Faith Group's Basic Management Policy
The basic policy of Faith Group is to create schemes to distribute digital contents to users. In future as
well, the Group will attempt to accurately grasp changes in society and in people’s lifestyles, and create
diverse services that closely match the using environments of feature phone, smartphone, PC, and TV
users. In addition, while producing and procuring contents suitable for these services, the Company andits affiliated group companies will strive to develop the methods, technologies and know-how to realize
these services and aim to become a higher value-added corporate group through business partnerships
with outside companies in addition to providing their own services independently.
6

(2) Medium- and Long-Term Business Strategy
The Faith Group will continue to construct new markets by creating a broad range of services that meetthe user demands of today and tomorrow. The Group will make efforts to actualize next-generation
services that are attractive to users, including the production and distribution of entertainment contentssuch as music, video and games, as well as various types of services utilizing information devices,
based on proposals for unique business solutions and through business partnerships with prominentcompanies in many fields. Moreover, in today’s increasingly diversified and complex market
environment, the Group is giving consideration to accurately grasping user needs, promoting its“multi-content on multi-platform strategy”, and improving its equity capital and profitability, which areoperating resources that are linked to increasing corporate value and shareholder profit. Accordingly,
the Group places emphasis on the equity capital ratio and the operating income as management indexes.
(3) Challenges the Faith Group Should Address
The domestic mobile content industry is continuing to grow by making innovative use of technology
and information transfer methods based on a succession of newly appearing ideas. Consequently, userneeds are becoming more diversified and complex at an accelerating pace, and a flood of various kindsof contents including free distribution items has been sweeping into the market. The Faith Group willcontinue its pursuit of intra-group synergies and conduct effective operations on a group-wide basis. At
the same time, with the aim of being able to provide excellent high-value-added contents in adiversifying usage environment and market to all users regardless of the type of network andinformation terminals they use, the Group intends to carry out the following measures.
① Content Business
The Faith Group will create new markets by developing distribution systems that bring benefits tocontent rights holders, distributors and users alike based on the technology and know-how accumulatedby the Group up to now as well as by providing its own business solutions through partnerships withprominent companies in a range of business fields. In order to realize this goal, the Group will makeevery effort to reinforce its in-house content production activities, while also engaging in production
tie-ups with content rights holders and attempting to expand its user reach in order to strengthen its
contact points with users.
Ever since its establishment, the Faith Group has endeavored to build up its content distribution
business by making use of various information devices as a major pillar of its business. From now on
too, the Group will continue to develop new service systems that are useful for content rights holders,
distributors and users, commercialize the necessary technology such as embedded terminal technology,
distribution system technology, etc., and construct new content distribution systems.
② Point Service Business
Up to now, point services have been centered on the retail industry, and in recent years there has been
an increase in partnerships encompassing the mutual use of points across multiple retail operations
while competition between point services has also been growing. In this situation, the Faith Group iscreating an unprecedented Point Service Business that includes O2O services. To this end, the Group
recognizes the need to improve the level of satisfaction experienced by its point service customers by
reducing operational costs and improving convenience, and by enhancing its service proposal power, etc.
In addition, the Group will adopt a strategic approach in tackling the tasks it needs to address.
③ Columbia Business
Regarding the Columbia Business, under circumstances in which the music and video-related industries
are facing a severe business environment, Nippon Columbia Co., Ltd.’s Sales/Digital Distribution
Business, which is mainly engaged in sales of products based on contents such as planned and produced
sound sources, video, etc., will increase its profitability through improved business efficiency byrounding out its artist lineup, nurturing hit artists and creating hit products, and by making use of its richcatalogue of sound sources and concentrating its management resources in order to expand into newfields in the entertainment business.
In the Direct Sales Business, which sells contents that make secondary use of in-house produced soundsources and images, in the special sales area, Nippon Columbia will continue to reinforce its
relationships with existing business partners while proceeding with the opening up of new sales
7channels and new business partners. In addition, Nippon Columbia will endeavor to achieve multiple
business deployment of sound sources by improving its planned products including products for thesenior/baby boomer generation while making effective use of its rich store of contents.
In the Mail Order Business, Nippon Columbia is developing its business efficiently using a “fulfillment
system” that conducts mail order operations such as “order receipt”, “payment acceptance” and“product delivery” consistently and efficiently. Moreover, by entering into business cooperation withother record companies in using this system, Nippon Columbia has successfully gained new sales
channels and obtained new income sources such as operation management fees, etc. In future too, inorder to expand business cooperation to more other companies in the same industry and also tocompanies in different business fields, Nippon Columbia will make approaches to the planning andproduction of CD and DVD products jointly with partner companies and to product planning ofhousehold items (such as lifestyle goods and daily sundries) that take customer needs into account.

84. Consolidated Financial Statements(1) Consolidated Balance Sheet(Unit: thousands of yen)

(Assets)
Current assets
Cash and deposits
Accounts and notes receivable
Marketable securities
Commercial products
Products in progress
Primary materials and inventory goods
Corporation tax refund receivable, etc.
Deferred tax assets
OthersAllowance for doubtful accounts
Total current assets
Fixed assets
Tangible fixed assets
Buildings and structures
Accumulated depreciation
Buildings and structures (net base)Machinery and delivery equipment
Accumulated depreciation
Machinery and delivery equipment (net base)Tools, devices and equipment
Accumulated depreciation
Tools, devices and equipment (net base)
Land
Lease assets
Accumulated depreciation
Lease assets (net base)Total tangible fixed assets
Intangible fixed assets
Software
Goodwill
Leased assets
OthersTotal intangible fixed assets
Investment and other assets
Investment securities
OthersAllowance for doubtful receivable
Total investments and other assets
Total fixed assets
Total assets

FY 2012(As of March 31, 2013)

FY 2013(As of March 31, 2014)

12,076,535
930,681
540,780
4,464
5,633
7,004
696,298
224,075
117,874△21,627
14,581,719

14,196,991
3,238,570
241,587
464,387
440,60363,564
67,118286,638
774,474△74,763
19,699,173

1,525,948△257,859
1,268,089
15,222△11,699
3,522
829,738△731,848
97,8901,500,895———
2,870,397

2,016,966△693,217
1,323,748
27,342△4,172
23,170797,288△667,463
129,824
1,501,684
914,368△829,947
84,4203,062,848

282,269
16,26915,913
19,621
334,074

442,145
4,247,061
22,807
406,934
5,118,948*1

9

4,761,282
63,890△225
4,824,948
8,029,420
22,611,140*1

1,679,127
623,900△296,727
2,006,300
10,188,097
29,887,271

(Unit: thousands of yen)

(Liabilities)
Current liabilities
Trade notes and accounts payable
Short-term loans
Lease obligations
Accrued expenses payable
Income taxes payable
Reserve for bonuses
Provision for point card certificates
Reserve for sales returns
OthersTotal current liabilities
Fixed liabilities
Long-term liabilities
Allowance for retirement benefits
Net defined retirement liabilities
Lease obligations
Deferred tax liabilities
OthersTotal fixed liabilities
Total liabilities(Net assets)
Shareholder's equity
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholder's equity
Other accumulated comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustments
Total other accumulated comprehensive income
Stock acquisition rights
Minority interests
Total net assets
Total liabilities and net assets

10

FY 2012(As of March 31, 2013)

FY 2013(As of March 31, 2014)

203,006
409,884
4,453
122,399
145,492
73,914
175,091—
288,137
1,422,9781,243,213
906,520
51,491
2,062,945
73,76370,403
191,510
148,890
1,399,389
6,148,127

333,400
127,394—
13,030156,077
5,755
635,657
2,058,636

105,400－
996,110
41,915
209,823
45,628
1,398,877
7,547,004

3,218,000
3,708,355
14,103,509△751,372
20,278,491

3,218,000
3,708,355
14,393,333△754,679
20,565,008

283,308△9,296
274,012——
20,552,504
22,611,140

227,400－
227,400
61,949
1,485,909
22,340,267
29,887,271

(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income(Consolidated Statement of Income)(Unit: thousands of yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Interest on securities
Exchange gain
Investment gain on equity method
Gain on investment partnership management
Interest on refund
Miscellaneous receipts
Total non-operating Income
Non-operating expenses
Interest paid
Investment partnership losses
Miscellaneous expenses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on disposal of fixed assets
Gain on disposal of investment securities
Gain on transfer of business
Gain on step acquisitions
OthersTotal extraordinary income
Extraordinary losses
Loss on disposal of fixed assets
Loss due to amortization
Loss on valuation of investment securities
Overseas tax practice-related loss
OthersTotal extraordinary losses
Net income before income taxes
Corporate, local, and business taxes
Income taxes - deferred
Total corporate, local, and business taxes
Net income before minority interests
Minority interests in income
Net income for the current fiscal year

FY 2012(April 1, 2012 ~March 31, 2013)
6,732,576*2 *6
3,420,425
3,312,151*1
2,298,665
1,013,458

FY 2013(April 1, 2013 ~March 31, 2014)
6,340,217*2 *6
3,657,383
2,682,833*1
2,174,105
508,728

30,217
6,395
4,157
18,06952,114——
7,121
118,075

16,838
7,096
2,096
3,501
15,303
3,257
18,837
16,362
83,292

7,119
3,809
1,464
12,392
1,119,168

5,044
—
737
5,782
586,239

*3

*4

316
51,400———51,71623,85693,4282,573
11,892351
132,102
1,038,782
158,665△206,124△47,458
1,086,240△25,435
1,111,676

*5

11

*3

*4

2,833
25,22028,320164,191
3,759
224,325
32,390—205,211
7,491
27,683272,776
537,788
84,58649,416
134,002403,785—
403,785

(Consolidated Statement of Comprehensive Income)(Unit: thousands of yen)

Net income before minority interests
Other comprehensive income
Valuation difference on other available-for-salesecurities
Foreign currency translation adjustments
Total other comprehensive income
Comprehensive income(Details)
Comprehensive income attributable to shareholders of
the parent company
Comprehensive income attributable to minority
interests

12

FY 2012(April 1, 2012 ~March 31, 2013)
1,086,240

FY 2013(April 1, 2013 ~March 31, 2014)
403,785

55,623△55,790

6,535
62,159
1,148,399

9,179△46,611357,174**

1,173,835

357,174△25,4350(3) Consolidated Statement of Changes in Shareholders’ Equity
FY 2012 (April 1, 2012 ~ March 31, 2013)
In the tables below, use “year” or use “accounting period” but please be consistent.
(Unit: thousands of yen)
Shareholders' equity
Retainedearnings

Capital stock Capital surplus
Balance at the beginningof the year
Changes of items during
the accounting period

3,218,000

3,708,355

13,106,638

Total
Treasury stock shareholders’equity△651,377

19,381,616

Cash dividend paid

△114,805△114,805

Net gain or loss

1,111,676

1,111,676

Acquisition of treasury
stock
Disposal of treasurystock
Net changes in
non-equity items
during the accounting
periodTotal changes of items
during the accounting
periodBalance at the end of theaccounting period△99,995△99,995－－

996,871△99,995

896,875

3,218,000

3,708,355

14,103,509△751,372

20,278,491

Minority
Interests

Accumulated other comprehensive income

Balance at the beginningof the year
Changes of items during
the accounting period

Valuationdifference on
otheravailable-forsale securities

Foreigncurrencytranslation
adjustments

Total
accumulated
othercomprehensiv
e income

Shareacquisitionrights227,124△15,270

211,853－

25,435

Total net assets

19,618,905

Cash dividend paid

△114,805

Net gain or loss

1,111,676

Acquisition of treasury
stock
Disposal of treasurystock
Net changes in
non-equity items
during the accounting
periodTotal changes of items
during the accounting
periodBalance at the end of theaccounting period△99,995

56,184

5,974

62,15956,184

5,974

62,159283,308△9,296

274,012

13△25,435

36,723－△25,435

933,598－－

20,552,504

FY 2013 (April 1, 2013 ~ March 31, 2014)(Unit: thousands of yen)
Shareholders' equity
Retainedearnings

Capital stock Capital surplus
Balance at the beginningof the year
Changes of items during
the accounting period

3,218,000

3,708,355

14,103,509

Cash dividend paid
Net gain or loss
Acquisition of treasury
stock
Disposal of treasurystock
Net changes in
non-equity items
during the accounting
periodTotal changes of items
during the accounting
periodBalance at the end of theyear

3,218,000

3,708,355

Total
Treasury stock shareholders’equity△751,372

20,278,491△113,934△113,934

403,785

403,785△3,492△3,492

△28

185

157

289,823△3,307

286,516

14,393,333△754,679

20,565,008

Minority
Interests

Accumulated other comprehensive income

Balance at the beginningof the year
Changes of items during
the accounting period

Valuationdifference on
otheravailable-forsale securities

Foreigncurrencytranslation
adjustments

Total
accumulated
othercomprehensiv
e income

Shareacquisitionrights283,308△9,296

274,012－－

20,552,504△113,934

Cash dividend paid
Net gain or loss
Acquisition of treasury
stock
Disposal of treasurystock
Net changes in
non-equity items
during the accounting
periodTotal changes of items
during the accounting
periodBalance at the end of theyear

Total net assets

403,785△3,492
157△55,907

9,296△46,61161,949

1,485,909

1,501,246△55,907

9,296△46,61161,949

1,485,909

1,787,762

227,400－

227,400

61,949

1,485,909

22,340,267

14

(4) Consolidated Statement of Cash Flows(Unit: thousands of yen)

FY 2012(April 1, 2012 ~March 31, 2013)
Cash flow from operating activities
Income before income taxes and minority interests
Depreciation and amortization
Impairment loss
Amortization loss on goodwill
Increase/decrease in allowance for doubtful accounts
Increase/decrease in reserve for bonus
Increase/decrease in allowance for unexercised sales
promotion points
Increase/decrease in allowance for retirement benefits
Increase/decrease in net defined retirement liabilities
Interest and dividends income
Interest on securities
Interest paid
Gain or loss on foreign exchange (△ = gain)
Gain or loss on equity method investments (△ = gain)
Gain or loss on investment partnership management (△ =gain)Gain or loss on sale of investment securities (△ = gain)
Gain or loss on valuation of investment securities (△ = gain)
Gain or loss on sale of fixed assets (△ = gain)
Gain or loss on disposal of fixed assets (△ = gain)
Gain or loss on step acquisitions (△ = gain)
Gain or loss on transfer of business (△ = gain)
Increase/decrease in trade receivables (△ = increase)
Increase/decrease in inventory assets (△ = increase)
Increase/decrease in trade payables
Increase/decrease in consumption tax receivable (△ =increase)
Increase/decrease in consumption tax payable
OthersSub-totalInterest and dividends received
Interest paid
Income tax refunded
Income tax paid
Cash flow from operating activities

15

FY 2013(April 1, 2013 ~March 31, 2014)

1,038,782
291,850
93,42824,330△8,248348△33,050

537,788244,922－49,463△3,306△3,51016,41818,004－△36,613△4,157
7,119△14,648△52,114－－△8,662△23,935△2,096
5,044△3,156△15,303△3,257△51,400
2,573△316
23,856－－
178,646
1,495
15,16910,929△25,220
205,211△2,83332,390△164,191△28,320
166,746△32,969△12,959△8,061

6,734△126,190
1,386,527
42,987△7,129541△2,067,534△644,607△10,190
1,479
911,489
336,250△5,071
698,957△226,162
1,715,463

(Unit: thousands of yen)

FY 2012(April 1, 2012 ~March 31, 2013)
Cash flow from investing activities
Expenditure for opening of term deposits
Income from withdrawal of term deposits
Income from redemption of marketable securities
Expenditure for acquisition of tangible fixed assets
Income from sale of tangible fixed assets
Expenditure for acquisition of software
Expenditure for acquisition of investment securities
Income from sale of investment securities
Expenditure for acquisition of shares of affiliates
Expenditure for acquisition of shares of subsidiaries in linewith changes in scope of consolidation
Proceeds from purchase of shares of subsidiaries resulting inchange in scope of consolidation
Income from liquidation of subsidiaries
Expenditure for loans receivable
Income from collection of loans receivable
Expenditure for security deposits
Income from collection of security deposits
Income from transfer of business
OthersNet cash flow from investing activities
Cash flow from financing activities
Net increase (decrease) in short-term loans payable
Expenditure for repayment of lease obligations
Expenditure for repayment of long-term borrowing
Expenditure for acquisition of treasury stock
Income from sale of treasury stock
Payment of dividends
Net cash flow from financing activities
Effect of exchange rate on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Decrease in cash and cash equivalents resulting from exclusionof subsidiaries from consolidation
Cash and cash equivalents at the end of the year

16

FY 2013(April 1, 2013 ~March 31, 2014)△6,392,145
5,190,000－△39,289
71△176,866△286,637
61,400△4,900*1△4,023,238
7,192,145
300,000△72,530
5,000△190,701△682,697
26,220△79,000－*2△207,822－*2

1,913,528

28,318－3,705△315
40,189－6,539△1,569,929－△3,1203,240△5,087
5,087
28,571△116,197
4,093,397

9,900△4,308△399,984△99,995－△113,804△608,192
14,473△2,808,256
8,961,796－△5,723△399,984△3,492
157△112,834△521,878
3,156
5,290,140
6,125,200△28,338－

6,125,200*1

11,415,340

(5) Notes Concerning the Consolidated Financial Statements(Notes Concerning the Premise of a Going Concern)
Not applicable(Significant Matters That Constitute the Basis for Preparation of the Consolidated Financial
Statements)
1. Items Concerning the Scope of Consolidation(1) Number of consolidated subsidiaries
Previous fiscal year: 4 companies, current fiscal year: 14 companies
Names of major consolidated companies:• Faith Wonderworks, Inc.
• GoodyPoint Co., Ltd.
• Future RECORDS Inc.
• ENTERMEDIA INC.

• OK LIFE, Inc.
• Nippon Columbia Co., Ltd.
• Columbia Marketing Co., Ltd.
• Columbia Songs, Inc.
• SLG, LCC
Regarding Nippon Columbia Co., Ltd., and its six subsidiaries, in accordance with the acquisition of
additional shares of Nippon Columbia stock during the current consolidated fiscal year, these companies
have been included within the scope of consolidation from the end of the current consolidated fiscal year.
Moreover, ENTERMEDIA INC., OK LIFE, Inc. and one other company, for which the Company newly
acquired a controlling shareholding during the current consolidated fiscal year, have been included
within the scope of consolidation.

(2) Names of major non-consolidated subsidiaries, etc.
Name of major non-consolidated company:• Rightsscale USA, Inc.
(Reason for exclusion from scope of consolidation)
Because this non-consolidated subsidiary is a small company, the sum totals of it gross assets, sales,
and net income or loss (amount corresponding to equity), etc., do not have a significant influence on
the Consolidated Balance Sheet.
2. Items Concerning the Application of the Equity Method(1) Number of equity method affiliates
Previous fiscal year: 4 companies, current fiscal year: 4 companies
Names of major consolidated companies:• Japan Rights Clearance Inc.
• Lync-Entertainments• FlyingPenguins Inc.
FlyingPenguins Inc. and one other company, for which the Company newly acquired a controllingshareholding during the current consolidated fiscal year, have been included within the scope of
application of equity method accounting.
Moreover, because in accordance with the acquisition of additional shares of Nippon Columbia Co., Ltd.,
this company has been included within the scope of consolidation from the end of the current
consolidated fiscal year, this company and one other company have been excluded from the scope of

application of equity method accounting.
(2) Non-consolidated companies to which the equity method is not applied (Rightsscale USA, Inc.) andaffiliated companies (Dragon Eye Inc. and others) have been excluded from the scope of applicationof equity method accounting because, in view of their net income or loss (amount corresponding toequity) and retained earnings (amount corresponding to equity), etc., excluding them from the scopeof application of equity method accounting has only a minor influence on the Consolidated Balance
Sheet and is of no overall significance.
3. Items Concerning the Accounting Periods of the Consolidated Subsidiaries
17

Among the consolidated subsidiaries, GoodyPoint Co., Ltd. has a settlement date of February 28 asits balance sheet closing date. In producing the Consolidated Balance Sheet, each company’s balance
sheet as of their respective balance sheet closing dates is used apart from in the case of OK LIFE,
Inc.. Moreover, among the consolidated subsidiaries, OK LIFE, Inc. has a settlement date ofNovember 30, and in producing the Consolidated Balance Sheet, the Company has used financial
statements based on a provisional statement of account dated February 28. However, necessary
adjustments for consolidation have been made concerning important transactions that occurred
between February 28 and the consolidated settlement date of March 31.
4. Items Concerning the Accounting Standards(1) Significant evaluation standards and methods
1) Marketable securities
Other securities:—Available-for-sale securities with a fair market value
Stated at fair value based on market values applicable on the date of consolidated settlement ofaccounts (in which all differences between the carrying amounts and the fair values are reported
as a separate component of net assets, while the cost of securities sold is calculated by themoving average method)—Available-for-sale securities without a fair market value: stated at cost determined by the moving
average method. For investment equities in investment partnerships, a method based on the mostrecent balance sheet available at the balance sheet reporting date provided in the partnershipcontract is employed, taking an amount equivalent to the equity value.
2) Inventories
The evaluation standard is the cost method employing the specific cost method (balance sheet values
calculated by devaluing the book values based on declining profitability).
a. Commercial products and merchandise: For the Company and some of its consolidated
subsidiaries, mainly stated under the gross average method; for the other consolidated
subsidiaries the first-in-first out method.
b. Products in progress: For the Company and some of its consolidated subsidiaries, stated under the
specific identification method; for the other consolidated subsidiaries, mainly stated under thegross average method.
c. Raw materials and supplies: Stated mainly under the gross average method.
(2) Significant depreciable assets and depreciation methods
1) Tangible fixed assets (excepts lease assets)
The declining balance method is mainly employed to calculated depreciation expenses for theseassets. (However, the company employs the straight-line method for buildings (apart fromattached facilities) acquired since April 1, 1998.) The useful lifetimes of the main types oftangible fixed assets are as follows.
Buildings and structures: 5 – 50 years
Machinery and delivery equipment: 2 – 12 years
Tools, devices and equipment: 2 – 15 years
2) Intangible fixed assets (excepts lease assets)
The straight-line method is employed. In the case of in-house-use software, this is based on theuseable period in-house (up to 5 years).
3) Lease assets
a. Lease assets pertaining to finance lease transactions involving the transfer of ownership
The straight-line method is employed. The useful lifetimes of the main types of intangible fixed
assets are between 5 and 12 years.
b. Lease assets pertaining to finance lease transactions not involving the transfer of ownership
The method to calculate depreciation for such assets is the straight-line method with theirresidual values being zero over their leased periods used as the number of years of useful life.
Among the financial lease transactions outside of transfer of ownership, in cases where the leasetransaction start date was on or before March 31, 2008, account processing is conducted inaccordance with the ordinary lease transaction method.
(3) Standards for recording significant allowances
1) Allowance for doubtful accounts
18

In order to prepare for losses due to doubtful accounts receivable, the estimated unrecoverable
amounts in consideration of the actual ratio of bad debts for general accounts receivable andindividual collectability for special bonds such as doubtful accounts receivable, etc., arerecorded.
2) Reserve for point card certificatesIn order to prepare for the cost burden of point utilization, for the balance of yet to be exchanged
issued points, the required amount expected to be utilized in future is recorded based on the pointcollection performance ratio.
3) Reserve for bonuses
In order to prepare for employee bonus payments, among the estimated future payment amount,
the Company and some of its consolidated subsidiaries record the current consolidated fiscal
year’s share of these expenses.
4) Reserve for losses due to sales returns
In order to prepare for future losses due to sales returns, anticipated losses accompanying future
returns of merchandise are recorded based on actual past return rates with respect to total sales.
(4) Accounting Standard for Retirement Benefits
In the calculation of retirement benefit liabilities and expenses, for the Company and certain
subsidiaries apply the simplified method in calculating the provision for retirement benefits, whichassumes all employees voluntarily terminate their employment at the end of the year. The otherconsolidated subsidiaries apply the following methods.
1) Attribution of expected retirement benefit payments
When calculating retirement benefit obligations, straight-line attribution is used to allocate
expected retirement benefit payments in the period until the end of the fiscal year.
2) Actuarial gains and losses and prior service cost
Transition obligation for the retirement benefit liabilities is amortized equally over 15 years.
Prior service costs are amortized as incurred by the straight-line method over certain periods(3 years), which are within the average remaining years of service of the employees at the time
the service cost is generated.
Actuarial gains and losses are amortized on a straight-line basis over certain periods (5 years),
which are within the average remaining years of service of the employees at the time the amounts
are generated in each fiscal year, allocated proportionately starting from the year following therespective fiscal year of occurrence.
(5) Important standards for revenue and cost recognition
Standards for recording income and expenditure related to software production orders
a. Software produced to order for which certainty of achievement with respect to sections
progressing up to the end of the current consolidated fiscal year is recognized: Progress-based(rate of progress of the work estimated using the cost-to-cost method)b. Other software produced to order: Completed contract method(6) Standards for conversion of significant foreign currency-denominated assets and liabilities into
Japanese yen
Receivables and payables denominated in foreign currencies are processed by being translated into
Japanese yen at the consolidated fiscal year-end spot exchange rates. Meanwhile, the assets andliabilities of overseas subsidiaries are converted into yen based on the spot exchange rate on the dayof consolidated settlement of accounts, revenue and expenses are converted into yen using the
average market price during the period, and exchange differences are included in Foreign currencytranslation adjustments under Net assets on the Consolidated Balance Sheet.
(7) Goodwill amortization method and amortization period
The amortization of goodwill is carried out using the straight-line method over a period of 5 years or
20 years. Also, regarding the balance between investment and capital (goodwill equivalent amount)in the case of companies accounted for by the equity method, amortization is conducted over 5 years
or less using the straight-line method. However, in cases where the amount of goodwill isinsignificant, one-time amortization is conducted for the fiscal term in which the relevant accountcase occurred.
(8) Scope of cash and cash equivalents reported in the Statement of Cash Flows
19

This item consists of cash on hand, demand deposits and short-term investments that are highly
liquid, easily realizable, bearing only insignificant risk of changing in value, and with a maturity datethat comes within 3 months of the acquisition date.
(9) Other important items necessary to produce the Consolidated Financial Statements
1) Accounting method for consumption tax: The tax exclusion method is adopted for consumption
tax and local consumption tax. Nondeductible consumption tax is processed as an expense for thecurrent consolidated fiscal year.
2) Adoption of the consolidated tax payment system: Some of the Company’s consolidated
subsidiaries have adopted the consolidated tax payment system.

(Accounting Standards Issued But Not Yet Applied)• Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, May 17, 2012)• Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, May 17, 2012)(1) Summary
This accounting standard was revised based on the standpoints of improving financial reporting andon international trends in order to enhance disclosure, centered on the treatment of unrecognizedactuarial gains and losses and unrecognized prior service costs, and calculation of retirement benefit
obligation and service costs.
(2) Effective date
The amendment of the calculation method for the present value of retirement benefit obligation andservice costs is scheduled to be adopted from the beginning of the fiscal year ending March 31,
2015.
(3) Impact of adoption
The effect of adopting this revised accounting standard on the consolidated financial statements wasunder assessment as at the time of preparation of these consolidated financial statements.
• Accounting Standard for Business Combinations (ASBJ Statement No. 21, issued on September 13,
2013)• Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, issued on
September 13, 2013)• Accounting Standard for Business Divestitures (ASBJ Statement No. 7, issued on September 13,
2013)• Accounting Standard for Earnings Per Share (ASBJ Statement No. 2, issued on September 13, 2013)• Guidance on Accounting Standard for Business Combinations and Accounting Standard forBusiness Divestitures (ASBJ Guidance No. 10, issued on September 13, 2013)• Guidance on Accounting Standard for Earnings Per Share (ASBJ Guidance No. 4, issued on
September 13, 2013)(1) Summary
These accounting standards have been revised centered on the following points: ① Treatment ofchanges in ownership interests as equity transactions where control continues through the purchaseof additional shares of subsidiary companies; ② treatment of expenses at the time of acquisition;③ presentation of net income for the current term and changes from minority interests tonon-controlling interests; and ④ provisional accounting treatment.
(2) Effective date
The adoption of these accounting standards is scheduled for the start of the fiscal year ending March2016. Also, the schedule calls for provisional accounting treatment to be applied from businesscombinations carried out from the beginning of the fiscal year ending March 2016.
(3) Impact of adoption
As of the time of the preparation of these consolidated financial statements, the impact of the
adoption of these accounting standards is under evaluation.

(Changes in Presentation Methods)(Consolidated Balance Sheet)
In the previous consolidated fiscal year, the Company reported the “Accrued expenses payable” in20

“Other” under current liabilities. The Company has reported this item separately for the current
consolidated fiscal year because the amount exceeded 5% of total liabilities. To reflect this change inreporting method, the Company has made certain reclassifications to its consolidated financial
statements for the prior consolidated fiscal year.
As a result, ¥411,137 thousand that was reported in “Other” under current liabilities in theConsolidated Balance Sheet in the previous consolidated fiscal year has been reclassified, with
¥122,399 thousand reported in “Accrued expenses payable” and ¥288,737 thousand reported in“Other.”
The item reported as “Allowance for retirement benefits” in the previous consolidated fiscal year isreported as “Net defined retirement liabilities” from the current consolidated fiscal year, in line withthe application of Accounting Standard for Retirement Benefits (ASBJ Statement No.26, released on
May 17, 2012, hereinafter referred to as Retirement Benefit Accounting Standard) and the Guidanceon Accounting Standard for Retirement Benefits (ASBJ Guidance No.25, released on May 17, 2012,
hereinafter referred to as Retirement Benefit Accounting Guidance).
In applying the Retirement Benefit Accounting Standard, etc., in accordance with transitional
provisions prescribed in Section 37 of the Retirement Benefit Accounting Standard, the presentation
has not been restated.

(Additional Information)
Not applicable(Consolidated Balance Sheet Related)*1. The following were held by the Company’s non-consolidated subsidiaries and affiliates.
(Unit: thousands of yen)

Investment securities (shares)

FY 2012FY 2013(As of March 31, 2013)
3,679,186(As of March 31, 2014)
125,425*2. Assets including title retention(Unit: thousands of yen)Internal facilities at subsidiary’s headquarters(Buildings and structures)

21

FY 2012FY 2013(As of March 31, 2013)(As of March 31, 2014)—

37,224

(Consolidated Statement of Income Related)*1 In the breakdown of cost of sales and selling, general and administrative expenses, the main items andamounts were as follows.
(Unit: thousands of yen)

FY 2012(April 1, 2012 ~March 31, 2013)
158,185
580,699
53,35024,406457,609362,940
2,576
24,330Executive compensation
Salaries and allowances
Provision of allowance for bonuses
Retirement benefit expenses
Commission paid
Advertising expenses
Provision of allowance for doubtful accounts
Amortization of goodwill

FY 2013(April 1, 2013 ~March 31, 2014)
162,755
595,883
64,347
19,617
420,664
331,173△291
24,095*2 Total research and development costs included in current term manufacturing costs were as follows.
(Unit: thousands of yen)

FY 2012(April 1, 2012 ~March 31, 2013)
41,813

FY 2013(April 1, 2013 ~March 31, 2014)
47,184*3 Details of gains on the disposal of fixed assets were as follows.
(Unit: thousands of yen)

FY 2012(April 1, 2012 ~March 31, 2013)
316

Machinery, equipment and vehicles

FY 2013(April 1, 2013 ~March 31, 2014)
2,833*4 Details of losses on the disposal of fixed assets were as follows.
(Unit: thousands of yen)

FY 2012(April 1, 2012 ~March 31, 2013)
1,223
331
22,301
23,856

Buildings and structures
Tools, devices and equipment
SoftwareTotal

FY 2013(April 1, 2013 ~March 31, 2014)
128
3,040
29,221
32,390*5 Impairment losses
The Faith Group recorded impairment losses concerning the following asset groups.
Previous consolidated fiscal year/FY 2012 (April 1, 2012 ~ March 31, 2013)
Location
Intended purpose
Type
Minato Ward, Tokyo
Content distribution system Software, etc.
Minato Ward, Tokyo
Unutilized assets
Long-term prepaid expenses (including thosewhich shall be expenses within a year)
In the impairment loss calculation, the Faith Group conducts capital grouping in the smallest
possible units that generate a cash flow that is mostly independent of other assets or asset group cash
flows. For the current consolidated fiscal year, in consideration of prospective future earnings andfuture cash flow, the book value of the content distribution system is recorded as an impairment loss(¥80,928 thousand). In consideration of prospective future earnings and cash flow, the book value of
unutilized assets is recorded as an impairment loss (¥12,500 thousand). Moreover, in the calculationof recoverable value, the impairment loss is measured while making the utility value zero.
22

Current consolidated fiscal year/FY 2013 (April 1 2013 ~ March 31, 2014)
Not applicable*6 The term-end inventory amount is the amount remaining after a book value write-down inaccordance with a decline in earnings. The following inventory asset appraised losses were inincluded in the cost of sales.
(Unit: thousands of yen)

FY 2012FY 2013(April 1, 2012 ~ March 31, 2013)(April 1, 2013 ~ March 31, 2014)
640

1,539

(Consolidated Statement of Comprehensive Income Related)*Reclassification adjustment amount and tax effect amount of other comprehensive income(Unit: thousands of yen)

FY 2012(April 1, 2012 ~March 31, 2013)

Valuation differences on other available-for-sale securities:
Amount accrued in the current term
Reclassification adjustment amount
Before tax effect adjustment
Tax effect amount
Total valuation difference on otheravailable-for-sale securities
Share of comprehensive income of equity method affiliates:
Amount accrued in the current term
Reclassification adjustment amount
Total other comprehensive income

FY 2013(April 1, 2013 ~March 31, 2014)

85,614—85,614△29,991△61,342△25,220△86,562
30,771

55,623△55,790

6,535—
62,1593,937
5,241△46,611(Consolidated Statements of Changes in Shareholders’ Equity Related)
Previous consolidated fiscal year/FY 2012 (April 1, 2012 ~ March 31, 2013)
1. Matters Related to Class and Total Numbers of Shares Issued and Shares of Treasury Stock
Start of current
consolidated
fiscal year

Increase during
current consolidated
fiscal year

Decrease during
current consolidated
fiscal year

End of current
consolidated fiscal
year

Number of shares issued
Common stock
1,196,000——
1,196,000
Total
1,196,000——
1,196,000
Treasury stock
Common stock
47,9508,707—
56,657
Total
47,9508,707—
56,657
Note: The increase of 8,707 shares in the amount of treasury stock of common stock was the result of a resolution by
the Board of Directors to acquire these shares.

2. Matters Related to Equity Warrants
Not applicable
3. Matters Related to Dividend Distribution(1) Amounts of dividends paid
(Resolution)
General Meeting of
Shareholders heldon June 28, 2012

Class ofsharesCommonstock

Total amount of dividends(thousands of yen)
57,40223

Dividend pershare (yen)50

Record date

Effective date

March 31, 2012

June 29, 2012

Board of Directors’Meeting held on
November 13, 2012

Commonstock

57,40250

September 30,
2012

December 10,
2012(2) Of dividends whose record date belongs to the current consolidated fiscal year, those whose
effective date of dividend falls on the following consolidated fiscal year
(Resolution)

Class ofsharesGeneral Meeting of
Shareholders heldon June 27, 2013

Commonstock

Total amountof dividends(thousands of yen)

56,967

Source offunds fordividends
Retainedearnings

Dividend
per share(yen)
50

Record date

Effective date

March 31, 2013

June 28, 2013

Current consolidated fiscal year/FY 2013 (April 1 2013 ~ March 31, 2014)
1. Matters Related to Class and Total Numbers of Shares Issued and Shares of Treasury Stock
Start of current
consolidated
fiscal year

Increase during
current consolidated
fiscal year

Decrease during
current consolidated
fiscal year

End of current
consolidated fiscal
year

Number of shares issued
Common stock
1,196,000
10,764,000—
11,960,000
Total
1,196,000
10,764,000—
11,960,000
Treasury stock
Common stock
56,657513,153140
569,670
Total
56,570513,153140
569,670
Notes:
1. The increase of 10,764,000 shares in the total number of shares of common stock issued is in accordance with theCompany’s stock split at a ratio of 10 ordinary shares for each ordinary share.
2. The increase of 513,153 shares in the total number of treasury stock of common stock represents the increase of509,913 shares due to the stock split of ordinary shares plus the increase of 3,240 shares due to the acquisition of an
odd lot.
3. The decrease of 140 shares in the total number of treasury stock of common stock is due to a request to purchase an
odd lot.

2. Matters Related to Equity Warrants
Not applicable
3. Matters Related to Dividend Distribution(1) Amounts of dividends paid
(Resolution)
General Meeting of
Shareholders heldon June 27, 2013
Board of Directors’Meeting held on
November 12, 2013

Class ofsharesCommonstock

Total amount of dividends(thousands of yen)
57,967

Dividend pershare (yen)50

Commonstock

57,96750

Record date

Effective date

March 31, 2013

June 28, 2013

September 30,
2013

December 9,
2013(2) Of dividends whose record date belongs to the current consolidated fiscal year, those whose
effective date of dividend falls on the following consolidated fiscal year
(Resolution)

Class ofsharesTotal amountof dividends(thousands of yen)

Source offunds fordividends
Retainedearnings

Dividend
per share(yen)
5

Record date

Effective date

General Meeting ofCommon56,951March 31, 2014 June 30, 2014
Shareholders heldstock
on June 27, 2014
Note: With effect from October 1, 2013, the Company carried out a stock split of its common shares at a ratio of 10
shares per share, and in conjunction with this, the share trading unit in which the Company’s stock can be tradedon the stock exchange was changed to 100 shares. Concerning the dividend per share announced at the General
Meeting of Shareholders, the amount reported reflects the result of the share split.

24

(Consolidated Statement of Cash Flows Related)*1 The relation of the end-of-term balance of cash and cash equivalents and the amounts of the items
listed on the Consolidated Balance Sheet(Unit: thousands of yen)

Cash and deposit accounts
Securities accounts
Term deposits with deposit terms of over 3 months
Securities other than cash equivalents
Cash and cash equivalents

FY 2012(April 1, 2012 ~March 31, 2013)12,076,535
540,780△6,192,145△299,970
6,125,200

FY 2013(April 1, 2013 ~March 31, 2014)
14,196,991
241,587△3,023,238—
11,415,340*2 Breakdown of main assets and liabilities of companies that are newly consolidated subsidiaries of
the Faith Group due to acquisition of their shares during the current consolidated fiscal year
(Nippon Columbia Co., Ltd.)The following is a breakdown of the assets and liabilities of Nippon Columbia Co., Ltd., an affiliate
of Faith under the equity method, at the time of its incorporation as a newly consolidated subsidy ofthe Faith Group by means of an additional share acquisition, as well as the acquisition value of thecompany’s shares, and the income (net amount) resulting from the acquisition.
(Unit: thousands of yen)

Current assets
Fixed assets
Goodwill
Current liabilities
Fixed liabilities
Minority interests
Stock acquisition rights
Acquisition cost of shares in Nippon Columbia Co., Ltd.
Value of shares in Nippon Columbia Co., Ltd. (existing holdings)
Value of cash and cash equivalents of Nippon Columbia Co., Ltd.
Deduction: Income resulting from the acquisition (net amount)

7,940,075
1,053,038
3,936,714△4,776,821△1,124,380△1,485,909△61,949
5,480,768△3,498,719△3,895,577
1,913,528(OK LIFE, Inc.)
The following is a breakdown of the assets and liabilities of OK LIFE, Inc. at the time of its
incorporation as a newly consolidated subsidy of the Faith Group by means of a share acquisition, as
well as the acquisition value of the company’s shares, and the expenditure resulting from theacquisition.
(Unit: thousands of yen)

Current assets
Fixed assets
Goodwill
Current liabilities
Fixed liabilities
Acquisition cost of shares in OK LIFE, Inc.
Value of cash and cash equivalents of OK LIFE, Inc.
Deduction: Expenditure resulting from the acquisition

113,8212,935
289,851△48,147△84,760
273,700△102,803
170,896(ENTERMEDIA INC.)
The following is a breakdown of the assets and liabilities of ENTERMEDIA INC. at the time of its
incorporation as a newly consolidated subsidy of the Faith Group by means of a share acquisition, as
well as the acquisition value of the company’s shares, and the expenditure resulting from theacquisition.

25

(Unit: thousands of yen)

Current assets
Fixed assets
Goodwill
Current liabilities
Fixed liabilities
Acquisition cost of shares in ENTERMEDIA INC.
Value of cash and cash equivalents of ENTERMEDIA INC.
Deduction: Expenditure resulting from the acquisition

113,934
15,33731,710△108,328△9,494
43,250△6,32336,926(Business Combination Related)
Business Combinations Through Acquisition
1. Nippon Columbia Co., Ltd.
In accordance with Faith’s acquisition of additional ordinary shares of Nippon Columbia stock bymeans of a public tender offer, Nippon Columbia Co., Ltd. and its six subsidiaries became
consolidated subsidiaries of Faith Inc. on March 26, 2014.
(1) Overview of business combination① Name and business contents of acquired company
Name:
Nippon Columbia Co., Ltd.
Business contents: Production, advertising and sales of audio, video and game software, etc.,
and music artist management② Main reason for proceeding with the business combination
A judgment was reached that it was desirable for Nippon Columbia Co., Ltd. to become aconsolidated subsidiary of Faith Inc. in order to further improve the corporate value of bothcompanies by strengthening the music-related service business partnership between them andfacilitating the mutual provision and use of their assets and business resources form the basis of
their respective businesses.
③ Date of business combination
March 26, 2014
Also, Faith Inc. is treating March 31, 3014 as the date on which it obtained control of Nippon
Columbia, Co., Ltd.
④ Legal form of business combination
Share acquisition with cash as consideration (tender offer)⑤ Name of company following acquisition
No change⑥ Percentage of voting rights acquired
Percentage of voting rights held prior to business combination:
Percentage of voting rights acquired on the date of business combination:
Percentage of voting rights held after business combination:

33.2%
17.7%
51.0％

Note: The percentage of voting rights was calculated using the number of voting rights (134,929
units) relating to the number of shares of Nippon Columbia Co., Ltd. (13,492,912
shares)—which corresponds to the number derived by deducting the number of shares oftreasury stock held by Nippon Columbia Co., Ltd. as of March 31, 2014 (19,958 shares)
stated in said securities report from the total number of issued shares of Nippon Columbia
Co., Ltd. as of March 31, 2014 (13,512,870 shares)—as the denominator.
⑦ Grounds for determining acquiring company
Faith Inc. is the acquiring company because it has acquired 51% of the voting rights of Nippon
Columbia Co., Ltd. as a result of a cash acquisition of shares.
(2) Period of results of acquired company included in consolidated financial statements
26

Because the acquired company’s settlement date is March 31, and the acquisition date was March 31,
2014, the acquired company’s business performance is not included in the Faith Group’s
consolidated financial statement for the current fiscal year. However, because the acquired company
was an equity method affiliate during the period in question, its business performance from April 1
2013 to March 31, 2014 is recorded as a “Gain or loss on equity method investments”.
(3) Acquisition cost of acquired company and breakdown of amount(Unit: thousands of yen)

Acquisition valueMarket price of common stock of the acquired company held
prior to business combination
Market price of common stock of the acquired company
additionally acquired on date of business combination

Expenses directly
Advisory expenses, etc.
required for acquisition

3,498,719
1,864,494
117,553

Acquisition cost

5,480,768(4) Difference between acquisition cost of acquired company and total amount of acquisition cost ofeach transaction: ¥164,191 thousand
Also, in the Consolidated Statement of Income, this amount is recorded as a “Gain on step
acquisitions” under “Extraordinary income”.
(5) Amount of goodwill, reason for recognition, and method and period of amortization① Amount of goodwill:¥3,936,714 thousand② Reason for recognition of goodwill
Additional income generating power can be expected to emerge from future business development.
③ Method and period of amortization of goodwill
Amortized by the straight-line method over 20 years.
(6) Amounts of assets acquired and liabilities assumed on date of business combination and breakdown(Unit: thousands of yen)

Current assets
Fixed assets
Total assets
Current liabilities
Fixed liabilities
Total liabilities

7,940,075
818,038
8,758,113
4,776,821
1,040,626
5,817,447(7) Of the acquisition cost, amount allotted to intangible fixed assets apart from goodwill andamortization period(Unit: thousands of yen)

Breakdown by main category
Trademark rights

Amount235,000

Amortization period
20 years(8) Estimated amount of effect on the Consolidated Statement of Income for the current consolidated
fiscal year under the assumption that the business unification was completed on the first day of thecurrent consolidated fiscal year, and its calculation method(Unit: thousands of yen)

Net sales
Operating income
Ordinary income
Net loss for current fiscal

13,975,489
74,495
129,767
83,364(Calculation method of estimated amounts)
The difference between net sales and profit and loss information calculated on the assumption thatthe business combination was completed as of the start of the current consolidated fiscal year and thenet sales and profit and loss information recorded on the Company’s Consolidated Statement of
Income is defined as the estimated amount of effect. The amount of effect is calculated as if the27goodwill recognized at the time of the business combination had occurred at the start of the current
consolidated fiscal year. The estimate amount of effect has not received audit certification.
2. OK LIFE, Inc.
In accordance with Faith’s acquisition of shares of OK LIFE, Inc. stock and with the decision toaccept new shares issued through a third-party allotment, OK LIFE, Inc. became a consolidated
subsidiary of Faith as of January 29, 2014.
(1) Overview of business combination① Name and business contents of acquired company
Name:
OK LIFE, Inc.
Business contents: Operation of social music site OKMusic, entrusted development of Web
software, editing and publishing of free paper okmusic UP's, etc.
② Main reason for proceeding with the business combination
By welcoming OK LIFE, Inc. into the Faith Group, Faith Inc. will be able construct mutual links
with the other distribution services that reach the Group’s customer base of over 10 million users
as well as with the various platforms that connect artists and fans. In addition, even greaterbusiness synergies can be expected in line with prospective developments in the O2O businessfield, such as the Faith Group’s e-tickets, distribution services and point solutions through links
with the free music-specialist paper okmusic UP’s, which has a circulation of more than 120,000
copies.
③ Date of business combination
January 29, 2014
Also, Faith Inc. is treating February 28, 2014 as the date on which it obtained control of OK
LIFE, Inc..
④ Legal form of business combination
Share acquisition with cash as consideration (tender offer)⑤ Name of company following acquisition
No change⑥ Percentage of voting rights acquired
59.3%⑦ Grounds for determining acquiring company
Faith Inc. is the acquiring company because it has acquired 59.3% of the voting rights of OK
LIFE, Inc. as a result of a cash acquisition of shares and a third-party allocation of nee shares.
(2) Period of results of acquired company included in consolidated financial statements
OK LIFE, Inc.’s settlement date is November 30, but it produced a provisional settlement ofaccounts on February 28, 2014. Because the date of acquisition was also February 28, 2014, theacquired company’s business results are not included in the Faith Group’s settlement of accounts forthe current consolidated fiscal year.
(3) Acquisition cost of acquired company and breakdown of amount(Unit: thousands of yen)

Acquisition value

Cash and deposits

Expenses directly
required for acquisitionDue diligence expenses, etc.

270,000

Acquisition cost

3,700
273,700(4) Amount of goodwill, reason for recognition, and method and period of amortization① Amount of goodwill:¥289,851 thousand28

② Reason for recognition of goodwill
Additional income generating power can be expected to emerge from future business development.
③ Method and period of amortization of goodwill
Amortized by the straight-line method over 5 years.

29(5) Amounts of assets acquired and liabilities assumed on date of business combination and breakdown(Unit: thousands of yen)

Current assets
Fixed assets
Total assets
Current liabilities
Fixed liabilities
Total liabilities

113,821
2,935
116,756
48,14784,760132,908(6) Of the acquisition cost, amount allotted to intangible fixed assets apart from goodwill andamortization period
Not applicable(7) Estimated amount of effect on the Consolidated Statement of Income for the current consolidated
fiscal year under the assumption that the business unification was completed on the first day of thecurrent consolidated fiscal year, and its calculation method(Unit: thousands of yen)

Net sales
Operating loss
Ordinary loss
Net loss for current fiscal

82,704
66,724
68,770137,981(Calculation method of estimated amounts)
The difference between net sales and profit and loss information calculated on the assumption thatthe business combination was completed as of the start of the current consolidated fiscal year and thenet sales and profit and loss information recorded on the Company’s Consolidated Statement of
Income is defined as the estimated amount of effect. The amount of effect is calculated as if the
goodwill recognized at the time of the business combination had occurred at the start of the current
consolidated fiscal year.
The estimate amount of effect has not received audit certification.

(Segment Information, etc.)
a. Segment Information
1. Outline of reportable segments
The Company’s reportable segments provide separate financial information among its various
structural units and also serve as objects of study when the Board of Directors periodically decide on
the allocation of business resources and make performance appraisals.
The Faith Group conducts services centered on developing the Content Business, which provides
one-stop contents encompassing everything from planning and production of contents to design andconstruction of platforms and delivering these things to users, and the Point Service Business.
As a result of the acquisition of additional shares of stock in Nippon Columbia Co., Ltd., by meansof a public tender offer that took place in March 2014, Nippon Columbia Co., Ltd. and its
subsidiaries have been included as consolidated subsidiaries of Faith from the end of the current
consolidated fiscal year. Accordingly, the Company has reorganized its business segmentclassification method so that the existing classification into two segments of the Content Businessand the Point Service Business has been changed to a classification into the three segments of theContent Business, the Point Service Business, and the Columbia Business. Moreover, in keepingwith this change, segment information for the previous consolidated fiscal year produced based on
the revised reportable segment classification is displayed.
Nippon Columbia Co., Ltd. and its subsidiaries are engaged in the Columbia Business, which
involves processing planned and produced contents including sound sources, videos, etc., into
various products and sale of these products.
Accordingly, the Faith Group categorizes the Content Business, the Point Service Business, and theColumbia Business as its three reportable segments.
The Content Business involves contents delivery, delivery platform technology development,
30

contents production, etc.
The Point Service Business involves sales of point systems, planning of promotions, planning,production and sales of sales promotion tools, etc.
The Columbia Business involves the processing of planned and produced contents including soundsources, videos, etc., into various products and the appropriate sale of these products.
2. Calculation method for sales, profit or loss, assets, liabilities and other items by reportable segment
The accounting method for reportable business segments is largely the same as the method for
preparing consolidated financial statements.
For profit of reportable segments, the operating income base figure is used. Inter-segment sales andtransfer amounts are decided in consideration of the market price and other factors.
3. Information on sales, profit or loss, assets, liabilities and other items by reportable segment
Previous consolidated fiscal year/FY 2012 (April 1, 2012 ~ March 31, 2013)
Content

Reportable segment
Point Service
Columbia

Total(Unit: thousands of yen)
Adjustment
Amountamount (1)recorded in
Consolidated
Financial
Statements (2)

Sales
Sales to externalcustomers
Inter-segment sales ortransfer amount
Total
Segment profit
Segment assets

5,303,090

1,429,486－

6,732,576－

6,732,576

15,698－－15,698△15,698－

5,318,788

1,429,486－

6,748,275△15,698

6,732,576

843,513

169,414－1,012,927

558

1,013,485

19,031,610

466,678

3,600,502

22,632,113△20,972

22,611,140

283,8997,998－

291,898△48

291,850

24,330－－24,330－24,33078,190－3,600,502

3,678,692－

3,678,692

207,396

11,181－

218,578△2,422

216,156

Other items
Depreciation expenses
Amortization of goodwill
Investment inequity-method affiliates
Increase in tangible andintangible fixed assets

Note 1.

The segment profit adjustment amount of ¥558 thousand, the depreciation expenses adjustment
amount of △¥48 thousand and the increase in tangible and intangible fixed assets amount of△¥2,422 thousand for this consolidated fiscal year are calculated by eliminating intersegment
transactions.
Note 2. Segment profit is adjusted with operating income in the consolidated financial statements.

Current consolidated fiscal year/FY 2013 (April 1 2013 ~ March 31, 2014)
Content

Reportable segment
Point Service
Columbia

Total(Unit: thousands of yen)
Adjustment
Amountamount (1)recorded in
Consolidated
Financial
Statements (2)

Sales
Sales to externalcustomers
Inter-segment sales ortransfer amount
Total
Segment profit
Segment assets

5,007,656

1,332,560－

6,340,217－

6,340,217

18,258368－

18,627△18,627－

5,025,915

1,332,929－

6,358,844△18,627

6,340,217

467,151

40,546－507,697

1,030

508,728

16,540,801

463,782

12,929,827

29,934,410△47,138

29,887,271

237,328

7,641－

244,970△48

244,922

24,095－－24,095－24,095

124,931－－

124,931－

124,931

262,813417－

263,231－

263,231

Other items
Depreciation expenses
Amortization of goodwill
Investment inequity-method affiliates
Increase in tangible andintangible fixed assets

31Note 1.

The segment profit adjustment amount of ¥1,030 thousand and the depreciation expenses
adjustment amount of △¥48 thousand for this consolidated fiscal year are calculated by eliminatingintersegment transactions.
Note 2. Segment profit is adjusted with operating income in the consolidated financial statements.

b. Related Information
Previous consolidated fiscal year/FY 2012 (April 1, 2012 ~ March 31, 2013)
1. Information by product and service
Information by product and service is omitted because similar information is disclosed in thesegment information.
2. Information by region(1) Sales: Information on sales by region is omitted because the amount of sales to external customers inJapan accounts for over 90% of the amount of sales reported on the consolidated balance sheet.
(2) Tangible fixed assets: Information on tangible fixed assets by region is omitted because the amountof fixed assets in Japan accounts for over 90% of the amount of fixed assets reported on the
consolidated balance sheet.
3. Information on major customers(Unit: thousands of yen)

Customer name
NTT DoCoMo, Inc.
XING INC.
Kirindo Co., Ltd.

Sales amount
2,138,957
1,723,874
703,939

Related segment nameContent Business
Content Business
Point Service BusinessCurrent consolidated fiscal year/FY 2013 (April 1 2013 ~ March 31, 2014)
1. Information by product and service
Information by product and service is omitted because similar information is disclosed in thesegment information.
2. Information by region(1) Sales: Information on sales by region is omitted because the amount of sales to external customers inJapan accounts for over 90% of the amount of sales reported on the consolidated balance sheet.
(2) Tangible fixed assets: Information on tangible fixed assets by region is omitted because the amountof fixed assets in Japan accounts for over 90% of the amount of fixed assets reported on the
consolidated balance sheet.
3. Information on major customers(Unit: thousands of yen)

Customer name
NTT DoCoMo Inc.
XING INC
Kirindo Co., Ltd.

Sales amount
1,904,000
1,461,967
749,594

Related segment nameContent Business
Content Business
Point Service Businessc. Information on Impairment Losses on Fixed Assets by Reportable Segment
Previous consolidated fiscal year/FY 2012 (April 1, 2012 ~ March 31, 2013)(Unit: thousands of yen)Content
Impairment
loss

93,428Point
Service—Columbia—

Total

Company-wide/
elimination

93,428Current consolidated fiscal year/FY 2013 (April 1 2013 ~ March 31, 2014)
Not applicable

32

Total
—

93,428

d. Information on Amortization of Goodwill and Unamortized Balance for Each Reportable Segment
Previous consolidated fiscal year /FY 2012 (April 1, 2012 ~ March 31, 2013)(Unit: thousands of yen)Content
Current term
amortization
Year-endbalanceColumbia

24,330Point
Service—

Total

Company-wide/
elimination

Total

—

24,330—24,33016,269——16,269—16,269Current consolidated fiscal year/FY 2013 (April 1 2013 ~ March 31, 2014)(Unit: thousands of yen)Content
Current term
amortization
Year-endbalanceColumbia

24,095

Point
Service—

Total

Company-wide/
elimination

Total

—

24,095—24,095

292,784—

3,954,2767

4,247,061—

4,247,061

e. Information on Gains on Negative Goodwill by Reportable Segment
Previous consolidated fiscal year/FY 2012 (April 1, 2012 ~ March 31, 2013)
Not applicable
Current consolidated fiscal year/FY 2013 (April 1 2013 ~ March 31, 2014)
Not applicable(Per Share Information)(Unit: yen)

FY 2012 (April 1, 2012 ~ March 31, 2013)
Net assets per share
1,803.89
Net income per share
96.95

FY 2013 (April 1 2013 ~ March 31, 2014)
Net assets per share
1,825.44
Net income per share
35.44(Note 1) The amount of net income per share fully diluted during the current consolidated fiscal year is
not recorded because there are no dilutive shares at this time.
(Note 2) With effect from October 1, 2013, the Company carried out a stock split of its common sharesat a ratio of 10 shares per share. For this reason, the net asset value per share is calculated
under the supposition that the stock split had taken place at the beginning of the previous
consolidated fiscal year.
(Note 3) The basis of the calculation of net income per share and net income for share fully diluted is
as follows.

33

FY 2012(April 1, 2012 ~ March 31, 2013)
Net income per share
Net income (thousands of yen)Amount not attributable toordinary shareholders (thousandsof yen)Net income applicable to common
stock (thousands of yen)
Average number of shares
outstanding during the period(shares)
Net income per share fully diluted(thousands of yen)
Net income adjustment amount(Adjustment amount of diluted
shares in consolidated
subsidiaries)
Increase in common stock(shares)
Summary of dilutive potential
shares that are not included in thecalculation of net income pershare after adjustment of dilutive
potential shares because of no
dilution effect

FY 2013(April 1 2013 ~ March 31, 2014)

1,111,676—

403,785—

1,111,676

403,785

11,465,990

11,392,053

—
(—)

—
(—)

—

—

Stock options on 1,099 shares issued
by Catch Media Japan, Inc, (an affiliate
accounted for by the equity-method)
based on the resolution of theextraordinary meeting of shareholders
held on February 22, 2013

Stock options on 135,000 ordinary
shares (13 kinds, 2700 units) issued by
Nippon Columbia Co., Ltd. (aconsolidated subsidiary)(Note 4) The basis of the calculation of net assets per share is as follows.
Total amount of net assets(thousands of yen)Amount deducted from total
amount of net assets (thousandsof yen)(Minority interests)
Year-end net assets applicable tocommon stock (thousands of yen)
Term-end number of shares ofcommon stock used in calculating
net assets per share (shares)

FY 2012 (as of March 31, 2013)
20,552,504

FY 2013 (as of March 31, 2014)
22,340,267

—

—

(—)
20,552,504(—)
22,340,267

11,393,430

11,390,330(Significant Subsequent Events)
Not applicable(Omission of Disclosure)
No notes are presented concerning information on lease transactions, financial instruments,
marketable securities, derivative transactions, retirement benefits, stock options, etc., tax effective
accounting, rental property and related parties because their amounts are considered too small andinsignificant for presentation in the Brief Statement of Financial Results.

34