BEYOND the Status Quo
Integrated Report 2023

Strengths of the Sega Sammy Group

SEGA SAMMY HOLDINGS

Surprising
the world
with
CREATIVITY

Sonic Frontiers became a major
hit worldwide

Integrated Report 2023

The Sonic series, which is particularly popular overseas and whose base spans all ages
from parents to children, is a flagship IP for
SEGA with cumulative sales of 1.66 billion
units/downloads (including F2P title downloads). In November 2022, we launched
Sonic Frontiers, our first all-new Sonic title innearly five years, simultaneously worldwide
and across multiple platforms. Featuring
Sonic’s unique supersonic action and action
adventure across a vast expanse of islands,
Sonic Frontiers has captivated users aroundthe world, surpassing 3.2 million copies
worldwide (as of the end of March 2023).
Games born out of SEGA’s creativity andpassion will continue to surprise and inspire
the world.

Introduction of Sonic IP topics
and information on games
such as Sonic Frontiers

https://sonic.sega.jp/
SonicChannel/index.html

©SEGA

01

Smart Pachislot Hokuto No Kenmaintaining industry-leading
utilization

SEGA SAMMY HOLDINGS

Launched in 2003, the first Pachislot
Hokuto No Ken won great acclaim for its
cutting-edge gameplay and LCD visual
effects. This legendary title achieved sales
above 620,000 units, a record that has yet
to be beaten by any other single title. With
Smart Pachislot Hokuto No Ken, we havefully reproduced the gameplay and LCD
visual effects of Pachislot Hokuto No Ken,giving them a new lease of life as a smart
pachislot title. The fun of this title has
appealed not only to users familiar with thefirst generation, but also to new users. The
new version has maintained record utilization rates, with sales exceeding 60,000
units (as of the end of July 2023). From one
era to another, Sammy’s innovation continues to inspire and move people.

Smart Pachislot Hokuto No Ken©Buronson & Tetsuo Hara/COAMIX 1983,©COAMIX 2007 Approved No.YRA-114©Sammy02

Strengths of the Sega Sammy Group

Integrated Report 2023

Changing
the world
with
INNOVATION

03

Strengths of the Sega Sammy Group

SEGA SAMMY HOLDINGS

04

Carving out
the futurewith TALENTHolding the largest scale global studio
structure among Japanese game companies

Creative AssemblySports Interactive
Two Point Studios

SEGA
ATLUS

EU

1,300

Approx.
employees

Amplitude
Studios
Creative Assembly Sofia

Relic Entertainment

Japan/Asia

NA

2,100

400

Approx.
employees

ConsolePC (Online)
MobileArcadeApprox.
employees

Sega of America

Integrated Report 2023

* Number of development employees (full-time and permanent contract
employees) as of the end of March 2023
* Japan/Asia include development employees of amusement machines

Diverse human resources
working globally
The SEGA SAMMY Group brings together
talented and expert people from around theworld who work day in, day out to create newvalue. To continue evolving while maintaining our role as a pioneer in a rapidly changing
business environment, we have established
SEGA SAMMY Group’s HR Transformation
Vision. This vision represents a departurefrom traditional human resource administration styles based on seniority and on rigid
structure. Going forward, the Group will continue to enhance various training programs
and strengthen human capital with the aimof maximizing the diversity and value of its
human resources and demonstrate theirstrengths in a wide range of business areas.

A training session

For more information on
our human capital strategy, see

P. 58-5905

Index08

Living Out Our Raison d’Être10

The Vision We Aim to Become in 2030

12

Value Creation Process

14

A Message from the CEO

20

A Message from the CFO

24

Financial Performance

28

An IP Portfolio that Powers Our Growth30	Business Overview
30 Entertainment Contents Business
SEGA SAMMY HOLDINGS

44 Pachislot and Pachinko Machines Business
52 Resort Business

54	A History of Experiences That Move
the Heart
56

Materiality Initiatives

68	ESG Risks and Countermeasures inthe Value Chain
70

Non-Financial Data

72

Special Dialogue

76

A Message from an External Director

78

Governance

Breaking Out of theand Becoming a Su

Amid dramatic changes in the business environm
we announced a medium-term plan and a clear vis
Guided by this vision, we are pressing ahead to breakprofit growth as we strive to become

In May 2022, we announced our Sustainability Vision
one team to address five material issues: human resources, pr

As always, we will continue to creat
INTEGRATED REPORT 2023 gives an overv
we are taking to a88	Directors, Audit & Supervisory Committee
Members, and Executive Officers
91

Financial Information

99

Company Profile / Stock Information

100 Consolidated Financial Statements

Cautionary Statement with Respect to Forward-Looking Statements
Statements in this integrated report regarding the plans, estimates, beliefs, management strategies, perceptions, and other aspects of SEGA SAMMY HOLDINGS INC. (“the Company”) and SEGA SAMMY Group Companies (“the Group”), including SEGA CORPORATION and Sammy Corporation, are forward-looking statements based on the information
currently available to the Company. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,”“forecast,” “estimate,” “project,” “anticipate,” “aim,” “may,” and “might,” and words of similar meaning in connection with a discussion of future operations, financial performance, events, orconditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s
assumptions and beliefs in light of the information currently available to management. The Company cautions you that a number of important risks and uncertainties could cause actual
results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue reliance on them. You also should not assume that theCompany has any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The Company disclaims any suchobligation. Actual results may vary significantly from the Company’s forecasts due to various factors. Factors that could influence actual results include, but are not limited to, economic
conditions, especially trends in consumer spending, as well as currency exchange rate fluctuations, changes in laws and government systems, pressure from competitors’ pricing andproduct strategies, declines in the marketability of the Group’s existing and new products, disruptions to production, violations of the Group’s intellectual property rights, rapid advancesin technology, and unfavorable verdicts in major litigation. [This INTEGRATED REPORT includes “forward- looking statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.]06

Sustainability website
Provides detailed information and data on activities related
to the Group’s five key issues (materiality). Please readalongside the INTEGRATED REPORT.

e Current Situationustainable Company

ment in which the SEGA SAMMY Group operates,sion in 2021 to point the way forward for the Group.
k out of the current situation. We are achieving steadye a truly sustainable corporate group.
Integrated Report 2023

n. Throughout the Group, we are working together as
roducts and services, environment, addiction, and governance.

te experiences that move the heart.
view of our thinking and the specific actions
achieve our vision.

web https://www.segasammy.co.jp/en/sustainability/

Cautionary Statement for Investors and Shareholders with Respect to Gaming Statutes and Regulations
SEGA SAMMY HOLDINGS INC. (“the Company”) is registered with the Nevada Commission as a publicly traded corporation and has been found suitable to directly or indirectly
own the stock of SEGA SAMMY CREATION INC., and Sega Sammy Creation USA, Inc., (“the operating companies”) both of which are operating companies that have been
licensed as manufacturers and distributors of gaming devices in Nevada. Pursuant to Nevada law, the Company’s shareholders are subject to the rules and regulations of the
Nevada Gaming Authorities. A detailed explanation of Nevada gaming statutes and regulations can be found on the Company’s corporate website:
https://www.segasammy.co.jp/en/ir/stock/regulation/
In addition, the operating companies are licensed to manufacture and sell gaming equipment in several countries, states, and regions other than Nevada (hereinafter referred to as“other regions”). Our shareholders may be subject to the same or similar regulations as Nevada under laws and regulations in other regions and rules and regulations stipulated byeach gaming authority.

07
©SEGA

Living Out Our Raison d’ÊtreIn every era, entertainment has given vibrancy to society. While entertainment is an
it has in itself the power to bring peace to society and inspire people. We will continu
our Group’s Mission of “Constantly Creating, Forever Captivating—Making life more
focusing on the four “Es” of Environment, Empathy, Edge, and Economics.
SEGA SAMMY Group Mission Pyramid

MISSION/PURPOSE (Raison d’être)Constantly Creating, Forever Captivating
SEGA SAMMY HOLDINGS—Making life more colorful—

VISION (Ideal self)

Be a Game Changer
Long-Term Goals to 2030
Entertainment Contents Business

Global Leading Contents Provider

Sustainability

Pachislot and Pachinko Machines Business

Winning a “Triple Crown”—Top Share in Utilization, Installation, and Sales
Environment

Empathy

Edge

Economics

Gaming and Resort

Realize the investment in Gaming area

Human Resources

08

Products andServices

Environment

Addiction

Governanceindustry that depends on peace for its existence, we believe thatue working as one team made up of all the Group’s employees towarde colorful.” We will also carry out sustainable management by“Creation is Life”

×“Always Proactive, Always Pioneering”

Integrated Report 2023

VALUE (Mindset and DNA)

Meterial Issues to Be Addressed09The Vision We Aim to Become in 2030

To achieve our vision for the Group in 2030, we are steadily implementing various m—Breaking the Current Situation and Becoming a Sustainable Company—.
Medium-Term Plan

—Breaking the Current Situation and Becoming a Sustainable Company—
From FY2022/3 to FY2024/3

Proactive investment (Consumer area)
Entertainment Contents
BusinessStrengthening the global branding of existing IPs
Creation of a “Super Game”

SEGA SAMMY HOLDINGSCreation of hits × Business efficiency
Pachislot and Pachinko
Machines BusinessNo. 1 in total utilization of pachislot and pachinko machines
Reinforcing the earnings base

Resort Business

Bolstering the profitability of existing resort facilities.
Careful assessment of investment opportunities in the Gaming area

From FY2022/3 to FY2026/3

Financial strategies for
maximizing corporate value

Quantitative Goals (FY2026/3)
ROE: Over 10%
D/E ratio: x 0.5 to 0.6

Efforts to addressmaterial issues (materiality)that make up the foundationof sustainability

10

Ordinary Income: Over ¥50.0 billion
Total return ratio: 50% or more

Consolidated ROIC: Over WACC
DOE: 3% or more

Human Resources

Products and Services

Environment

Developing people who
can create experiencesthat move the heart

Providing safe, dependable,
and innovative products andservices

Strategic commitment toaction on climate change

Addiction

GovernancePrevention of addictions
and disorders

Strengthening sustainability
governancemeasures under the slogan of the medium-term plan: Beyond the Status Quo

Realize a sustainable society andincrease corporate value
From FY2025/3 to FY2030/3

I ncreasing our presence inthe global mobile domain
Scaling up our IP lineup

 areful assessment of investment opportunities inConline casino and sports betting overseas
Careful assessment of investment opportunities inland-based casinos overseas

Global Leading Contents Provider

Triple crown: Top share in utilization,
installation, and sales
Building a stable earnings structure

Integrated Report 2023

 trengthening the development ofS
smart Pachislot and Pachinko machinesIncreasing our market share

The vision we aim to become in 2030

Realize the investment in Gaming area

2030 targets
Human Resources

Culturally diverse human resources:
Approx. 900 people– (approx. 21%–)
Percentage of women in managerial positions:
Approx. 80 people– (approx. 8%–)
Amount invested in education:¥4.0 billion or more cumulatively
Engagement score: 58*1 or above/Rating A*2 or above*1 Source: Link and Motivation Inc, engagement score based on motivation cloud*2 Engagement Rating

Products and Services

 lobal leading contents provider
G(Entertainment Contents Business)
Win a “triple crown”—top share in utilization, installation,and sales (Pachislot and Pachinko Machines Business) romoting combined effort by all GroupP
employees based on a concrete action plan

Environment

 chieve carbon neutrality in the Entertainment Contents
A
Business and Pachislot and Pachinko Machines Business.
(Reduce group-wide carbon emissions by around 50%)

Addiction

 ompliance with laws and regulations, voluntary rulesC
related to addiction, etc.
Contributing to the sound development of the industry
Implementation of industry-academia collaborative
research on addiction

11

Value Creation Process

The Group will use the management resources we have cultivated so far and impleme“Creation is Life” × “Constantly Creating,Group Values/DNAMISSION/PURPOSE (Raison d’être)INPUT

BUSINESS

Financial capitalBusiness portfolio that carries out our
MISSION/PURPOSE

Capital strength and strong financial position
Total assets: ¥501.5 billion

Entertainment Contents BusinessTotal net assets: ¥313.3 billion

Pachislot and Pachinko Machines Business

Consumer/Amusement Machine/Animation and Toys

Pachislot machines/ Pachinko machines
Planning pachislot/pachinko game content for PCs and smartphones
Gaming machine

Equity ratio: 66.0%
SEGA SAMMY HOLDINGS

Resort Business

Manufacturing capital
Creative DNA that creates experiences thatmove the heart across a wide range of businessdomains globallyIntellectual capital
The Group’s rich IP lineup

P. 28

R&D capabilities
Number of development personnel: 4,695
R&D expenses: ¥80.4 billion

Human capital
Consolidated employee numbers: 8,219(Number of full-time and permanent contract employees *excluding
temporary employees)

Developing and operating resorts in Japan and overseas

Medium-Term Plan
(FY2022/3-FY2024/3)

Beyond the Status Quo
Breaking out of the Current Situation andBecoming a Sustainable Company

Medium-term plan final year targets(figures announced in May 2021)

Ordinary income: ¥45.0 billion

ROE: Over10%

Entertainment Contents Business einforcing the earnings base by strengthening the global brandingRof existing IPs
Investment stage toward becoming a global player

Pachislot and Pachinko Machines Business ecoming No. 1 in total utilization of pachislot and pachinkoBthrough creation of hits
Improving business efficiency and maintain stable earnings

Resort Business

Careful assessment of investment opportunities in the Gaming area

Employees in Japan: 5,864
Employees overseas: 2,355
Amount invested in education: Approx. ¥0.47 billion** Companies in scope: SEGA SAMMY HOLDINGS, SEGA (Japan), SammySocial capital

Material Issues to Be Addressed
Sustainability helps keep life colorful
Human
Resources

Products andServices

Addiction

Governance

Environment

Alliances with other companies
The above figures are the actual results for the fiscal year ended
March 2023.

12Foundation for value creation
Risk management

Compliance

Strong financial position

ent effective strategies so that we can continue to provide value to all stakeholders“Always Proactive, Always Pioneering”
Forever Captivating —Making life more colorful—

OUTPUTNet sales: ¥389.6 billion
Ordinary income: ¥49.4 billion
ROE: 14.7%
Entertainment Contents BusinessNet sales: ¥282.8 billion
Ordinary income: ¥41.1 billion

VISION (Ideal self)

Be a Game Changer
Creation of social value
Human Resources

Total new titles: 10.09 million units(Japan: 1.09 million units / Overseas: 8.99 million units)
Total repeat sales: 17.79 million units(Japan: 1.38 million units/Overseas: 16.4 million units)

Cultural diversity

Global simultaneous launch x multi-platform support
Number of Titles

 reating a foundation where people can thrive regardlessCof gender

Total new titles: 10 titles (about 8.8 million units)

Overseas net sales¥116.7 billion (overseas sales ratio: 62.1%)

 romoting “game change” by increasing culturally diversePhuman resources

Active career opportunities for womenDevelopment of core human resources trategic development of human resources who can leadS
the next generation

Maintenance of work environments
 aintaining and improving the engagement ofMhuman resources

Pachislot and Pachinko Machines BusinessNet sales: ¥94.2 billion
Ordinary income: ¥20.7 billion

Products and Services

Cumulative unit sales

Quality improvement

Pachislot: 94,966 units

Pachinko: 103,556 units

Share of total utilization
Share of total utilization ofpachislot and pachinko machines: 4th
Pachislot: 3rd Pachinko: 3rd* In-house estimation based on DK-SIS data (Data for 4 yen Pachinko and 20 yen Pachislot)of Daikoku Denki Co., Ltd.
* Utilization Share = Ratio of Sammy machine’s utilization out of total number of installedmachines for each title × utilization of each title (Pachislot: Numbers of inserted medals,
Pachinko: Numbers of shot balls)

Resort BusinessNet sales: ¥11.5 billion
Ordinary income: ¥ –3.2 billion
Phoenix Seagaia Resort No. of facility users (Thousands)
3 accommodation facilities: 394
2 golf courses: 103 Other facilities: 449

Integrated Report 2023

Full Game: Unit sales

OUTCOME aking content and services that serve, inspire, and awakenMover 3 billion gamers worldwide
Triple crown: Top share in utilization, installation, and sales

Safety and security
 reating rules that allow everyone in the world to enjoyCgames without discrimination
Continue creating content that users and operators canrely onEnvironment
Scope 1, 2
Achieving carbon neutrality

Scope 3
Reducing GHG emissions by 22.5% or more

Addiction
Prevention of addictions and disorders

Above figures are actual results for the fiscal year ended March 2023.

13

A Message from the CEO

SEGA SAMMY HOLDINGSHaruki Satomi
President and Group CEO,
Representative Director
SEGA SAMMY HOLDINGS INC.

Steady growth in both sales and profit as we moved towardachieving our slogan: Beyond the Status Quo
14

What does it mean for SEGA SAMMY to continue creating experiences that move 
the heart?

The second year of the medium-term plan saw 
significant strides in business performance
In the Consumer area of the Entertainment Contents Business,

The SEGA SAMMY Group Mission / Purpose (Raison d’être)Sonic Frontiers and Persona 5 Royal (Remaster) were hits andis Constantly Creating, Forever Captivating —Making Life Moreperformance in F2P titles was also brisk. In the Pachislot andColorful—. For our Group, whose business is grounded in

Pachinko Machines Business, sales of pachislot machinesentertainment, creating experiences that move the heart is thewere robust, especially Pachislot Kabaneri of the Iron Fortress,

very purpose of our existence.

driving a significant year-on-year increase in both sales andMoreover, creating experiences that captivate and move theprofits. The Resort Business also experienced recovery, withheart only once is pointless. To pursue sustainability, it is equally

Phoenix Seagaia Resort achieving profitability for the first time

vital that we continue creating such experiences. Two notions go

since it joined the Group. Segment sales were up significantly

into the word “colorful” in the second half of the Mission. One isyear on year as a result, and the loss margin narrowed.
In this way, sales and profits were up significantly year on

different values, cultures, genders, and races. The other notion

year across all of our businesses, while losses narrowed. The

involves facing up squarely to negative aspects including

result was net sales of ¥389.6 billion, ordinary income of

addiction that emerge in the course of the Group’s business that¥49.4 billion, and ROE of 14.7%—in other words, we were

we cannot simply pretend not to look at. Rather, by facing up toable to reach our targets for the final year of the medium-term

and minimizing these aspects, we add bright hues to society byplan a year ahead of schedule. Thus, for the fiscal year endingmeans of the experiences that move the heart that we offer. This

March 2024, the final year of the plan, we have significantly

is the kind of Group we are striving to be.

revised our performance targets upward.

Integrated Report 2023

to respect diversity, putting value on empathy with people ofMedium-Term Plan: Changes in Ordinary Income (FY2015/3–FY2024/3)

Growth in Entertainment Contents and Pachislot and Pachinko Machines businesses
drove achievement of targets a year ahead of schedule
Entertainment Contents Business
Pachislot and Pachinko Machines Business
Other/Elimination
Consolidated Ordinary Income(–FY2020/3)
ROE

Billions of yen

Resort Business

Mid-term Plan

12.7%
9.2%
2.9%

1.8%

4.6%
0.9%

58.0

49.4
0.4%

33.3

–3.4%

16.4

25.2
14.5
7.4

20.0

41.1

10%
45.0

25.0

9.0
36.8

7%

20.7

1.7

27.9

(Announced on May 2021)

5%

10.2
28.5

16.8

14.7%

Beyond the Status Quo

30.0
9.0

45.0
25.0

13.0

30.0

40.0

–11.3

Road to 2020
FY2015/3 FY2016/3

FY2017/3(Structuralreform)Beyondthe Status Quo

FY2018/3 FY2019/3 FY2020/3 FY2021/3 FY2022/3 FY2023/3 FY2024/3(Forecast)

FY2022/3 FY2023/3 FY2024/3(mid-term) (mid-term) (mid-term)

15

Review of Entertainment Contents BusinessFurther acceleration of the IP strategy
The Sonic IP, which arose out of our games, has seen steady

Creating worldwide hits

expansion into movies, anime, and other media. Sonic has

In the mainstay Consumer area, new Japan-based titles such

now grown into a huge IP, the most successful example of ouras Sonic Frontiers and Persona 5 Royal (Remaster) are

IP strategy. More than anything else, the secret behind thisenjoying significant sales growth overseas. On the other hand,

success lies in our continued pursuit of the sheer fun of thethe sales of new Europe-based titles that we had looked forgame where it got its start.

failed to materialize, shedding a light on some issues. In

For the hugely popular Sonic Frontiers title, thetoday’s game market, users increasingly tend to readdevelopment team tested the game over and over again, evennumerous reviews and media information before they buy a

postponing the release date, insisting on raising the quality ofgame. Talked-about titles with high ratings can record

the game to the utmost limit. As a result, Sonic Frontiers has

phenomenal sales worldwide, but we see a growing number

become one of the best games in the entire Sonic IP gameof cases where sales are sluggish for games that fail to catch

series, winning over many new Sonic fans.

the attention of users. The key to making hit games that

Success with Sonic IP has equipped the Group with a

SEGA SAMMY HOLDINGS

generate huge sales is to create games that offer new, never-

wealth of knowledge regarding IP development, which we

before-seen experiences, increase engagement with users,

plan to harness in actively pursuing measures to expand otherand get widely talked about.

excellent IPs on a global scale as well. SEGA has created

In addition, as playing games via downloading has become
mainstream, digital distribution platforms are now available

many compelling IPs over its long history. To maximize theirpotential, we will further advance and pursue our IP strategy.

that allow games to be delivered instantly around the world.
This has surely increased the odds of creating a worldwide hit.

Acquisition of Rovio Entertainment Corporation

Even in Southeast Asia and the Middle East, where we expect

We completed our acquisition of Rovio Entertainment

to see major expansion of the games market going forward,

Corporation in August 2023, bringing the company into theuser access to our games has become much easier than ever

SEGA SAMMY Group.

before. We will take full advantage of this opportunity.
Given this context, we believe it is important to continue toEstablished in Finland in 2003, Rovio develops andoperates mobile games—it is most known for Angry Birds. It

maximize the value of our powerful IP lineup, delivering high-also engages in a licensing business to expand its IP into areas

quality products and services to game users around the world.

other than games.
Rovio has particular strengths in the mobile games field,
where it is positioned to compete in the growing global market.
We believe Rovio is the ideal partner to fill in the missing
pieces in our quest to achieve further growth for the Group.

16

SEGA has the ability to develop and operate major titles

Smart pachislot offers significant benefits for both users

for video game consoles and PCs, a lineup of globallyand pachinko halls. It allows users to play in comfort, withrecognized IPs like Sonic, and a track record and expertise inless obtrusive sounds and no need to insert medals. Halls,

the mobile games market in Japan. Rovio, meanwhile,

meanwhile, are freed from tasks such as carrying medals

possesses the Angry Birds IP, which boasts a global fan baseback to machines, and can lower power consumption. For

centered in Europe and North America. It also has the ability

this reason, we see growing moves at various halls toto develop and operate global mobile games and has the

expand their floorspace dedicated to smart pachislot. The

game operation support tool Beacon, the platform supporting

popularity of smart pachislot and smart pachinko are

its games. Our two companies clearly have a mutually

outstripping initial expectations.

beneficial relationship.
SEGA has now built up a track record in acquisitions,

To fully capture these market tailwinds and changes in theindustry and sustainably grow the Pachislot and Pachinko

mainly in Europe. Going forward, we will aim to generate new

Machines Business, developing new hit machines is essential.

synergies by capitalizing on complementary capabilities

The crucial point here is for the development department tobased on the shared values of both companies.

adequately gauge the various demands of a diverse range ofplayers. To support this, we launched a project, called Parlor
Sammy, setting up a mock hall on company premises. Here,employees can freely try out machines and provide feedback
about their impressions and suggestions for improvement to
the development department. By gathering and analyzing the

Birth of hit titles and full recovery toa growth trajectory

various opinions coming out of Parlor Sammy and establishing

In the Pachislot and Pachinko Machines Business, revised

steadily enhancing the quality of our machines.

regulations have made it possible to develop machines thata flow for refining machines under development, we are
Another key issue is responding quickly and flexibly tomeet user demands better than ever before, paving the way

the increase in the number of hit machines. In the fiscal

for the creation of hit titles.

year ended March 2023, we were unable to fully meet

The medal-based No. 6.5 model Pachislot Kabaneri of therobust demand for machines due to shortages ofIron Fortress became a huge hit in the fiscal year ended Marchsemiconductors and other parts—this is an ongoing issue.

2023, maintaining high utilization rates and generating

Going forward, we plan to further refine our demand

multiple additional sales after debuting in halls. Furthermore,

forecasts, ensure the sufficient supply of parts, andfollowing its April 2023 launch, Smart Pachislot Hokuto No Kenstrengthen the framework for the stable supply of products

continues to have the kind of high utilization rate that has been

by introducing standardized parts.

unprecedented in recent years. The new Smart Pachislot

Integrated Report 2023

Review of Pachislot and Pachinko Machines Business

Our structural reforms have succeeded in improving

Hokuto No Ken machine is a remake of the historic hit ofprofitability in the Pachislot and Pachinko Machines

around two decades ago, Pachislot Hokuto No Ken, with newBusiness, and the segment is returning to a growthelements added. Many dormant users who had moved away

trajectory. To take this business forward even further, we willfrom pachislot and pachinko machines for quite some time arecontinue to carry through with the various measures that

returning to the pachinko halls. The smart pachislot game has

have borne fruit so far.

also gained support across generations, offering compelling
gameplay and interesting production elements that havecaught on even among young new users. It is no exaggeration
to say with pride that Smart Pachislot Hokuto No Ken is driving
current growth in the smart pachislot market.

17

Actively pursuing human capital managementresources. In addition, in employment rankings sponsored by
Mynavi and newspaper publisher Nikkei, SEGA ranked 6th

The essential element in achieving the Group Mission /among university students in the sciences, 11th among

Purpose (Raison d’être) is personnel who can “light a fire

students in the humanities, and 8th overall. Our rise to the top(passion)” in their hearts. We believe that the ideal employee

10 in these rankings is a welcome change.

is someone who can gradually transfer that fire to others andOn the other hand, it is also true that the public in some

SEGA SAMMY HOLDINGS

spread it throughout the Group. Valuing such personnel andrespects still has a negative impression of the Group’s

empowering them to play an active role in the business is thebusiness. This is why we must face up to social issues evenlinchpin of the Group’s human resources strategy. To this end,

more rigorously than other companies, and create new value

we are working on various reforms to our personnel systems,

that has a positive impact on society. By continuing to act withincluding revising our compensation system and doing away

this conviction, we can gain empathy from people, and as wewith seniority-based job assignments. Furthermore, we aredo, our employees will be even more proud of the Group. I

working to enhance various training programs offering

want all of our employees to do their jobs with pride. This has

language education and other opportunities for staff tobeen my unchanging desire since I took over leadership of theacquire new skills to enable them to make contributions evenGroup. We will continue to actively promote human capitalin times of rapid change.

management so that we can go on building a team of people

Thanks in part to these efforts, we are seeing gradualimprovement in our engagement score, which we set as a

who can “light a fire” in their heart and enable them to play anactive role in the business.

non-financial indicator for the material issue of human

While minimizing the negative impact we have on society,
we strive to maximize the positive impact our businesses
generate to a far greater extent
18Making governance stronger is 
a never-ending goalMoreover, as uncertainties mount throughout the world
and the Group’s businesses become more global, the criticalimportance of global governance increases year by year. WithAt present, half of our board of directors is made up of outsidebusinesses operating around the world, SEGA held a Global

officers. Of the outside directors, more than half are women

Legal Meeting at its Osaki head office in May 2023, the first

and the group also includes foreign nationals. We havetime in four years. SEGA staff from Japan, America, andensured adequate diversity. We have also established a Group

Europe came together to share information on legal matters

Management Committee for the sole purpose of carrying out

and intellectual property. We were able to share issues faced

discussions before Board of Directors meetings. In the fiscal

by each site and reinforce the collaboration needed toyear ended March 2023, the committee held a total of aroundaddress them. We will expand these events to provide more

32 hours of discussions on management issues. The quality ofopportunities for communication and proactively strengthen

our discussions has improved dramatically compared to

global governance.

before, with lively and sometimes unexpected opinions being
expressed from a variety of perspectives. Outside directors
sometimes offer extremely critical opinions, which generates

In Closinga healthy sense of tension at meetings.
The Group has steadily expanded its sales and profits over theperiod of the medium-term plan. Our slogan, Beyond thecompanies all gathered at Phoenix Seagaia Resort in Miyazaki

Status Quo, is quickly becoming a reality.

Prefecture for a two-day management retreat. The aim was to

The fiscal year ending March 2024, the final year of thefoster extended discussions around management from aplan, will be a pivotal year in which we will continue thislong-term perspective. In an atmosphere of speaking to one

favorable trend while further accelerating growth as we work

another in a thoroughly candid way, the discussions wereto realize our long-term vision. To make this happen, it will beoften heated, even on topics that are difficult to address atvital to further boost the motivation of our employees, who are

regular Board meetings. It was a very meaningful event.

the driving force behind all our actions. As Group CEO, I have

We are also actively developing a framework formany roles and responsibilities, but the most important thingsustainability governance. One part of this involved setting

for me is to get our employees to fully understand andup a Group Sustainability Subcommittee in April 2022

empathize with our Mission and Vision, and to help bring out

under the Group Management Committee, which is atheir passion and energy. I believe an ideal organization is one

voluntary committee in the Group. The subcommittee has

in which every individual takes on tasks and issues with aallowed directors to more accurately grasp thesense of purpose, which causes both employees and thesignificance of our material issues and gauge the progressCompany to grow.

of initiatives. It also enabled us to visualize issues requiring
attention going forward.

Integrated Report 2023

In September 2022, internal and external directors,
executive officers, and executives from major GroupWe will continue working to minimize the negative impact
we have on society, including the issue of addiction. At theAt all of these meetings, we will continue to take onsame time, we will strive to maximize the positive impact ourboard the opinions of outside directors and other experts,

businesses generate to a far greater extent. As the Group’s

considering them as invaluable feedback from ourrepresentative, I will personally work to guide management

stakeholders, and will actively reflect them in ourwith integrity and humility, and would like to ask all of ourmanagement plans.

stakeholders for their empathy with the Group’s businessactivities and for their continued support as I do so.

19Message from the CFO
Proceeding with a financial strategy
that balances proactive growthinvestments with shareholder returns
to enhance corporate value

Koichi Fukazawa
Senior Executive Vice President andGroup CFO, Director of the Board

SEGA SAMMY HOLDINGS

Solid performance across businesses boosted total shareholder return

ahead of schedule. This strong performance is the fruit of thegrowth strategies we have carried out so far in each business,
which were well timed for these favorable market conditions.

In the medium-term plan that began in the fiscal year ended

For the fiscal year ending March 2024, the final year of the

March 2022, we have been aggressively expanding ourplan, we expect continued profit growth with net sales of

equity spread and shareholder returns with the aim of maxi-¥433.0 billion and ordinary income of ¥58.0 billion.

mizing the Group’s corporate value.
In the fiscal year ended March 2023, we achieved steadyprofit growth in the Entertainment Contents Business, partic-

Balancing profit growth and efficiency

ularly in the Consumer area. In the Pachislot and Pachinko
Machines Business, earnings rebounded sharply, fueled by

We are pursuing profit growth, including through aggressive

growth in sales of new No. 6.5 model pachislot machines thatgrowth investments. At the same time, we aim to maintain atake advantage of revised regulations. Given the current

certain level of capital efficiency using ROIC as an indicator.

robust performance of smart pachislot machines, we expect

In the Pachislot and Pachinko Machines Business, thefurther growth in the fiscal year ending March 2024, when the

structural reforms we undertook in the fiscal year endedroll-out of new titles will be fully underway.

March 2021 have led to substantially lower fixed costs. On top

In addition to this growth in profitability, the return on
invested capital (ROIC) for each business segment is on an

volume of machines sold, we have been able to achieve a

upward trend, and a lower tax burden has led to a large

sizable return on invested capital. I am confident that theincrease in ROE and, as a result, equity spreads are trending

Pachislot and Pachinko Machines Business going forward will

positive. Total shareholder return has also continued to rise

be able to maintain consistently high ROIC.

as the share price maintained its upward trajectory on the

The Entertainment Contents Business has also steadily

back of significant improvement in business performance.

increased ROIC, although we expect somewhat lower ROIC

We were also able to achieve ordinary income of ¥45.0

in the near term due to goodwill amortization associated withbillion—the target for the final year of our medium-term plan—

20of that, by efficiently developing machines and increasing theour recent acquisition of Rovio. Still, we have put in place

Trend of ROE, COE and Equity Spread
ROE

COE

Per business ROIC trend

Equity spread

14.7%

Entertainment Contents BusinessResort Business
WACC

Pachislot and Pachinko Machines Business

42.6%
37.4%

12.7%
11.4%
7.8%

9.1%

12.2%

10.1%
23.5%

6.4%

+4.6pt

4.6%

2.9%

0.4%

0.9%

+0.5pt–4.5pt–4.9pt

8.8%
8.5%

14.3%
10.2%

5.2%

18.6%

5.2%

7.4%

–7.7%

–8.8%

–9.7%

–5.5pt

11.1%

10.1%

–12.5%–19.4%

19.9%

14.8%

8.4%

6.5%

19.8%

9.3%

0.0%

–7.6%

–16.2%–11.0pt
FY2018/3 FY2019/3 FY2020/3 FY2021/3 FY2022/3 FY2023/3

FY2018/3 FY2019/3 FY2020/3 FY2021/3 FY2022/3 FY2023/3 FY2024/3(Forecast)* Per business ROIC: Adjusted profits per business/Investment capital per businessappropriate hurdle rates for such acquisitions, and expect

thereby rectifying the strong domestic weighting of the busi-

ROIC to improve over the longer term.

ness model to date. We expect to be able to secure profits

With the acquisition of Rovio, we have filled in a crucial
missing piece in this business, which we expect to contributesignificantly to future business growth. The global games

going forward by realizing synergies with our existing business at an early stage.
Our basic policy regarding shareholder returns is to adopt

market has been growing rapidly in recent years, with mobile

a total return ratio of 50% or more or a dividend on equity ratio

games expanding to account for half of the market. In con-(DOE) of 3% or more, whichever is higher. Based on thistrast, the mobile games business accounted for only about

policy, we decided to pay a dividend of ¥59 per share (includ-

30% of sales in the Consumer area before the acquisition,

ing an interim dividend of ¥20) for the fiscal year ended

most of which was generated in the Japanese market. With

March 2023. Also, in 2023, we resolved to buy back ¥10.0

Rovio joining the Group, we will be able to greatly expand

billion in treasury stock (up to 8 million shares).

Integrated Report 2023

* ROE: Return on equity
COE: Cost of equity (Source: Bloomberg)
Equity spread: ROE-COE

sales in the overseas mobile games business, a huge market,

Maximization of
the Corporate Value

Shift to the management focusing on capital efficiency
Expansion ofequity spread

Expansion of TSR

ROE: Over 10%

Shareholder return
Total return ratio: 50% or more

Investment focus on Consumer business

Growth of profit
Ordinary Income: Over ¥50.0 billion

Improvement ofasset efficiency

ROIC management
Management of business portfolio

Improvement of per business company ROIC

Optimization ofcapital cost
D/E ratio: around 0.5-0.6(Net D/E ratio: around 0.2-0.3)

R educing of WACC through optimal
capital structureA ctive use of debt according to the riskR eduction of long-term risk throughenhancement of ESG

21

Concept of Investment in Growth (–FY2026/3)
Areas of consideration for investment
Strengthen development resources

Consumer Area
Approx. ¥100.0 billion

Gaming Area
Approx. ¥100.0 billion

Other
Approx. ¥50.0 billion

Expansion of organic development pipeline
Strengthen global mobile and online games

Progress stablishment of SEGA
E
Sapporo StudioTOB of Rovio Entertainment
Corporation

Investment in
new ecosystem trengthen CRM functions to revitalizeS
user communities
Investment in newly emerging business areas

Careful assessment of investment
opportunities in the Gaming area

Online casino and sports betting overseas
Land-based casinos overseas
Both domestic and overseas IR tep back from domestic andSoverseas IR
Considering online gaming area

Expand CVC investment limit(Total limit: ¥15.0 billion)

 trengthen open innovation activities,
S
including investment in start-up companiesI mplement 18 new investments,
approx. ¥3.0 billion
Exit from existing investment portfolio x 4

Creation of new business,acquisition of IPs, etc.

 stablishment of joint ventureEwith PAPYLESS CO., LTD.
“GAPOLI” service released

Total ¥250.0 billion
SEGA SAMMY HOLDINGS

Continuing to invest in future earnings drivers

casinos) in North America. So far, only a limited number ofstates have lifted their bans on such casinos, but discussions

The Rovio acquisition used around ¥100.0 billion out of theare unfolding in many areas. To be able to adapt to such

¥250.0 billion we had earmarked for growth investments indevelopments at an early stage, we are exploring entry into

the medium-term plan. The allocation of the investment

the B2B business, including both consumer side and platform

amount indicated in the plan is not strictly determined, and we

strategies. Whichever approach we take, making further

are still around the halfway mark.

inroads into global markets has to start with building a foun-

Going forward, depending on the level of accumulated
cash and the growth potential of an investment target, we will

dation in North America, so we will actively move forward withinvestments with an eye toward possible acquisitions.

consider increasing the investment budget.
Apart from the Rovio acquisition, we are consideringother aggressive growth investments that will significantly
change the balance sheet. We will thus need to consider

Linking financial indicators and
business strategies

reviewing our financial strategy framework. Now more thanever, we must also work together with Group companies to

We are always looking for ways of measuring the impact ofimprove capital efficiency, including ROIC management andnon-financial factors on our finances.

business portfolio management.
Regarding leverage, even after the Rovio acquisition, we

narios showing how the strengthening of non-financial capital

have room to make use of borrowing to raise funds. To

will contribute to and support our business strategies. We areachieve sustainable growth for the Group in the next five tocurrently developing such scenarios with a view to incorpo-

ten years, we will continue to maintain an aggressive invest-

rating them into our next medium-term plan.

ment stance that includes the use of debt, so that we can

22

For this reason, the Group’s first priority is to clarify sce-

Quantitatively analyzing the financial impact of climate

reinforce existing businesses and develop new businesses.

change, particularly in terms of carbon credits related toMoreover, we are continuing our strategic investments incarbon neutrality, is relatively straightforward. However, in

the Gaming area, which we expect to become a third driver ofdeliberations going forward, it will be vital to consider how theearnings for the Group. A specific target is iGaming (online

improvement of our human capital indicators exerts a positiveimpact on finances. We must ensure that our humanresources strategies and business strategies are aligned. We

The role of the CFO is to help enhance 
corporate value

have set up SEGA SAMMY College, a program for developing
the Group’s core human resources. The College offers a full

We have a longstanding emphasis on engaging with the capi-

range of seminars on personnel development for all levels,

tal markets. Through dialogue with investors and sharehold-starting with Satomi Cram School, a program for staff in man-ers, we seek to gain understanding of our management andagement positions.

business strategies. Such dialogue also allows us to reflect

We will continue to verify whether these various human

the thinking of investors and shareholders in our manage-

resource development measures have a positive impact onment strategy. We see this as an essential process for

the Group over the longer term, and adjust them accordingly.

enhancing corporate value. I see the role of the CFO as one of

As our network of overseas subsidiaries grows in line withsteering this process so that it functions smoothly. Going

our accelerating overseas expansion, the SEGA SAMMY

forward, I will fulfill my duties as a CFO in terms of finance asGroup Mission Pyramid, the shared model expressing thewell as in a wide range of areas that affect corporate value,Group’s significance to society, will take on an even more criti-

including formulating management strategies, ESG, andcal role. By sharing this set of values across our international

engaging with capital markets. I appreciate your interest inoperations, while also preserving the outstanding corporate

the ongoing growth of the Group.

culture unique to each business company, I am confident that
Integrated Report 2023

we can greatly contribute to enhancing corporate value.

We will clarify scenarios showing how the strengtheningof non-financial capital will contribute to and support
our business strategies
23

Financial Performance
Net Sales*1
Sales increased across all businesses, consolidated sales grew significantly, up 21.4% year on year to¥389.6 billion.

¥

Billions of yen

378.0

366.8

347.9

366.9

389.6

366.5

331.6

323.6

389.6 billion
320.9

277.7

’14

’15

’16

’17

’18

’19

’20

’21

’22

’23

(FY)

Operating Income / Operating Income Margin
SEGA SAMMY HOLDINGS

46.7 billion / 12.0%

Operating income rose 46.0% year on year to ¥46.7 billion on higher sales in theEntertainment Contents Business and Pachislot and Pachinko Machines Businessand reduced losses in the Resort Business.

¥

Operating income

Billions of yen / %Operating income margin

12.0
10.2

10.0

38.5

8.0

17.4

4.7

7.5
29.5

5.1

32.0

5.5
3.9
13.0

17.7

17.6

46.7

27.6

2.3
6.5

’14

’15

’16

’17

’18

’19

’20

’21

’22

’23

(FY)

Ordinary Income / Ordinary Income Margin49.4 billion / 12.7%

Ordinary income increased 48.4% from the previous year to ¥49.4 billion. Thiswas mainly due to non-operating income such as profits from investment partnerships and foreign exchange gains associated with the revaluation of assets
denominated in foreign currencies despite non-operating expenses recorded
from losses from investment partnerships and equity in losses of affiliates.

¥

Ordinary income

Billions of yen / %

10.7
40.5

10.4
7.8
16.8

4.6

4.7

4.5
14.5

’14

’15

’16

’17

12.7
49.4

33.3

6.9
28.5

16.4

Ordinary income margin

’18

2.3

’19

25.2

7.4
’20

0.6
’21

1.7
’22

’23

*1 As the recognition of net sales was changed (1) from a net basis to a gross basis and (2) from a shipment basis to a delivery basis in FY2016/3, figures for FY2015/3 reflect these changes retrospectively

24

(FY)

Profit (Loss) Attributable to Owners of Parent*2
Profit attributable to owners of parent increased 24.1% year on year to ¥45.9 billion due to a decrease intaxable income due to the recording of deferred tax assets in U.S. subsidiaries, a decrease in taxable
income from net loss carried forward, and a decrease in corporate tax credits related to research anddevelopment in U.K. subsidiaries.

¥

45.9 billion

Billions of yen

45.9
37.0

30.7

27.6
13.7

8.9

5.3

2.6

1.2

–11.3
’14

’15

’16

’17

’18

’19

’20

’21

’22

’23

(FY)

Operating Income (Loss) by Segment*3
Billions of yen

FY2015/3–FY2023/3 Segments
Entertainment Contents Business
Pachislot and Pachinko Machines Business3
Resort Business
Adjustment*

Pachislot and Pachinko Machines Business
Consumer Games Business
Amusement Machine Sales Business
Amusement Center Operation Business
Other BusinessCorporate and eliminations

0.0
2.0
4.0

45.2

’14

0.0

25.7
–2.5
–0.9
–2.0
–6.5

–1.2
–1.2
–6.4

’15

11.1

’15

4.2

25.7

20.9

26.3

–2.3
–6.0

–1.8
–5.7

–2.2
–5.7

’16

’17

38.7

16.5

’18

14.8

9.8

11.9
–2.5
–6.5

13.4
–2.4
–7.8

’19

’20

Integrated Report 2023

Changes to segments in 2015
FY2014/3–FY2015/3 Segments

33.9

23.2

27.9

–3.6
–8.5

–10.6
–4.1
–6.7

’21

20.0
–1.1
–10.9

9.3
–2.5
–8.7

’22

’23

(FY)

Operating Income Margin by Segment%
Pachislot and Pachinko Machines Business
Amusement Center Operation Business (area)
Consumer Games BusinessEntertainment Contents Business

24.9
21.4
17.2

16.9

21.2

17.8
14.9
11.3

13.3

12.8

14.4

13.7

12.3

2.1
0.1
’14

5.4

3.6

7.1

6.7
4.5

2.2
0.0

’15

’15

’16

’17

’18

’19

’20

’21

’22

’23

(FY)

*2 The Company has adopted the “Revised Accounting Standard for Business Combinations” (Accounting Standards Board of Japan (ASBJ) Statement No. 21, issued on September 13, 2013) and haspresented “net income (loss)” as “profit (loss) attributable to owners of parent” from FY2016/3.
*3 As of the FY2015/3 change in segments, elimination of inter-segment transactions and general corporate expenses that are not allocated to the reporting segment are included in the adjustment tosegment income (loss).

25

ROE / ROA*4

14.7% / 9.8%

ROE was up 2.0 points year on year to 14.7%.
ROA was up 1.2 points year on year to 9.8%.
*4 ROA = Profit attributable to owners of parent ÷ Total assets

ROE

%

ROA

14.7
12.7
9.3

9.2

5.7

5.2

4.6
2.9

1.8
1.0
’14

’15

0.9

1.8

’16

9.8

8.6

’17

’18

0.6

’19

3.0

0.4
0.3

’20

’21

’22

’23

(FY)

Cash Flows
SEGA SAMMY HOLDINGS

Operating activities provided net cash of ¥44.7 billion for the fiscal year ended March 2023
(compared with an inflow of ¥39.6 billion in the previous fiscal year).
Investing activities used net cash of ¥2.3 billion (compared with an outflow of ¥8.7 billion in the previous fiscal year).
Billions of yen

Net cash provided by (used in) operating activities

75.2

59.1
36.6 37.0

54.3

38.5

26.4

16.9

6.0

–0.7
–38.5

–37.7

–18.3
–35.2

’14

’15

’16

–4.7

’17

Net cash provided by (used in) investing activities

14.8

30.424.0

23.0

–20.4

–7.2
–22.1

–15.4

’18

’19

’20

–6.3

’21

39.6

30.8

Free cash flow

44.7

42.3

–8.7

–2.3

’22

’23

(FY)

Net Income per Share / Cash Dividends per Share

207.13 / ¥59

Net income per share (diluted) was ¥207.13.
The Company paid an annual dividend of ¥59 per share.

¥

Yen

Net income per share (diluted)

Cash dividends per share

207.13158.24125.39117.40

40
’14

26

40
—
’15

22.90

40

’16

40

38.04 40

40

58.63

40

11.24
’17

’18

’19

30

40

59

—
’20

’21

’22

’23

(FY)

Capital Expenditures / Depreciation and Amortization*5

11.8 billion / ¥8.2 billion

Capital expenditures were down 9.2% year on year to ¥11.8 billion.
Depreciation and amortization increased 2.5% year on year to ¥8.2 billion.

¥

Billions of yen

Capital expenditures

38.1

Depreciation and amortization

34.4
28.7

16.1

28.0
17.6

27.0
16.6

24.1
16.3

22.8
16.2

14.8

14.5

14.5

12.1

13.0
8.0

’14

’15

’16

’17

’18

’19

’20

’21

11.8

’22

8.2

’23

(FY)

R&D Expenses and Content Production Expenses *5/ R&D Expenses to Net Sales Ratio¥

Billions of yen / %R&D expenses and content production expenses

18.4
15.7
59.2

’14

67.6

’15

16.7
58.0

’16

18.3
67.1

’17

19.2
62.0

’18

Total Net Assets / Equity Ratio
Total net assets increased ¥38.7 billion from the end of previous fiscal year to¥331.3 billion.
The equity ratio decreased 1.1 points to 66.0%.

20.1
66.6

’19

20.9

22.3

61.9

’21

348.2

’14

68.9

’22

322.4

’15

55.3

59.0

’23

(FY)

331.3 billion / 66.0%
Total net assets

60.0

20.6

¥

Billions of yen / %

63.2

21.5

80.4

76.5

’20

R&D expenses to net sales ratio

Integrated Report 2023

80.4 billion / 20.6%

R&D expenses and content production expenses increased 16.7%
year on year to ¥80.4 billion.

65.0

65.1

64.2

69.0

67.1

299.9

311.4

310.4

305.3

296.8

291.2

292.6

’16

’17

’18

’19

’20

’21

’22

Equity ratio

66.0
331.3

’23

(FY)

*5 The aggregate calculation method has changed as of FY2014/3. Consequently, R&D expenses and content production expenses include amortization cost of digital game titles. Until FY2013/3, depreciation andamortization included amortization cost of digital game titles.

27

An IP Portfolio that Powers Our Growth
List of major IP
Pachislot andPachinko Machines

Examples of IP developed in-house
IP title

First appearanceyear

Multifaceted rollout

Video Games

MoviesAmusement
Machines

Toys, etc.

Cumulative unit sales / downloads

More than 1.66 billion (Units and downloads*2)

SEGA SAMMY HOLDINGS

Sonic the Hedgehog
Series1991

Puyo Puyo
Series1991*1

Virtua Fighter
Series

1993

Sakura Wars
Series1996

Like a Dragon
Series2005

ALADDIN
Series1989

̶̶

Beast King
Series2001

̶̶

PHANTASY STAR
Series1987

̶

CHAIN CHRONICLE
Series2013

̶(Full games and F2P total)

39.0

Approx.
million (Units and downloads*2/IDs/users)(Full games and F2P, Amusement Machines-registered IDs total(Total for registrations after IP acquisition))
More than 18.8 million (Units and downloads/IDs)(Full games and F2P total. Total number of
IDs in Amusement Machines.)

Approx. 5.8 million (Units and downloads)(Full games and F2P total)

Approx. 21.3 million units̶(Full games total)

Approx. 580 thousand units(pachislot and pachinko machines total)

Approx. 510 thousand units(pachislot and pachinko machines total)

Approx. 10.0 million users*3

̶Approx. 26.0 million (Units and downloads*2)(Full games and F2P total)*1 SEGA CORPORATION acquired the rights in 1998. Figures for cumulative unit sales are the totals for titles that SEGA sold after acquiring the rights.
*2 Including downloads of free-to-play titles. *3 Total for domestic and overseas versions of PHANTASY STAR ONLINE 2 and PHANTASY STAR ONLINE 2 NEW GENESIS.

Examples of acquired IP
IP title

First appearanceyear

Multifaceted rollout

Cumulative unit sales / downloads

Approx. 19.2 million (Units and downloads*2)

Shin Megami Tensei
Series1992

̶

Persona
Series1996

̶Total War
Series

2000

̶

̶

̶

̶

More than 43.4 million (Units and downloads)

Football Manager
Series

2004

̶

̶

̶

̶

More than 30.2 million (Units and downloads)(Full games and F2P total)

Approx. 17.7 million (Units and downloads)(Full games and F2P total)

Examples of IP licensed from third parties
IP title

First appearance
year

SEGA feat. HATSUNE MIKU Project
Series2009

Hokuto No Ken
Series2002

SOUTEN-NO-KEN
Series2009© SEGA / © Crypton Future Media, INC. www.piapro.net©Buronson & Tetsuo Hara/COAMIX 1983, ©COAMIX 2007 Approved No.YRA-114 ©Sammy©Tetsuo Hara & Buronson/NSP 2018, Approved No.YKP-122 ©Sammy

28

Multifaceted rollout̶Cumulative unit sales / downloads

Approx. 24.0 million (Units and downloads*2)

̶(Full games and F2P total)

More than 8.54 million (Units and downloads)(pachislot and pachinko machines, full games,
F2P and amusement machines total)̶̶Approx. 490 thousand units(pachislot and pachinko machines total)

The Group boasts multiple, highly competitive IPs. While developing andexpanding these IPs to ensure stable profitability, we are strategicallyremastering and remaking IPs that have strong potential.

More than

1.66

Sonic the Hedgehog series

billion (Units and downloads)(Full games and F2P total)

Sonic, SEGA’s flagship IP, was introduced in 1991 as a high-speed action game in which players
must run frenetically pace through stages of various ups, downs, and loops. Several hit games
followed, continuing to attract fans around the world. The Sonic the Hedgehog movie, released in
2020, and its sequel, Sonic the Hedgehog 2, released in 2022, were each global blockbusters.
This has helped to accelerate the growth of the Sonic IP.

21.3

million units(Full games total)

The Like a Dragon series was launched in 2005 under the concept of entertainment
for a mature audience. It depicts the way of life of a cast of fierce men in a vast entertainment district. Using an actual entertainment district as its backdrop, the gamerealistically captures the look and feel of that world. Featuring famous actors, thegame has been promoted through many tie-ups with other companies. This has garnered it widespread attention, bringing the cumulative unit sales of the series toaround 21.3 million units.

Approx.

17.7

Integrated Report 2023

Approx.

Like a Dragon series

Persona series

million (Units and downloads)(Full games and F2P total)

The Persona series is a coming-of-age themed RPG about teenage boys and girls who, having
awakened to their special Persona powers, encounter various incidents and hardships as theygrow. With its unique characters and settings, stylish songs, and compelling stories, the Persona series has gained many fans around the world. This popular series, with its cumulative totalof 22 titles, has been adapted for a variety of media, including live music, animation, and manga,
which has attracted new users.

More than

8.54

Hokuto No Ken series

million (Units and downloads)(pachislot and pachinko machines, full games, F2P and amusement machines total)
The original Pachislot Hokuto No Ken boasts the largest sales volume in the history of thepachislot and pachinko machines market, with a cumulative sales volume of about 620,000
units. The total number of pachislot and pachinko machines, full games, F2P titles and amusement equipment is more than 8.54 million (units/DL), making it a huge IP. Smart Pachislot Hokuto
No Ken was introduced in 2023, and it has become a major hit.

29

Business Overview
Entertainment Contents

Entertainment Contents Business

Top Message

Global branding of our IPs engenders solid
confidence in medium- to long-term growth

SEGA SAMMY HOLDINGS

Yukio Sugino
President and COO,
Representative Director
SEGA CORPORATION

Progress on the Medium-Term PlanThe Entertainment Contents Business has set a long-term

engagement, we strategically promoted the development ofgoal of becoming a leading global content provider. To achieve

games, movies, animations, merchandising, and otherthis goal and elevate the business to the next level, we arechannels. Through these efforts, we have achieved a certain

conducting R&D activities to create a “Super Game,” a major

degree of success with Sonic Frontiers, which has generated

title that scales globally, by the fiscal year ending March 2026.

sales far above our initial plan.

Under the current medium-term plan, we are actively investing

Furthermore, in August 2023, we welcomed into the Groupin reinforcing our earnings base through the global branding of

the Finland-based company Rovio Entertainment Corporation

existing IPs.

(Rovio), which owns the world-famous Angry Birds IP and

In the fiscal year ended March 2023, the second year ofbrings advanced capabilities in mobile game development

the medium-term plan, we were able to achieve ordinary

and operation. By gaining these capabilities, we will ramp up

income of ¥41.1 billion from the Entertainment Contents

full-fledged global expansion in live operated mobile games,

Business, meeting the target for the final year of the medium-an area that has so far posed a challenge for us.

term plan one year ahead of schedule. In the Consumer area,

Details about Rovio’s entry into the Group are provided on

P. 38-39

we steadily advanced simultaneous worldwide releases of
new game titles and multi-platform development of content,

30

In the Amusement Machine area, although there werereleasing various remakes and remasters such as PERSONA

headwinds such as higher input costs caused by the

5 ROYAL (Remaster) and spin-off titles. In our Sonic IP, in an

weakening of the yen and rising raw materials costs, theeffort to expand the value of the IP and strengthen user

market has rebounded quickly as the economy picked up

5 years

Visualized Earnings Growth

3 years

Core Strategies

Strategy 2

Core Strategies

Creation of a “Super Game”

Mobile games forthe global market

Utilize past IPs

Mobile games for
the Japanese market

Amusement machines

AnimationToys

By FY2024/3

Enhancement of the libraryof past IPs
Support subscription-based
services

Earnings

Strategy 1

Strengthen the global branding ofexisting IPs

Strengthening development
resources

Steady profit generation

By FY2026/3

By FY2030/3

after the COVID-19 pandemic. Business has been firm,

is a growth area, the diversified portfolio that we have built

particularly around sales of the UFO Catcher® crane gamehas given us a firm earnings base.

series and prizes for these games. Going forward, while

Integrated Report 2023

Growing mainstay IPs into global brands

The Entertainment Contents Business has slowed slightly

steadily earning profits in the strong domestic market, we willin the post-pandemic business environment, after becoming

continue to advance global expansion for markets such as

overheated by factors including stay at home demand,

Asia, North America, and Europe, where the growing

especially in the Consumer area. However, from a medium- to

popularity of Japanese animation content has created thelong-term perspective, we expect the global game market topotential for growth in the prize machine market.

continue to expand. Helped in part by this market tailwind, up

In the Animation area, as well as video production andto the fiscal year ended March 2023 we have been able toallocated revenue led by the blockbuster movie Detective

achieve results far faster than expected in our original plan.

Conan, the rise of Japanese animation in the global market

From a strategic standpoint also, we have been taking firmhas fed into the distribution revenue we generate bysteps toward medium- to long-term growth. In the fiscal year

providing works to distribution platforms that carry that

ending March 2024, the final year of the current medium-termgenre. Business performance has also been steady in theplan, we will work to achieve steady results and to makeToys area. As well as standard products for the domestic

further progress in the next medium-term plan.

market, we continue to earn royalty income from productproposals based on our strong planning capabilities foroverseas markets. In addition to the Consumer area, which

31

The history of Sonic IP value growthEntertainment Contents

Born in 1991, Sonic is extremely popular in Japan and around the world, and has been at
the core of SEGA's IP strategy. In recent years, our transmedia strategy including
movies and animation has further raised awareness of Sonic, which has expanded
earnings opportunities.

1991-2010

Birth and expansion of
Sonic IPSEGA SAMMY HOLDINGSIn 1991, Sonic the Hedgehog was released in North
America. The game struck a chord with its frenetic
pace and cool main character, Sonic. It became ahuge hit, selling more than 4 million copies worldwide.
A series of sequels including Sonic the
Hedgehog 2 and Sonic the Hedgehog CD werereleased, becoming further hits. Later, we ventured
into 3D action gameplay and rolled out games on a
range of hardware platforms. These developments
were well received, and the popularity of Sonic
grew further. The Sonic IP came to be recognized
as the “face of SEGA,” and it has continued to growas an IP with many fans around the world.

Sonic the Hedgehog

2010s

TURNING POINT!
Sonic IP challenges and comeback
Sonic’s overwhelming popularity, especially in North
America, gradually began to wane. The 2010s were adifficult time for the Sonic IP. Even in North America, where
Sonic had been so popular, interest had faded among fans,retailers, and media, and the younger generation of fans
was dwindling. To tackle this challenge, the Sega ofAmerica (SOA) team led a complete review of the gamebuild, thoroughly examining how fans really want to playand enjoy Sonic.
Our social media strategy
involved posting not only gameinformation, but also content for
sparking conversations among
Sonic fans and encouraging them toshare. This attracted the younger generation of fans, helping
build a new community of fans. Out of this community wasborn Sonic Mania, which made use of a ground-breaking
method of building a game while communicating with fans.
Released in 2017, Sonic Mania has created a buzz among
fans, becoming a hit worldwide, which has driven a revivaland growth of the Sonic IP.

2010
32

2017

IP value
Games at the coreof our IP strategy
became hits.

©2022 PARAMOUNT PICTURESCORPORATION AND
SEGA OF AMERICA, INC.

2020 –

Successful transmedia
strategy2022-2023
The action adventure game Sonic Frontiers, which was released
globally in 2022, became a huge hit, and has achieved cumulative
worldwide sales of over 3.2 million copies (as of March 31, 2023).

Expanding Sonic IP

MoviesSonic the Hedgehog and its sequel Sonic the
Hedgehog 2 were global box-office hits.

Integrated Report 2023

Carrying on the momentum of the global blockbuster
movies, we sped up our expansion of the Sonic IP on
several fronts. These included creating animation content
for global distribution platforms, collaborating with games
that enjoy worldwide popularity, and pursuing licensing invarious areas, including toys and apparel. These efforts
have increased user touchpoints, which has increased thefanbase globally.

2023
Sonic Superstars is a new game that preserves the nostalgic
feel of classic 2D Sonic side-scrolling action while
reimagining it with beautiful 3D graphics. For the first timeever in the Sonic series, the game can be played offline as acooperative multiplayer by up to four players.

© 2020 PARAMOUNT PICTURES AND SEGA OFAMERICA, INC. ALL RIGHTS RESERVED.

Animation
SONIC PRIME was released globally on
Netflix from December 2022.

Collaborations
Secured partnerships with mega-populargames and their massive audiences(Scheduled for release on October 17, 2023)

Minecraft

Licensing
Toys, games, food, apparel, etc.
Expanding IPs in various areas

Danone Mobile Partnership

2020
©SEGA

33

Entertainment Contents

Top Message

Expanding our rich lineup of IPs
to markets worldwide will lead to growth

Shuji Utsumi
Co COO, Director of the Board
SEGA CORPORATIONSEGA SAMMY HOLDINGS

Targeting global markets has become par for the course
In the fiscal year ended March 2023, the Entertainment

marketing budget from the initial plan and significantly raisingContents Business made significant strides toward achieving

sales goals to fully capture opportunities. We implemented

the goals of the current medium-term plan and realizing thethe marketing plan on a scale that the Group had not

long-term vision beyond that.

experienced in quite some time. Needless to say, the plan

The major topic for the year was the success of Sonic

helped to whet fan expectations before the game’s release,

Frontiers. In addition to incorporating elements of the existing

but internally as well, it caused all the team members involved

Sonic series, this title also broke new ground in offering new

in the title, from development to marketing and publishing, toways to play. But because of this, right after releasing theset their sights higher and helped foster a firm commitment toinitial teaser movie, we realized we had failed to fully convey

make Sonic Frontiers a global hit. The upshot was that we had

the game’s marketing message, and fan reaction was mixed.

recorded over 3.2 million units sold of this hit game as of theAfter doing careful testing, we found that long-standing Sonic

end of the fiscal year ended March 2023. In the culture of thefans in particular were extremely positive about the newGroup today, taking on the challenge of succeeding in global

gaming experience. Sonic is an IP supported by a worldwide

markets has become par for the course, and I think Sonic

fan base. Once we were convinced that this title would catch

Frontiers became an iconic title showing just how much ouron with fans, our confidence grew, and I internally announced

efforts can pay off.

a marketing plan, the Go Big Plan. This entailed increasing the34

Transmedia strategy
Movie
Collaboration

Animation

IP

Licence

Mobile game

ComicsCS/PC
game

As we roll out Sonic IP not only to games but also to movies,

with consumers expanded further. Through these efforts, weanimation, and other media, promoting tie-ups with

were also able to build strong trust relationships withcompanies in various industries, our presence in various

numerous global companies like Paramount Pictures andmarkets continues to expand. This model of success with the

Netflix. My sense is that our presence in global markets today

Sonic IP is called a transmedia approach, and we areis at an unprecedented level. By building even stronger win-

positioning it as a key strategy for expanding IP, exploring the

win relationships with partner companies in other industries,

application of the strategy to IP other than Sonic going

we look for even more opportunities to further enhance theforward. The transmedia approach itself is not an entirely newvalue of our IP going forward.

concept, but with the development of digital platforms in

We will also strategically apply the expertise gained

recent years, touchpoints with users are expanding at an

through the Sonic IP to other IPs, including our own popular IP

unparalleled scale and speed.

series such as our mainstay Persona and Like a Dragon titles

Taking the Sonic IP as an example, the first stage was tens

Integrated Report 2023

Transmedia strategy for maximizing IP value

as well as Angry Birds, the IP of Rovio Entertainment, whichof millions of people around the world watching the Sonic

recently joined the Group. Because SEGA is a video gamemovies in theaters. Then, through further development oncompany, our premise is first to develop interesting games

video distribution platforms, we were ultimately able to exposethat captivate fans, but I also believe that by launching the best

hundreds of millions of users to Sonic IP. From blockbuster

games at just the right time in tandem with the development ofmovies to spin-out video productions and the distribution ofvideo productions and merchandise, we can not only groworiginal animation content on Netflix, the range of touchpoints

game sales but also maximize the value of our IP.

35

Entertainment Contents

Launching revivals from our rich IP library and aiming for success with a “Super Game”
When the Group was working on its hardware business, we

We are also making steady headway in development of

had much more success in overseas markets than in Japan.

the “Super Game” that we are seeking to create in the medium

As a result, fans’ respect and deep affection for the titles andto long term. As the name implies, a “Super Game” involves thebrands we sold at the time still run deep, especially overseas.

concept of a game that stands head and shoulders above

With its strong brand awareness and numerous IP gems,

normal games. I encourage stakeholders to look forward to

SEGA SAMMY is truly like a kind of Treasure Island. I see thisthe fruit of our efforts, which include R&D to create a gameas a huge competitive advantage. We are currently movingthat builds a whole worldview involving the entire gaming

forward with plans to revive a succession of IPs. While

ecosystem, including not only players but also streamers who

retaining the nostalgic elements so beloved by fans from thestream the game and their viewers.

past, we will introduce innovative ideas and technologies thatappeal to the current market, aiming to surpass user
expectations by providing new experiences that merge
nostalgia with a sense of freshness.

SEGA SAMMY HOLDINGS

Aiming to be a global leading contents provider
I have no doubt that the video game market has a very bright

The Group will come together as we continue to movefuture. The penetration rate of smartphones and PCs grows

ahead, aiming to be a global leading contents provider andevery year, even in highly populated developing countries withcreating innovative content that astonishes users aroundsizable young populations. Environments continue to emerge

the world.

that allow people around the world to easily download andenjoy games. It is clear that the gaming population in theseregions will naturally continue to increase and that the video
game market will thus continue to grow globally. I also believethat games are better positioned to benefit from technologicalinnovation than movies, music, or other media. Looking back,the introduction of 3D graphics yielded dramatic
improvements in the expressiveness and immersive nature ofgames. The development of online technologies also ushered
in greater diversity in the ways people interact with games andvastly expanded the industry ecosystem. As technology
progresses, it will become possible to provide unprecedented
forms of entertainment and create new business models. With
our sights fixed on this future world, we are actively examining
and rolling out new technologies, including investing in venture
startups that possess unique technologies.

36

PICK UPKey Persons in Expanding IP Value
Like a Dragon IP

Executive Officer
Head of 1st Development DivisionGame Content & Service Business HQ
SEGA CORPORATION

Integrated Report 2023

Masayoshi Yokoyama

Since the first title was released in 2005, theLike a Dragon (originally Ryu ga Gotoku) series
has been adapted into numerous films andother media. However, the high popularity of theseries in Japan for many years did not reallytranslate into overseas markets. It was in thisLike a Dragon: Infinite Wealthcontext that the release of Yakuza: Like a©SEGA
Dragon (Ryu ga Gotoku 7) in 2020 ushered in a
major turning-point for the series.
Ichiban Kasuga is the new protagonist of Yakuza: Like a Dragon. While he is definitely old school, the lack of gender or age bias in his words and actions resonated withmany users overseas and led to the title becoming a global hit. I don’t think this was acoincidence by any means, but rather a sign that we as creators have come closer tomeeting international standards.
The Like a Dragon IP is a work that taps into the current state of society. Now that
we have broken out of the vague notion that the game is somehow limited to Japan, weare taking a big step out into the world. We have plans underway to astonish users
around the world not only with a new release that is just around the corner, but also withother developments in the works. I believe our stakeholders can expect big things as
the Like a Dragon IP continues to grow through our transmedia strategy.

Atlus IPs
With a commitment to being both “Unique &Universal,” Atlus is creating unique gameplaying experiences that touch the soul.
Our mainstay IPs, the Persona and Shin
Megami Tensei series, have found audienceswith users around the world as Japanese
Persona 3 Reloadrole-playing games that allow players to©ATLUS. ©SEGA. All rights reserved.
experience the feel of Japanese cities andculture. The Persona series in particular has
become a huge hit, with the bright, pop image of Persona 4 Golden getting even higher
marks from users in Europe and America than in Japan. In addition, the value of our IPs
has grown rapidly in recent years owing to our multiplatform deployment and aggressive strategy of remaking and remastering past titles.
To expand the value of our IPs even further, we will continue to pursue measures togain the even stronger loyalty of our fans, including strengthening horizontal promotions of the series and holding events, mainly live music shows, around the world. We
also plan to release a new IP in 2024, called Metaphor: ReFantazio—we took on a boldchallenge with this ambitious new title, capitalizing on Atlus’s strengths as an expert inrole-playing games. I’m confident the new title will delight users.

Naoto Hiraoka
Senior Managing Director
General Manager of Consumer Software Division
ATLUS CO., LTD.

37

Acquisition of Rovio Entertainment Corporation (Rovio)
Entertainment Contents

SEGA made a public tender offer for Rovio, a mobile game company headquartered in Finland,through our subsidiary SEGA Europe Limited. In August 2023, Rovio became a Group company.
Increasing our presence in the rapidly growing global video game market, including mobile games, will hdevelopment system and operational capabilities. That is why we decided to make this acquisition.
By acquiring Rovio, which operates mobile games globally, we have brought onboard Rovio’s managed m
operational expertise. This will enable us to accelerate our development of mobile game versions of SEGA
platforms. In this way, we will strengthen the SEGA gaming portfolio and accelerate our global expansion m
Key Strength of Rovio
Development and Operational Capabilities regarding Mobile Gaming
A key strength of Rovio is its outstanding capabilities in developing
and operating mobile games. It has eight game studios focused on
casual games not only in Finland but also in Sweden and Canada.
Combined, they have achieved a 2022 average of 6.7 million daily
active users and a cumulative total of 5 billion downloads. Rovio
currently has a total of five titles that boast cumulative sales of over

EUR 100 million each, including Angry Birds 2 and Angry Birds
Dream Blast. Since the first Angry Birds game was launched in
2009, it has been animated and made into a movie. Merchandising
has been developed, as have theme parks through location-based
entertainment businesses.

SEGA SAMMY HOLDINGSGame Studio Portfolio
HISTORIC FOOTHOLD

6.7

million

Daily Active Users (2022 Average)

NEW ORGANIC STUDIOS

5.0

billionCumulative Downloads*1

STUDIOS FROM ACQUISITION

8Live Service Games“Beacon”, the Tool for Live Service Game Operation
Beacon, a game operation support tool owned by Rovio, is a toolthat centrally provides the functions necessary for the operation oflive service games. It can help boost the efficiency of game operations as well as the accuracy of operational measures. By utilizing
this platform, which brings together the know-how that Rovio has

Data Lake*2*1 5 billion cumulative downloads include titles outside of Angry Birds*2 Method of storing large data as raw data
© Rovio Entertainment Corporation. All Rights Reserved

38

cultivated in the global mobile market, particularly in Europe andAmerica, and by leveraging also the power of the talent that supports it, we will accelerate the globalization of SEGA’s mobile
game business, which is currently Japan-oriented.

Player Recognition Analytics Advertising EffectivenessAB testing Live Operation Payment Personalization
Client Segmentation Ad mediation Cross-Promotion
Push Notification Research Privacy Framework
Game Server Infrastructure Machine Learning / AI
Red: Categories where synergies can be most expectedhinge upon strengthening our ongoing game

mobile gaming development capabilities andA’s existing IP as well as our coverage of multiple
more than ever.
SEGA’s overseas mobile revenue up to around 45% of total mobile revenue
Overseas sales currently account for a 12% share of SEGA’s
mobile game business. In contrast, Rovio generates 97% of its
sales outside of Japan. With Rovio joining the Group, we expect

SEGA Mobile
Japan/Overseas Ratio
Overseas

Rovio Mobile
Japan/Overseas Ratio
Japan

12%

88%

Simple consolidated basis
Japan/Overseas Ratio

Overseas

Japan

97%

3%

Overseas

Japan

45%

55%

Revenue

53.8 billion¥

34.0 billion*

Revenue3¥

88.0 billion*3 €232 million (Assumption of €1=¥146.9)
Note: Calculated based on SEGA and Rovio’s cumulative figures as of Q3. Rovio’s revenue breakdown taken from data.ai

Integrated Report 2023

Revenue¥that overseas sales will grow to account for 45% of SEGA’s mobile
business (on a simple consolidated basis for the two companies).

Pursuing synergies based on shared values and complementary capabilities
With our clear complementary relationship and shared values,
there could not be more well-suited partners than Rovio and
SEGA. SEGA has the ability to develop and operate large-scale
titles for consoles and PCs, a lineup of globally recognized IP
including Sonic, and results and expertise in the Japanese mobile
game market. In contrast, as well as its Angry Birds IP, which has a
global fan base centered on Europe and America, Rovio also hascapabilities in developing and operating global mobile games and,backing these capabilities, its game operation support platform
Beacon. In addition, Rovio and SEGA share a common set ofvalues that emphasize improving IP value from a long-term perspective. Going forward, we will pursue new synergies based onthese complementary capabilities and shared values.

 lobal development and operation capabilities forGlarge-scale PC/Console games

 evelopment and operational capabilities ofD
global F2P games

Wealth of popular IPs such as the Sonic series

Globally recognized “Angry Birds” IP apability and expertise in expansion of IP toCvarious media

 rack record regarding IP licensing to moviesTand merchandising evelopment and operational capabilities forD
mobile games in Japan

Strong fanbase in the US and Europe
Proprietary game operation platform, “Beacon”

Rich M&A experience centered around Europe

Shared values that nurture IP over the long term
39

Entertainment Contents

In addition to drawing on our abundant IP assets to roll out content globally, we
our broad business portfolio.
External Environment
The global video game content market continues to grow against the backdrop of rising download sales and the proliferation of game distribution platforms. Although the Amusement Machine and Amusement Facilities Operations markets were hard hit by COVID-19, the prizes
began to rally in 2021 and the market is recovering gradually.
Video Game Content Market Size

212.4

(billion dollars)

93.8

37.8

31.1
12.3

13.8

’15
Japan

36.8

37.2

45.3

48.8

52.0

16.2

’16
Asia

30.6

8.4
22.2

7.1
21.1
27.6

5.9
19.5
25.1

9.4
26.7

10.1
27.2

’17

N. America

17.1
’18

Europe

51.0

47.6

71.3

65.7

17.3
’19

14.5
34.1

12.9
33.2

19.8
’20

21.8
’21

19.8
41.1

15.2
33.3

16.0
34.4

36.6

39.2

49.7

51.6

54.5

58.3

65.6

66.6

67.7

68.9

Others

19.7

19.1

19.1
’22

61.2

70.0

20.0

20.3

’23

’24

’25

’26

(Forecast)(Forecast)(Forecast)(Forecast)(CY)

SEGA SAMMY HOLDINGS

Source: SEGA SAMMY estimates based on data from Newzoo Global Games Market Data (July 2023)

Domestic Amusement Machine Sales and Revenues from
Amusement Facilities Operations

Number of Amusement Facilities and Amusement Machine
Units Installed(Billions of yen)

377,825 362,099
433.8

462.0

485.9

520.1

540.8
164.7

2019

156.9

157.4

152.9

161.7

2015

2016

2017

2018

Amusement machine sales

418.7
107.3
2020

449.2

354,463 349,835 340,383 342,211 334,239 340,454

4,856

4,542

4,381

4,193

4,022

3,931

3,882

3,894

2015

2016

2017

2018

2019

2020

2021

2022

152.0
2021

(FY)

Revenues from amusement facilities operations

Source: Japan Amusement Industry Association

Number of amusement facilities(CY)

Number of amusement machine units installed

Source: National Police Agency

Anticipated Opportunities and Risks

40

17.4

18.7

Responses

Opportunities

Risks

Targeting opportunities

 ngoing growth in the videoO
game content market
In the global video game content
market, the market environment has
been changing drastically. Sales
methods for consumer games havediversified, as instanced by thegrowth in download sales. At thesame time, a broader variety ofmonetization methods, such as the
expansion of F2P and subscription
services, has led to an environment
where profits can be secured continuously over a long period of time.

I ntensification of the competitiveenvironment due to the emergence of titles using high-quality,
leading IP in the consumer area

 xpanding touchpoints with users
EProlonging product life cycles
Strengthening user engagement

 ossible reduced willingness ofP
facility operators to invest capital
due to changes in personal
consumption trends and userneeds in the field of Amusement
Machine Sales

Addressing risks

 eneration of surplus inventoryG
in consumer game software,toys, etc., when new products
cannot be launched during thesales season

 ptimizing the number of titles under operation and the scale of newOtitle launches
Providing a profit model that improves the investment efficiency offacility operators and secures long-term stable earnings for the GroupStrengthening product development management

e will work to expand business value by taking advantage ofBusiness Overview
Ensuring steady earnings through expansion across a range of areas
SEGA SAMMY’s Entertainment Contents Business has expanded into various entertainment domains, each of which presents different market growth potential and levels of competition. Leveraging its well-balanced portfolio, the Group is generating stable income
without relying excessively on any specific IP, title, or business activity.

Consumer Area
We will focus on expanding the scale of earnings by strengthening
the global branding of existing IPs.
To capitalize effectively on our abundant IP assets, including
dormant IPs, we will further develop these IPs by means ofremakes, remastering, and reboots, etc., as well as offering them tosubscription-based services and other forms of monetization
across multiple channels.
Integrated Report 2023

Sonic Frontiers©SEGA

Amusement Machine Area
We will aim to improve profitability by focusing on strong-performing
prize categories.

UFO CATCHER 10©SEGA

Animation and Toy Area
In the Animation area, in addition to producing animations ofour major IPs, such as Detective Conan, Anpanman, and LUPIN
THE 3rd, the Group is focusing on the animation licensing andmerchandising businesses.
The Toy area is expanding to encompass a broad target audience, including mainstay educational toys, character goods, andproducts for adults.

DETECTIVE CONAN: Black Iron Submarine©2023 GOSHO AOYAMA/DETECTIVE CONAN COMMITTEEAll Rights Reserved.

41

Entertainment Contents

Progress of Medium-Term Plan
Global Branding of Existing IPs

Goals

We will expand touchpoints with users and maximize earnings opportunities by reinforcing simultaneous worldwide
releases and the multiplatform deployment of content. We will also focus on remaking and remastering existing IPs andsupport subscription-based services to prolong product life cycles. Furthermore, we aim to strengthen user engagement
and increase the value of our IPs through a mix of media and other approaches to connect these IPs with more people.

1

2

Expansion of touchpoints

3

Prolonging the productlife cycle

Strengthening ofuser engagement

Progress
1 Expansion of touchpoints
Made steady progress with global launches and multi-platform development. Achieved sales of about 6 million units with 7 titles in
FY2022/3, and about 8.8 million units with 10 titles in FY2023/3. In FY2024/3, we plan to release 12 titles, targeting sales of about 12
million units.
SEGA SAMMY HOLDINGS

Multiple simultaneous worldwide releases and multiplatform deployment of content (new titles)
FY2022/3

7

10

titles (about 6 million units)

FY2023/3

12

titles (about 8.8 million units)

FY2024/3 (Forecast)titles (about 12 million units)

2 Prolonging the product life cycle
By promoting remakes/remasters and spin-offs/changes of theme, we achieved sales of approximately 4 million units in FY2022/3
and approximately 3.5 million units in FY2023/3. In FY2024/3, we are targeting about 5 million units. We will also continue to actively
promote subscriptions.
Released many titles with remake/remaster, spin-off/changes of theme (new titles)
FY2022/3

About

4

FY2023/3

Aboutmillion units

Sonic Colors: Ultimate
Super Monkey Ball Banana Mania
Lost Judgment, etc.

3.5

FY2024/3 (Forecast)Aboutmillion units

Persona 5 Royal (Remaster)Like a Dragon: Ishin!
Sonic Origins, etc.

5

million units

Sonic Origins Plus
Samba de Amigo: Party Central
Etrian Odyssey Origins Collection, etc.

3 Strengthening of user engagement
We strengthened our media mix, and worked to further raise awareness of the Sonic IP and expand our brand. Going forward,
Paramount Pictures will develop a third Sonic movie and an original TV series for Paramount +, its paid streaming service.

42

CY2020CY2022

Released the Sonic
the Hedgehog movie

Released the Sonic
the Hedgehog 2 movie

Sonic Prime launches
worldwide on Netflix

Global Box Office Revenue

Global Box Office Revenue

Released Sonic Frontiers$$Sold overunits worldwide

320

million400

CY2023 –million

3.2

millionFuture initiatives withPARAMOUNT PICTURES

 evelopment of a third feature filmD
Development of original TV series to be
distributed in Paramount+Released new title Sonic Superstars

Achievements in FY2023/3 and future initiatives
Entertainment Contents Business Performance
Overall segment(Billions of yen)

305.0

282.8

Consumer Area

Amusement Machine Area

Animation and Toy Area

(Billions of yen)(Billions of yen)(Billions of yen)

235.9
15.6%

36.8
2022

14.5%

14.8%

41.1

45.0

2023

2024

187.9

205.0

158.3

32.8

29.3
(FY)

(Forecast)

Net sales
Ordinary income
Ordinary income margin (%)

2022

2023

2024

(FY)

(Forecast)

Net sales

64.9

49.7

36.0

2.5

2.9

2022

2023

Operating income

Net sales

63.5
25.6 29.3 36.0
4.5
4.5
3.0

5.0
2024

(FY)

(Forecast)
Operating income

2022

2023

Net sales

2024

(FY)

(Forecast)
Operating income

Consumer Area

*Developed by SEGA CORPORATION and published by Bandai Namco Entertainment Inc.

Integrated Report 2023

In terms of full games, we released new titles include Sonic Frontiers, Persona 5 Royal(Remaster), and Like a Dragon: Ishin!, and sales volume remained strong at 10.09 million
units (compared with 8.77 million units sold in the previous fiscal year). Sales of repeat
titles, however, remained soft due to weakness in the market, with 17.79 million copies sold(compared to 18.43 million in the previous fiscal year). As a result, overall full game sales
totaled 27.89 million units (compared with 27.20 million units sold in the previous year). In
F2P, Project SEKAI COLORFUL STAGE! feat. Hatsune Miku and ONE PIECE Bounty Rush*
drove performance, resulting in year-on-year sales and profit growth.
Going forward, we will work to advance our business development on a global scale. We
will concentrate our management resources toward this aim, and enhance our development
system by hiring and training talented human resources. We will also develop high-quality
content, and expand our library by creating and utilizing IP.
Persona 5 Royal (Remaster)©ATLUS. ©SEGA. All rights reserved.

Amusement Machine Area
Sales and profits rose year on year due to strong performance in the prize machine category.
We will continue to strengthen the prize machine category, where demand remains strong,while responding to the effects of supply chain turmoil, exchange rate fluctuations, and soaring prices in raw materials.
EIKETSU TAISEN©SEGAAnimation and Toy Area

In the Animation and Toy area, in Animation we recorded revenues from animation production and distribution, including the newly released movie Detective Conan: The Halloween Bride. In Toy, sales were firm,
both for new products such as With a front camera! Fun to change mouse covers! Sumikkogurashi Personal Computer Premium Design by yourself and for mainstay products, resulting in year-on-year growthin sales and profits.
As well as strengthening various video distributions, we will continue to promote sales of new andmainstay products in the Toy area.
With a front camera! Fun to change mouse covers!
Sumikkogurashi Personal Computer Premium Design by yourself©2022 San-X Co., Ltd. All Rights Reserved.

43

Pachislot and Pachinko Machines Business
Pachislot and Pachinko Machines

Top Message

Changes in the external environment are
steadily opening up new opportunities

Ayumu Hoshino
Senior Executive Vice President and
COO, Representative Director
Sammy Corporation
SEGA SAMMY HOLDINGS

Progress of the Medium-Term Plan
The medium-term plan calls for creating hits and improving business efficiency in the Pachislot and Pachinko
Machines Business, aiming to generate steady earnings even amid changes in the business environment.

Creating Hits 
The current medium-term plan lays out three measures aimed atpany premises. It is playing a major role in the development ofcreating hits. First is a review of the product lineup. We focusedsuch interesting machines, allowing employees to freely enjoy

our development on the products that could be expected tomachines under development and give their frank, direct evalu-

become solid drivers of earnings and reorganized our sales

ations. Their evaluations and comments are collected and fed

lineup. Specifically, we launched the Sammy Classic series,

back to the development department, where they are used towhich consists of revivals of IPs that were popular in the era ofrefine the machines. In the past, we left it to the development

No. 4 model machines. Including titles such as Pachislot DISC

department to decide when a machine was ready for produc-

UP, Pachislot GAMERA, and Pachislot Aladdin A Classic, thistion and launch, but with the broader perspective provided byseries has recorded robust sales. On the other hand, for No. 6.5

Parlor Sammy, we are steadily enhancing the quality of ourmodel pachislot machines that offer new gameplay, Pachislot

machines, which improves our chances of creating a hit.

Kabaneri of the Iron Fortress became a major hit, far beyond

Another key factor in creating a hit is strong communication

our expectations. This well-aligned approach of capitalizing onamong the developers. To encourage this, we are working topast IP while looking ahead and taking on the challenge of newshare information more extensively within the development

gameplay based on new IP is steadily producing results.

department, giving visibility to the kinds of projects and issues

The second measure is increasing the probability of a hit.

44

Parlor Sammy is a mock pachinko hall we set up on com-that fellow developers are working on. These efforts are helping

The main principle at work here is to create many machines

us grasp industry trends and fostering a culture that is condu-

that offer a truly entertaining experience to the end-users whocive to new ideas and approaches.

actually play the games. Developing machines with gameplay

The final measure is strengthening media functions. Even ifthat end-users enjoy leads to higher utilization rates. Creating

we create an interesting machine, that will not easily feed into

popular machines with high utilization rates will in turn benefit

sales growth unless it becomes widely known. This is where

pachinko halls, our direct customers.

coming up with promotions that leverage media functions is soMedium-term targets
Creation of hits
1

Revising the product lineup

 ptimizing the product lineup (centered on series machines)ORigorous screening and selection of new IPs
Revivals of past IPs
2

Increasing hit potential

 reating machines from a user-centric perspectiveCDeeper user analysis by attribute3

Enhancing media functions

Expanding communication with users through digital media

Improving business efficiency
1

Improvement of development efficiency

 se common visual images for pachislot and pachinko machines
U
Rationalize visual production
Expand derivative titles, such as spec changes
2

Cost reduction

 romote introduction of standardized parts between pachislotP
and pachinko machines
Hold down excess inventory by optimizing first-lot production(medium to long-term target: zero excess inventory)
3

Promote online commerce

Expand online sales support to pachinko machines

content, we are also working to streamline the costs of hard-audience. So, for example, for men in their 40s and 50s, weware, such as reusing machine gimmicks and other internal

mainly use TV commercials, while for people in their 20s it isequipment. This also helps shorten the development time-

mainly social media. With Smart Pachislot Hokuto No Ken, oneframe, enabling us to test games on actual machines at anof our current big hits, the aim was to appeal to dormant users

earlier stage than in the past. This allows more time for thein their 40s and 50s. As well as broadcasting TV commercials

process of refining games, which feeds into higher quality.

featuring popular entertainers who are big fans of the original

We also rigorously controlled surplus inventory, a factor

Pachislot Hokuto No Ken, we carried out large-scale promo-that hampers business efficiency. However, currently an eventions across a range of channels, including displaying posters

more pressing concern is over issues with the global procure-at Japanese pubs. These efforts paid off, contributing to highment of semiconductors and other parts, where supply is not

utilization immediately after the machine’s launch.

keeping up with demand. Procurement conditions are improv-

Integrated Report 2023

essential. We use media strategically according to the target

ing somewhat, but our priority for the time being is to ensure a

Improving Business Efficiency 
To improve business efficiency, our efforts focused on optimizing

stable supply in preparation for growth in demand.
Recognizing the likelihood of a resurgence in such procure-development operations, an area that involves substantial

ment risks down the road, we will work on fundamental, long-expenses, and in particular reviewing the number of images

term solutions. While continually updating the supply chain,used for visual effects. To be sure, an array of visual effects

including diversifying our suppliers, we will pursue productusing numerous images makes pachislot and pachinko

development that enables stable production, including stan-machines interesting, but in our discussions we questioned thedardizing parts and promoting the reuse of parts.

necessity of creating multiple new images for rare visual

In fact, going a bit further, if we standardize all of the hard-

effects that pop up only once in tens of thousands of times.

ware parts used in our machines, in future it could be possible

From this vantage point, we took a careful look at what kind of

to create a downloadable pachislot or pachinko machine invisual effects really influence gameplay. Then, we were able towhich only the software is switched out via a network connec-

curb costs substantially by paring down the number of images

tion. This would enable us to radically mitigate procurement

created. We are also working to standardize images in cases

risks. This is technically possible already, and this approach

where the same IP is used in both pachislot and pachinko titles.

would also enhance security. Of course, we would need to

For series machines, we have also been repurposing images

address any regulatory issues, and will discuss the idea thor-by tweaking visual effects from past machines.

oughly with relevant authorities as we make steady progress

As well as these kinds of optimizations in terms of software

towards implementation.
45

Pachislot and Pachinko Machines

OutlookSome people predict that the number of pachinko halls andas a whole can draw in users by creating machines that offer

pachislot and pachinko players will continue to decrease as

new gameplay while complying with the rules and regulations,Japan’s population declines, but I am not so pessimistic. Just as

this will recharge the entire market in the near future.

we saw a major expansion of the market in the No. 4 model era,

Smart pachislot and pachinko machines offer an array ofthe pachislot and pachinko machines market still has plenty ofadvantages and carry huge hidden potential. Not only does

potential for growth once it gains momentum.

eliminating the physical pay-out of medals and pachinko balls

SEGA SAMMY HOLDINGSIn 2023, the launch of Smart Pachislot Hokuto No Ken caused

lead to lower running costs and energy savings at pachinko

dormant users in their 40s and 50s who had played the originalhalls, but since game data can be collected and managed, it

Pachislot Hokuto No Ken to return to pachinko halls and ener-

also helps in monitoring the excessive gaming behaviors thatgized the market. Rather than letting this be simply a one-off

can lead to addiction. Meanwhile, adopting cashless payment

boom, it is important to keep those users in the market. Withalso makes it possible to monitor individual spending patterns

this in mind, we will continue pursuing aggressive productand issue alerts on payments above a certain amount. We

development centered on the Classic Series targeting therecognize addiction as a serious issue that we and all busi-

dormant user base, while working at the industry association

nesses involved in the pachislot and pachinko machines indus-

level to give impetus to revitalization of the industry as a whole.

try have to tackle. We believe that fulfilling our responsibilities toCurrently, there is a trend for both pachislot and pachinko tosociety and promoting a healthy industry image is vital forundergo regulatory review. So, my hope is that, if the industry

ensuring the sustainable growth of this market.

Potential Shape of the Future Pachislot and Pachinko
Expectations for all sorts of possibilities unconstrained by existing concepts

Short to medium term
Improvement of gameplay
Reduction in
the number of parts
Enhancement ofhall environments
Fraud prevention

Long-term potential

 ower operational burdenLfor pachinko halls

More diverse pachinko hall layouts

Measures against infection

Cashless operation

Measures against addiction
 ower barriers toL
new store opening

Machines that can download and replace software
Digitization of operations
Communication between pachislot and pachinko machines

Continuing to Take on Challenges

46

The various measures we have carried out based on the medi-

always pioneering.” Continuing to take on challenges naturally

um-term plan have borne fruit in the Pachislot and Pachinko

sometimes involves failing, but the crucial thing is to draw on

Machines Business, giving us a framework for generating solid

such experiences in embracing the next challenge. As I see it, aearnings. Going forward, by developing compelling machines

major role for myself and the rest of the management team is tothat serve, inspire, and awaken users and by creating hit titles,

cultivate the seeds of such challenges and support our human

we will drive substantial top line growth. To this end, we will

resources. I invite our stakeholders to follow our progress as

foster an environment of taking on even greater challenges in

we continue to drive the upward trend in the Pachislot andline with Sammy’s corporate value of being “Always proactive,

Pachinko Machines Business.

PICK UPKey Person in Creating a Hit
Developing innovative pachislot and pachinko machinesthat move users
The Hit Pachislot Kabaneri of the Iron Fortress

Hidekazu Kouchi
Vice President, Executive Officer
Managing Director of PS Research &Development Division
Sammy Corporation

Integrated Report 2023

I think the so-called “Tsuranuki specifications” of Pachislot Kabaneri of the Iron Fortress,
which took full advantage of revised regulations for No. 6.5 model machines—including
revisions to the upper limit on medal pay-out—were a major factor in making thismachine a hit. We were moving ahead with different specifications when we first startedout but switched course in the final stages of development, deciding to change thespecifications to capitalize on the features of No. 6.5 models.
It was really tough to incorporate the changes in such a shortperiod of time to avoid delaying the launch. But thanks to theagility of the whole team, we were able to launch the machine
without a hitch.
We got a very warm reception from users for the kind of
gameplay that can only be experienced with Pachislot
Kabaneri of the Iron Fortress, such as its unparalleled reelplay and exhilarating bonus wins. The machine design strikes
a delicate balance between being mild and easy to play whilestill making users look forward to medal pay-out. My sense isthat the overall gameplay, combined with high-quality visual
effects using movie and sound elements, has earned highPachislot Kabaneri ofmarks from users and is leading them to play the machine for
the Iron Fortresslong periods of time.
©Kabaneri Committee ©SammyThe Hit Smart Pachislot Hokuto No Ken
Smart Pachislot Hokuto No Ken is based on the concept of a full-fledged remake of the original
Pachislot Hokuto No Ken, which recorded roughly 620,000 unit sales. We believed the key to success
was to find the right way to balance the features the machine should inherit from past models while
having the courage not to change and to evolve by adding elements we thought would be desirable.
Our greatest focus was on the most appealing aspect of the original machine—a battle bonus that theuser doesn’t know how long will last. At the start of development, we were considering reproducing theoriginal in a different form, but were able to reflect revised regulations for smart pachislot machines andcome up with the ideal combination of inheritance and evolution. We also started running in-house
trials from an early stage, and the whole team worked together through trial and error to decide which
new features we wanted to incorporate or not until we came up with a product we were satisfied with.
The result was a huge hit, which original fans liked for its nostalgic elements and high degree offaithfulness to the original, while new fans who never knew the original liked the machine’s fun andeasy-to-understand nature.
The Hokuto no Ken series is an IP that has been well-loved by fans for a long time. We will continue to aim
for further growth in this series by fusing elements inherited from the original with evolved new elements.

Smart Pachislot Hokuto
No Ken©Buronson & Tetsuo Hara/
COAMIX 1983,©COAMIX 2007 Approved No.
YRA-114©SammyContinuing to Take on Challenges
The success of these machines, both of which under the new regulations fall into the “mild” category in terms of the moderate pay-in
typically needed to hit a jackpot, gives me the sense that we have an environment in which it is easier to offer a wide variety of specifications and gameplay without relying solely on the gambling aspects of the machines.
Also, as various types of entertainment emerge, I feel strongly that pachislot and pachinko need more variety as well. We will continue to take on the challenge of being a company that generates excitement among users by making them wonder what kind ofmachine we will put out next without relying too heavily on any single aspect, like specifications, gameplay, or the IP.
47

Pachislot and Pachinko Machines

As an “innovator in the industry,” we will launch new initiatives and strive to gen
External Environment
Along with the slow decline of the player population since 1995, there has been a long-term downtrend in the overall number of pachinkohalls, as well as in the number of machines installed and in annual machine turnover. On the other hand, the opening of large pachinko halls
and an increase in locations of major hall operators has been causing a rise in the number of machines installed per pachinko hall.
Market Size and Number of Pachislot and Pachinko Players

Numbers of Pachinko Halls and Installed Pachislot andPachinko Machines per Pachinko Hall

1,790

13,585

458.8

337.9

51.8

7,665

720
41.1
33.9
’04

14.6
’05

’06

’07

’08

’09

’10

’11

’12

’13

SEGA SAMMY HOLDINGS

Pachislot and pachinko market (trillions of yen)
Pachislot and pachinko players (ten thousands)

’14

’15

’16

’17

’18

’19

’20

’21 (CY)

Other leisure markets (trillions of yen)

’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20
Number of pachinko halls (halls)
Number of installed pachislot and pachinko machines per pachinko hall (units)

’21

’22

(FY)

Source: White Paper on Leisure Industry 2022, Japan Productivity Center

Source: National Police Agency

Pachislot and Pachinko Machines: Number ofInstalled Machines, Unit Sales, and Annual Turnover

Pachislot and Pachinko Machine Approval Process
When marketing a new pachislot or pachinko machine,
manufacturers are required to go through multiple step approval
processes in accordance with the Act on Control and Improvement of
Amusement Business, etc.

1.11
4,935

5,484

3,563
0.49
1,754

Machinemanufacturer

1.	Application for
prototype testing
2.	Prototype testing
results issued
3.	Application for
installation approval
4.	Installation
approval issued

Nationally authorized testingorganizations
Public Safety Commissionin each prefecture

5.	Contract andproduct delivery’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 (FY)
Number of installed pachislot and pachinko machines (thousands of machines)
Pachislot and pachinko machine unit sales (thousands of machines)
Annual turnover (times)

Pachinko halls

6.	Application for approval

8.	Start ofoperations

7.	Final authorization

District police station

Source: National Police Agency and Yano Research Institute Ltd. “Pachinko Manufacturer Trends 2023”(Research of Japanese Market)

For more information on market data, see

Anticipated Opportunities and Risks

48

Responses

Opportunities

Risks

Targeting opportunities

Possibility of expanding user base
By setting standards that allow new
machines with a broader range of
gameplay, recent revisions to regulations may expand the user base.

I ssue of gambling addiction
Changing user preferences
Risk of inability to procuresufficient materials
Surplus parts

 reation of HitsC
Improvement of Business Efficiency

 rowing demand for machinesGthat take advantage of revised
regulations
If models that take advantage ofrevised regulations gain the supportof users, we can expect this totrigger greater demand among
pachinko hall operators and feed
into sales growth.

P. 97-98.

Addressing risks
 aunch initiatives to tackle addiction across the industry
LEstablish a system for developing a product lineup that features
new types of gameplay and meets market needs
Standardization of parts
Cut procurement lead times
Strengthen inventory controls
Allow effective use of parts for other productsnerate stable profits by enhancing profitability.
Business Overview
Leveraging development capabilities to offer products that meet demand
The Pachislot and Pachinko Machines Business draws on a powerful IP lineup and industry-leading development capabilities to supply products that meet the demands of adiverse fan base. We are working to develop and market machines with innovative gameplay that will help bring vitality to the market for both pachislot and pachinko machines.
We are also seeking to lower costs through measures centered on the standardization
and reuse of parts.

Sammy’s Strengths©SammyMultiple well-performing series
Cumulative unit sales

Hokuto no Ken

39

Approx.
thousand units

ALADDIN

15

Approx.
thousand units

Beast King

16

Approx.
thousand units

SOUTEN-NO-KEN

16

Approx.
thousand units

3,040
580
510

490

Number of
titles in series

Cumulative unit sales

Hokuto Muso

12

Approx.
thousand units

Eureka Seven

7

Approx.
thousand units〈Monogatari〉
Series12

Approx.
thousand units

Code Geass

4

Approx.
thousand units

Series

280
170

150

Integrated Report 2023

Number of
titles in series

Series70

Note: As of March 31, 2023

Lowering costs and raising profitability
Pachislot and pachinko businesses are characterized by a reliance on electronicparts that carry a high cost ratio.
The Group is working to raise development efficiency and lower costs, suchas through the reuse of parts.
Value Chain of the Pachislot and Pachinko Machines Business
1 A
 verage development lead time:
1 year–2.5 years

3 Average sales lead time:
1 month–In-house

1

2

3

4

Development

Manufacturing

Sales

Operations

Reuse of parts

Collection bytrade-ins or purchase

External

Sourcing parts throughdisassembly, etc.

Lower parts costs
Lower environmental impact

49

Pachislot and Pachinko Machines

Progress of Medium-Term Plan
Achieve top share of total utilization of pachislot and pachinko machines
and maintain steady earnings

Goals

We aim to create hits and expand share of utilization by optimizing the product lineup, manufacturing machines from auser-centric perspective, and expanding communication with users through digital media. We will also improve businessefficiency and maintain steady earnings by promoting standardized imagery and parts between pachislot and pachinko
machines and promoting e-commerce.
Creation of Hits

1

Revising the product lineup

2

Increasing hit potential

3

Enhancing media functions

2

Cost reduction

3

Promote online commerce

Improvement of Business Efficiency

1 Improvement of development
efficiency

Progress
Although Pachislot was strong, total utilization share decreased YoY due to struggle in Pachinko
Trend of our utilization share
SEGA SAMMY HOLDINGS(%)

FY2022/3

15.0

10.0

5.0

FY2023/3

1st

K Company

18%

1st

S Company

18%

2nd

S Company

18%

2nd

K Company

16%

3rd

Sammy

11%

3rd

S Company

14%

4th

S Company

9%

4th

Sammy

9%

 achislot: Increased due to strong sales ofP
No. 6.5 Model (+2p)

0.0March 2023

April 2022
Total (pachislot and pachinko)

Pachislot

Pachinko achinko: Decreased due to low utilization,
P
while sales were strong (-7p)

Future initiatives
Pachislot: Actively launch smart pachislot while continuously launch No. 6.5 Model, which utilization remains strong
Pachinko: Work on developing machines that will be supported by users* In-house estimation based on DK-SIS data (Data for 4 yen Pachinko and 20 yen Pachislot) of Daikoku Denki Co., Ltd.
* Utilization Share = Ratio of Sammy machine’s utilization out of total number of installed machine for each title × utilization of each title (Pachislot: Numbers of inserted medals, Pachinko:
Numbers of shot balls)* Calculated by average of the fiscal year (Exclude weeks falling in two fiscal years)

Utilization level of Pachislot is significantly increasing
Utilization Trend (Pachislot & Pachinko)(%)

Beginning of Smart Pachislot Hokuto No Ken Installation

 achislot: Utilization level has increased due to installation ofP
No. 6.5 Model and smart pachislot, which responds to revision of regulation
Due to installation of Smart Pachislot Hokuto No Ken, etc.,
recent utilization is significantly increasing

140
120

Beginning of Smart Pachislot Installation

100
80

 achinko: Due to lack of new hit machines,Putilization continues centered on regular machines

Beginning of No. 6.5 Beginning of Pachislot Kabaneri of the Iron Fortress
Model Installation Installation

60
Apr. 2022

Jul.

Oct.

Jan. 2023

Apr.

Pachislot: Utilization Trend (YoY)
Pachinko: Utilization Trend (YoY)* In-house estimation based on DK-SIS data (Data for 4 yen Pachinko and 20 yen Pachislot) of
Daikoku Denki Co., Ltd.

50

Achievements in FY2023/3 and future initiatives
Pachislot and Pachinko Machines Business Performance
Overall segment(Billions of yen)

115.0
94.2
75.8

1,583
1,879
22.0%
2,05021.7%
293

Pachinko
Unit Sales & Number of Titles(Thousands of units)(Thousands of units)

10

328
360

77

13.5%
20.7

Pachislot
Unit Sales & Number of Titles
1,583

1,879
146
2,050

293
94

328

8

360
8

25.0

97

103

5

5

2022

2023

93
6

10.2
2022

2023

2024

(FY)

(Forecast)

Net sales
Ordinary income
Ordinary income margin (%)

2022

2023

2024

(FY)

(Forecast)

Unit Sales (Thousands of units)
Number of Titles

2024

(FY)

(Forecast)

Unit Sales (Thousands of units)
Number of Titles

Integrated Report 2023

In the fiscal year ended March 2023, sales of pachislot machines were roughly 94 thousand units (compared with 77 thousand units sold in the previous fiscal year). This wasdue to strong sales of No. 6.5 model machines such as Pachislot Kabaneri of the Iron Fortress and Pachislot Saga of Tanya the Evil. In particular, Pachislot Kabaneri of the Iron Fortress has maintained a high level of utilization since its release in July 2022, and following
a series of additional sales, unit sales have been significantly above initial plan. Sales ofpachinko machines totaled 103 thousand units (compared with 97 thousand units sold in
the previous fiscal year), reflecting sales of flagship machine series such as P Shin Hokuto
Muso Chapter 4. As a result of these factors, the Pachislot and Pachinko Machines Business achieved year-on-year increases in sales and profits.
In the fiscal year ending March 2024, as well as No. 6.5 model machines, which show
good utilization, we will also actively launch smart pachislot titles such as Smart Pachislot
BIOHAZARD: VENDETTA starting with Smart Pachislot Hokuto No Ken. Based on theabove, we expect that, following on from the fiscal year ended March 2023, pachislot
machines will continue to drive sales and profit growth. Although parts procurement
conditions are improving, we will continue to monitor the situation closely. We will build aflexible and stable supply system to ensure our readiness to meet strong demand.

Smart Pachislot BIOHAZARD: VENDETTA©2017 CAPCOM/VENDETTA FILM PARTNERS.
ALL RIGHTS RESERVED.
©SammyMajor titles released in FY2024/3 (As of October 2023)
Delivery month

Pachislot

Pachinko

Smart Pachislot Hokuto No Ken

Apr. 2023

Smart Pachislot BIOHAZARD: VENDETTA

Jul. 2023

Pachislot Kizumonogatari –Hajimari No Toki–

Sep. 2023

Pachislot Kabaneri of the Iron Fortress (Additional Sales)

Oct. 2023

P Aura Battler Dunbine 2 –ZEROLIMIT HYPER–

Apr. 2023

P Hokuto No Ken Bokyosei

May 2023

P Kabaneri of the Iron Fortress ~4,000Rengeki ver.~Jun. 2023

P BLACK LAGOON4

Jul. 2023

P Shin Hokuto Muso Chapter 4©Buronson & Tetsuo Hara／COAMIX 1983,
Approved No.KOU-423© 2010-2013 Koei Tecmo Games Co., Ltd. ©Sammy

51

ResortResort BusinessWe are aiming to invest in the Gaming area as the third driver of earnings intandem with bolstering the profitability of existing resort facilities.

External Environment
Pandemic-related behavioral restrictions continue easing
Behavioral restrictions in Japan continue to ease. Travel restrictions overseas, which had caused a severe impact, have also been eased.

Anticipated Opportunities and Risks

Opportunities
Entry into the Gaming area
Entry into the Gaming area has thepotential to become a major source of
earnings for the Group.
SEGA SAMMY HOLDINGS

52

Risks


Risk of lower customer numbers in
the event of a resurgence of
infections

Responses

Targeting opportunities
 pply know-how accumulated during the Japan IR entry study towardA
investing in the Gaming area

Addressing risksAs a measure against the COVID-19 pandemic, thoroughly implemented
preventive measures in accordance with national and local
government policies

Achievements in FY2023/3 and future initiatives
Phoenix Seagaia Resort achieved the highest sales and firstprofitability since it joined the Group due to the contribution of
the government and facility’s own measures to stimulate tourism
demand, as well as the implementation of various measures andthe enhancement of CRM focusing on individual customers.
Overseas, at PARADISE CITY, which is operated by PARADISE SEGASAMMY Co., Ltd. (an equity method affiliate), theeasing of travel restrictions from June 2022 brought a gradual
recovery of casino sales. From October 2022, drop amounts(the amount of chips purchased by customers) of Japanese VIPs
rebounded sharply, reaching pre-pandemic levels.

As a result, net sales in this segment were ¥11,540 million (anincrease of 33.2% from the previous fiscal year) and ordinary
loss was ¥3,217 million (ordinary loss of ¥6,738 million for theprevious fiscal year).
We will continue to work on tactical measures to attract customers in Japan at the Phoenix Seagaia Resort and overseas at
PARADISE CITY. We will also apply the knowledge we haveaccumulated so far with the aim of investing in the Gaming area,a market that is expected to grow.

Business Overview
Through the operation of resort facilities in Japan and overseas, the Group is working to build up development and operational
expertise in areas such as hotels, golf, entertainment facilities, commercial facilities and casino operations, while examining
investment opportunities in the Gaming area.

Phoenix Seagaia Resort(Miyazaki City, Miyazaki Prefecture)

Japan’s leading resort complex

PARADISE CITY

©Phoenix Resort(Incheon Metropolitan City, South Korea)

South Korea’s first IR facility
PARADISE CITY, operated by PARADISE SEGASAMMY Co., Ltd., ajoint venture with the PARADISE GROUP of South Korea, is the firstIR facility in South Korea with hotels, casinos, convention halls, commercial facilities, and entertainment facilities. We aim to be the preeminent IR facility in northeast Asia by providing high-quality spaces
and services.

The North Country Golf Club

Integrated Report 2023

Phoenix Seagaia Resort offers a richly varied resort experience thattakes advantage of a beautiful natural setting. Surrounding it is avast, nearly 700-hectare grove of Japanese black pines spreading
roughly 11 kilometers north-south along the coast of the Pacific
Ocean in Miyazaki Prefecture. The resort has three accommodation
facilities, including the Sheraton Grande Ocean Resort. It also
boasts a world-class convention center and Phoenix Country Club,one of Japan’s preeminent golf courses.
In 2017, the largest renewal since the resort’s opening was completed, transforming it into New Seagaia, which pursues the quintessential resort experience. Aiming to offer the most delicious food inJapan, we continue to create new culinary experiences at the resort
by making use of its location in Miyazaki, which is well known inJapan as a treasure trove of food.

(Chitose City, Hokkaido)

As part of its activities to promote sports and contribute to the community of Chitose City, the Company runs Sega Sammy Cup Golf
Tournament and operates it as a facility for snow activities, North
Snowland in Chitose, in winter.

53

A History of Experiences That Move the HeartThe SEGA SAMMY Group will continue to pursue the creation ofexperiences that move the heart well into the future.
The SEGA SAMMY Group was formed in October 2004 through the management integration of SEGA,a creator of well-known innovative products, and Sammy, a developer of various industry-first products.
Since the management integration, SEGA SAMMY Group companies have continued to offer
experiences that move the heart for consumers and pursue new experiences through the full-scale
entry into the Resort Business in 2012 and other initiatives.

Management Integration 2004
Established 1975

1989

2001

2003

2008

2009

SEGA SAMMY HOLDINGS	Launched ALADDIN, theindustry’s first single-bonus
hitter pachislot machine	Launched Beast King, apachislot machine with assist
time (AT)	Launched Pachislot Hokuto No
Ken, which set an unprecedented sales record unbeaten
to this day	Launched Pachinko CR
Hokuto No Ken, the Company’s
best-selling pachinko machineby number of units	Launched Pachislot Psalms ofPlanets Eureka Seven, which
introduced new gameplay
characteristics into No. 5 models

ALADDIN

Beast King

Pachislot Hokuto No Ken

Pachinko CR Hokuto No Ken©Sammy©Sammy©Buronson & Tetsuo Hara／NSP 1983
©Sammy©Buronson & Tetsuo Hara／NSP 1983,©NSP2007 Approved No. SAE-307©SammyPachislot Psalms of Planets
Eureka Seven©2005 BONES/Project EUREKA©Sammy©BNEI

Established 1960

1988
	Launched the Mega Drive home
video game console powered bya high-performance 16-bit CPU

1993
	Started rolling out Virtua Fighter,a 3D computer graphics (CG)fighting game1998
	Launched Dreamcast, the industry’s first home video consolewith internet connectivity

2005

2012

	Launched Ryu ga Gotoku, thefirst title in a blockbuster seriesof home video console games	Launched the first title in the
Sangokushi Taisen series of
network-enabled trading cardgames	Started distribution of online
RPG PHANTASY STARONLINE 2

Mega Drive©SEGA

Dreamcast

PHANTASY STAR ONLINE 2

©SEGA

©SEGA

Virtua Fighter©SEGA

Ryu ga Gotoku©SEGA

Sangokushi Taisen
©SEGA

54

2015

2019

	Launched new series Pachinko CR Shin
Hokuto Muso, drawing on a game IP

2022

	Launched Pachislot Hokuto No Ken
Tenshou, the first title in the Hokuto No
Ken series for No. 6 models

2023	Launched Pachislot Kabaneri of the Iron
Fortress for No. 6.5 models

Launched Smart Pachislot Hokuto No Ken

Pachinko CR Shin Hokuto Muso

Pachislot Hokuto No Ken Tenshou

Pachislot Kabaneri of the Iron Fortress

Smart Pachislot Hokuto No Ken©Buronson & Tetsuo Hara／NSP 1983,
Approved No.KOJ-111©2010-2013 Koei Tecmo Games Co., Ltd.
©Sammy©Buronson & Tetsuo Hara／NSP 1983,©NSP 2007 Approved No.YAF-420©Sammy©Kabaneri Committee ©Sammy©Buronson & Tetsuo Hara/COAMIX 1983,©COAMIX 2007 Approved No.YRA-114©Sammy20172022	Made PHOENIX RESORT CO., LTD. awholly owned subsidiary	Established a joint venture "PARADISESEGASAMMY Co., Ltd." with the
PARADISE GROUP of South Korea

	Acquired gaming machine manufacture and sales license in the U.S. State
of Nevada	Opened PARADISE CITY, South
Korea’s first integrated resort	Sonic the Hedgehog 2 became aworldwide hit.

	Sonic Frontiers became a big hit.

©SEGA

Phoenix Seagaia Resort

Integrated Report 2023

2012

©2022 PARAMOUNT PICTURESCORPORATION AND
SEGA OF AMERICA, INC.

PARADISE CITY

©Phoenix Resort

2013

2016

	Started distribution of smartphonegame Puyo puyo!! Quest and
CHAIN CHRONICLE	Launched home video console game
Persona 5	Launched PC game Total War:WARHAMMER 2

2020
	Released the Sonic the Hedgehog movie

Total War: WARHAMMER 2

Puyo Puyo!! Quest© Games Workshop Limited 2020.
Published by SEGA.

©SEGA

Persona 5

Sonic The Hedgehog©2020 PARAMOUNT PICTURES AND
SEGA OF AMERICA, INC.
ALL RIGHTS RESERVED.

	Launched HATSUNE MIKU:COLORFUL STAGE!

HATSUNE MIKU: COLORFUL STAGE!
© SEGA/© CP/© CFM©ATLUS. ©SEGA. All rights reserved.

CHAIN CHRONICLE
©SEGA

55

Materiality Initiatives
Sustainability helps keep life colorful

We at SEGA SAMMY believe our determination to enhance life witha rich and colorful stream of captivating experiences should
be reflected in our approach to sustainability.

It is our responsibility to put sustainability at the heart of everything we do,in tandem with our people, society, and the environment.
SEGA SAMMY will continue to pursue this synergy as

a company dedicated to the shared experiences of a colorful world.
GROUP MISSIONSEGA SAMMY HOLDINGS

Constantly Creating, Forever Captivating— Making Life More Colorful —Products and Services
Providing safe, dependable, andinnovative products and services
Related SDGs

Material Issues
to Be Addressed

Human Resources
Developing people who can create
experiences that move the heart
Related SDGs

Governance
Strengthening sustainability
governance
Related SDGs

56

Addiction

Environment

Prevention of
addictions anddisorders

Strategic commitment
to action on climatechangeRelated SDGs

Related SDGs

Materiality Identification Process
Issues Capturing and Materiality Evaluation

STEP

1

Between 2016 and 2020, SEGA SAMMY Holdings received the “Sustainable Management Diagnosis” conducted by theCommittee for the Promotion of Management Diagnosis to visualize strengths and issues related to sustainability.
In 2019, our group’s corporate board meeting formulated management policies for CSR and SDGs and set three important themes to be addressed. They are “Improvement of job satisfaction and diversity, and elimination of inequity”, “taking
action on addiction”, and “addressing the social issue of super-declining birthrate and aging society.”
In April 2019, the assessment committee organized by professional members of management, human rights, environment, and more, along with our CSR, SDGs Promotion Department manager (current Sustainability Department) organizeda stakeholder dialog. We engaged in many discussions to identify our group’s unique materiality on the comprehensive
perspective by giving feedback from meetings with investors, stockholders, and employees, where opinions and requests
were raised, to the Board of Directors meeting.

Issues Identification

STEP

Setting and Approval of Materiality

STEP

3

In April 2022, our Group Sustainability Session approved the current materiality content and disclosure of the materiality,
and the Group Management Strategies Committee (now the Group Management Committee) subsequently held discussions. Following these discussions, the Board of Directors granted its approval.

Integrated Report 2023

2

In 2019, we set four issues, including the three important themes to be addressed written above, and added “Environmental
responses” as our group’s materiality.
In 2020, we evaluated the set materiality themes to ensure their relevance to our businesses. We then redefined themateriality framework by referencing the “SASB Standards.”
The current five materiality themes were identified by focusing on the value created by our core businesses to meetsocial needs, achieve a sustainable society, and continuously enhance corporate value, all aligned with our group missionof “Constantly Creating, Forever Captivating.”

Progress Monitoring and Reviewing Materiality

STEP

4

Group companies establish their actual action themes, numerical targets, and deadlines for each materiality. They createda flow for periodically monitoring progress by setting medium-term goals based on the materiality themes and holding
yearly Group Sustainability Session and Group Sustainability Promoting Meeting to report and assess their progress.
We periodically report the entire group's progress in the financial results briefings and integrated reports to our stakeholders, and also share this information on our internal and external websites.
Opinions and requests from our stakeholders are scrutinized in the Group Sustainability Session and then reviewed
and updated to the optimized form after identifying issues by taking into account the importance of social problems andmanagement issues in the context of the social condition, international trends, and external environment, all through ongoing communication with our stakeholders.

Initiatives to addressmateriality

Evaluation by Group Sustainability
Subcommittee and Group Sustainability
Promotion Committee

External disclosure of
progressEngagement withstakeholders

Confirmation of issues,
review of action themes for optimal format

57

Human Resources
Developing People Who Can Create
Experiences That Move the Heart

Main Activities and Milestones

2030 Targets
Culturally diverse human resources*1

SSHD*, SEGA, Sammy Monitoring of quantitative targets (annual)

Approx. 900 people–(approx. 21%–) xpanding scope for disclosure ofE
companies

Percentage ofwomen in managerial positions

Whole company Updating existing initiatives, adding new initiatives (annual)

Approx. 8%–(Approx. 80 people–)

SSHD*, Reexamining target figures andSEGA, Sammy reconsidering action plan

Amount invested in education¥4.0 billion or more cumulatively
SEGA SAMMY HOLDINGSSEGA
Building a global system

Exploring of culturally
diverse human resource
measuresGroup Reviewing disclosure policy andcompanies examination of action plan

Implementing culturally
diverse human resource
measuresEngagement score
4

58* or above/Rating A*5 or above

Implementing
the action plan

* SEGA SAMMY HOLDINGS INC.

Four Key Indicators in Human CapitalCompanies included 1 2 3 : SEGA SAMMY HOLDINGS, SEGA (Japan), Sammy,
4 : Major Group Companies in Japan

1 Developing culturally diverse*1 human resources
Number of people (ratio)
approx. 21% or above

Percentage among Group
companies included:
Approx. 15%554 people

Approx. 17%658 people

Approx.
900 people

2 Active career opportunities for women
Percentage of women in managerial positions

2

Approx. 5%*(42 people)

Approx. 6%(72 people)

Approx. 8%
or above(80 people or above)

FY2022/3
FY2023/3
FY2031/3
As of December(Results)(Target)*1 Certified based on numerous criteria, such as being a foreign national, having overseas residence
experience and multicultural experience, and having a certain level of proficiency in languages suchas English or Chinese. Human resources who can deal with diverse cultures and use their experience in their work.

April 1, 2023
(Results)*2 Percentage of management positions held by women (including specialists)

3 Development of core human resources
Amount invested in education¥4.0 billion*3

4 Maintenance of work environment
Engagement score

2021

2030
(Target)or more cumulatively￥0.47 billion /Approx.
¥0.15 billion / year

year

FY2022/3
As of December

FY2023/3(Results)*2 Cumulative investment from FY2023/3 to FY2031/3

58

58 or above

Average￥0.45 billion /year

FY2031/3(Target)50.1*4

52.8

(B*5)

（BB）

2021

March 2023
(Results)(Rank A or above)*4 Source: Link and Motivation Inc, engagement score based on motivation cloud*5 Engagement rating

2030(Target)MESSAGE
A Message from the Head of Human Resources

Promoting humanresources strategies forbusiness transformation
Makoto Takahashi

Formulating the HR Transformation Vision
Through structural reforms, the Group has been able to evolve
into a structure capable of generating stable earnings. We haveachieved the original final year targets of our current medium-termplan ahead of schedule.
Looking at the rapidly changing market environment and user
trends from a long-term standpoint, however, it is clear that constant evolution of our business model will be needed. Without it,
we cannot expect sustainable growth in the future, and instead
can expect that the risks we face will only increase.
Spurred by this sense of urgency, we have positioned “transformation” as the core theme of the Group’s human resources
strategy. To advance this transformation, in November 2020 weformulated the HR Transformation Vision, which articulates ourideal image for our organization and our human resources.
Fortunately, our Group is full of human resources who genuinely love our products and services. They have a mindset ofwanting to deliver those products and services to more users andembracing change to make that happen. That is why the HR
Transformation Vision has gained such good traction within the
Company, with clear signs of change.

Linking management strategy and humanresources strategy
SEGA SAMMY has listed “Human Resources” as one of its material issues to be addressed.
As user needs diversify and businesses become more global,
creating new products and services to attract new users will
become increasingly important. To adapt to this situation, we arefocusing on hiring and training multicultural human resources who
understand diverse cultures and values. We are building an environment where women can play a more active role and investingin education for each and every employee to hone their skills. We
are also building a workplace where these diverse humanresources can work with vigor and enthusiasm.
In the next medium-term plan, which is currently under discussion, we will further strengthen the links between our management strategy and human resource strategy. We must be able toflexibly allocate appropriate human resources so that we are nothindered by a lack of human resources when implementing our
new strategy. To achieve this, we will need to visualize what kindof skill set each employee has and build a database based onthese insights. By doing so, we can specify the skills that areimportant for the future of the Company, using those parameters
as we design various human resource development programs.
I believe that if we can create such an environment, we willfurther increase our internal momentum toward new challenges,
which will in turn accelerate our transformation and growth.

Integrated Report 2023

Executive Vice President,
Executive Officer

59

Products and Services
Providing Safe, Dependable, andInnovative Products and Services

Main Activities and Milestones

2030 Targets

Whole company Updating existing initiatives, adding new initiatives (annual)
SEGA Global branding of existing IP

Creation of a “Super Game”

Global leading contents provider(Entertainment Contents Business)

Win a “triple crown”—top share inutilization, installation, and sales

Sammy  Promotion of user-oriented development/
Brush-up with a test-shoot evaluation system(Pachislot and Pachinko Machines Business)

Quality Improvement
SEGA SAMMY HOLDINGSE  Evaluation Team that Supports the Fun of Each Title
At SEGA, we have an in-house evaluation team that assesses the titles we develop for smartphones and video game consoles bymeasuring the level of fun that they offer.
The evaluation team objectively assesses the titles, comparing the final version against the concept set by the development
department at the time of game planning. The team checks whether a unique appeal has been achieved for the title, and whether
customers can enjoy the game as originally intended. The evaluation result is also used by management and the development
department to review and discuss the development status, and helps improve the quality of SEGA’s games.
Our global evaluation teams collaborate closely to gather feedback from the main target markets so that it can be used in thedevelopment process. This helps to ensure that the game is enjoyable in a way that meets our customers’ expectations.
Role of evaluation teamDevelopment

Checkpoint

Development

Checkpoint

Development

Checkpoint

Development

Evaluation teamObjective assessment and analysis of development status
Feedback to various functions such as development, organization and management

Clearing development challenges and helping to improve the quality of titles

Launched on October 17, 2023, Sonic Superstars is an all-new
title in the Sonic series. In this game, players can also enjoy theseries’ first offline multiplayer mode, which can be played with up to
four players, as well as battle mode, which can be played both offlineand online. While preserving the 2D side-scrolling feel of the original
Sonic, this completely new high-speed action game also reimagines
and evolves the gameplay with 3D graphics. The evaluation team isalso supporting the tackling of new challenges in this latest entry in
the Sonic series.

60

Sonic Superstars©SEGA

LaunchE Entertainment Contents Business
P Pachislot and Pachinko Machines Business
R Resort Business
SS Group

Market analysis,
hypothesis
validation

Planning while
identifying needs

Brush-up using
unique test-shootevaluation

P  User-oriented Development Process
While planning, Sammy uses data-based market analysis and hypothesis
validation to identify targets and needs. We have also put in place a systemfor enhancing the level of perfection with a unique test-shoot evaluation
system that provides more user-oriented evaluations.

Consolidationand knowledge
creation

Effective
promotion andmarket launch

P  Brush-up Using Highly Unique Test-shoot Evaluation
Sammy is leveraging industry-leading human resources for development to deploy a massive 100-people scale test-shootevaluation into the development process. In addition, we have installed a mock hall (Parlor Sammy) that closely resembles theactual play environment, and are working to refine our products. These efforts have led to the creation of hit titles such as
Pachislot Kabaneri of the Iron Fortress and Smart Pachislot Hokuto No Ken.

Reliable and usefultest-shoot evaluation

Creation of hits

Integrated Report 2023

Large-scale test-shoot evaluation systemwith 100 people scale
Preparation of mock hall environmentCombination of detailed attribute data andproduct evaluation

Safety and Security
E Initiatives of the Global Product Operations Division
SEGA is increasing its connections with customers through the multi-platform global expansion of our game titles. Simultaneously
releasing a game globally across several platforms calls for a number of processes to be brought together thoroughly and seamlessly.
We must ensure that game quality meets the standards of each platform and of SEGA. At the same time, we must observe thelaws and regulations of each country and region where the game is released, while also localizing the game into many languages
and ensuring that the creative expression of the game is preserved and appropriate.
In response to this situation, the Global Product Operations Division is working to develop guidelines for various workflow at
SEGA’s development and publishing sites in Japan, Asia, North America, and Europe with the aim of improving execution accuracy
and optimizing its processes. In addition, the Global Product Operations Division shares information such as laws, regulations andguidelines that should be complied with in the target region on the company’s intranet. When any of these are revised, the divisionoffers support to ensure that each global business site appropriately implements the required response, including providing materials and holding study sessions as necessary.
With SEGA entities all around the world working together, the Global Product Operations Division serves as a hub for thedevelopment of game titles that customers of all ages and backgrounds can enjoy safely and with peace of mind.

P Thorough Quality Assurance System
Sammy has put in place a thorough safety management
system. It has established a Quality Assurance Department
as a dedicated organization in its commitment to ensuring
zero major defects that would affect personal physical safety.
In addition, we conduct not only in-house quality audits,
but also audits of domestic and overseas cooperating
factories utilizing online as well.

Development

Manufacturing

Sales/after sales

Reliability testing

Mass production
quality audit

Feedback
61

Environment
SEGASAMMY Colorful Carbon Zero*1

Our Efforts for ‘Environment’
The SEGA SAMMY Group has been working on effectively using energy, reducing the environmental load from offices and production bases, and environmentally conscious design of products/services to combat global warming. In May 2022, we set aquantitative target for reducing greenhouse gas (GHG) emissions. In Scope 1 and 2, we aim to reduce group–wide emissions byaround 50% by 2030 based on the fiscal year ended March 2021 and achieve carbon neutrality by 2050. In Scope 3, SEGACORPORATION and Sammy Corporation, the Group’s major operating companies, aim to achieve a more than 22.5% reductionthat meets the SBT*2 standard by 2030. This endeavor will be realized through engagement with suppliers, including suppliersurveys and collaboration to address climate change issues.
*2 Companies set greenhouse gas emission reduction targets in alignment with the Paris Agreement's requirements and scientific evidence, with a focus on the next five to fifteen years.

SS  Transition to Alternative Fuel Vehicles and Implementation of Photovoltaic Systems
SEGA SAMMY HOLDINGS

To reduce our group-wide Scope 1 (direct) emissions in Japan, we plan to replace company vehicles used by sales departments,
production and development departments, and executives with environmentally friendly vehicles. We also plan to graduallytransition to non-gasoline vehicles by comprehensively assessing the price, load capacity, and selection options for leased company vehicles.
To reduce our Scope 2 (indirect) emissions, we plan to gradually transition to green power (or renewable energy), using green
power certificates to offset any shortfalls.

Roadmap to Carbon Neutrality

2021
Entertainment
Contents Business
Pachislot and Pachinko
Machines BusinessSwitch to non-gasoline vehicles
Adoption of “raw green” electricity
Purchase of green energy certificates
Introduction of photovoltaic equipment and services
Switch to renewable energy sequentially by 2030

Resort Business

Adoption of new renewable energy technologies and decarbonization innovations by

Introduction of energy-saving equipment (such as LED lighting, replacement with high62

E Entertainment Contents Business
P Pachislot and Pachinko Machines Business
R Resort Business
SS Group*1 SEGASAMMY Colorful Carbon Zero is the name of the action plan to promote the Group’s efforts to reduce greenhouse gas emissions.
“Colorful” conveys the idea of using a variety of measures to achieve zero carbon emissions.

SEGA SAMMY Group Scope 1 and 2 Greenhouse Gas Emissions（t-CO2）

8,322

5,952
3,824

4,762
13,537

FY2021/3
Entertainment Contents Business (including SSHD)

18,256FY2022/3

Group total
Reduction of around 50%

2,717
5,332

Group total
100% reduction

15,485

FY2023/3

Pachislot and Pachinko Machines BusinessResort Business

2030(target)2050(target)At Sammy, we are actively working to reduce Scope 3 emissions by promoting reuse and minimizing excess inventory. As part ofthese efforts, we have established a dedicated project team to reduce our environmental burden. Comprising members from theproduction, development, and sales departments, the new team evaluates various strategies to achieve this goal, including the
adoption of materials with lower environmental burden.
Furthermore, in our efforts to reduce energy consumption by pachislot and pachinko machines, we have initiated the introductionof pachislot machines equipped with adjustable brightness functions. We have also begun offering smart pachislot machines, known
for their lower power consumption. In the future, with a view to realizing machines that can download and replace software, which
would eliminate the need for replacing hardware itself, our commitment to minimizing our environmental burden will continue.

2030
Achieve carbon neutrality inthe Entertainment Contents Business andPachislot and Pachinko Machines Business.
Reduce group-wide carbon emissions byaround 50%

Integrated Report 2023

P  Enhancing Reuse, Expanding Standardization of Parts, and Introducing Smart Pachislot Title

2050
Group-wide
carbon neutrality

2050

h-efficiency heating equipment)

63

Environment

Disclosure Based on
TCFD Recommendations
The Purpose of Expressing Support for TCFD and Participating in the TCFD Consortium
The Group has implemented climate-related financial disclosurein line with the TCFD framework since 2022.
In June of the same year, the Group announced its endorsement of the key recommendations of the final report (TCFD Recommendations) of the Task Force on Climate-related Financial
Disclosure (TCFD), which provides a framework for climate-related information disclosure and serve as guidelines to verify theadequacy of the Group’s measures related to climate change.

In addition, as member of the TCFD Consortium, which comprises companies and financial institutions supporting the TCFD,
we are actively exchanging information with other supporting
companies and financial institutions to ensure more effective
information disclosure.

Governance
SEGA SAMMY HOLDINGSAs an organization to discuss and deliberate on the fundamental
policies and critical matters related to the Group’s climate change,
we established the Group Sustainability Subcommittee within theGroup Management Committee, an optional committee, in April
2022. The Group Sustainability Subcommittee comprises the
President and Group CEO of the Company, as well as directors
and members of the Board Audit Committee who are consistent

with sustainability in the skills matrix of the Board of Directors.
Additionally, it includes the CFO of the Group, ensuring compliance with TCFD disclosure requirements. The Sustainability
Division of the Company manages the secretariat.
The Board of Directors receives reports on the policies andplans developed in the Group Sustainability Subcommittee andapproves them as appropriate.

Strategy
To assess the potential risks and opportunities arising from futureclimate change and their financial implications for our businessactivities, we have conducted scenario analysis methods using
the TCFD framework.
We disclose the results of our scenario analysis based on

three axes: short-term (within 2 years), medium-term (over 2
years to within 10 years), and long-term (over 10 years) for thetiming of the emergence of climate change-related risks andopportunities that are expected to have a significant impact on
the Group.

Scenario Analysis Results (Risks/Opportunities, Financial Impact)
Category

Changes to policies andregulatory requirements

Efforts to improve
resource efficiency

Physical changes in theenvironment

Timing

Impact on the SEGA SAMMY Group [ ● Risk ● Opportunity]

Impact level

Medium/long term● The carbon tax burden will increase if governments adopt more brutal climate change-related
regulations and apply carbon taxes to greenhouse gas emissions.

MediumMedium/long term● If governments adopt more brutal climate change-related regulations and apply carbon taxes togreenhouse gas emissions, manufacturers will pass on the resulting increase in the carbon tax
burden, leading to higher procurement costs.

Large

Medium/long term●● Electric power charges could increase or decrease due to the use of electric power produced
using renewable energy.

SmallIntroduction of new regulations

Short tolong term● Manufacturing costs could rise due to transitioning to alternative materials (recycled/biomass
plastics) with smaller environmental footprints in response to tougher regulations.

Large

Relocation of highly efficientbuildings

Medium/long term●B y centralizing head office functions in Sumitomo Realty & Development’s Osaki Garden Tower,
which has advanced environmental systems and features, we will reduce greenhouse gas
emissions and curb cost increases resulting from the future introduction of carbon taxes.

Small

Recycling/reuse

Short tolong term● We will reduce costs by recycling used amusement machines and reusing parts.

Small

Reduction of parts, materials,
and packaging throughenvironment focused changes
to marketing formats

Medium/long term●W e will reduce the cost of parts, materials, and packaging, etc., by shifting to environment-friendly
marketing formats for online game sales and sales of amusement machines.

Large

Increasing seriousness ofabnormal weather events

Medium/long term● Sales could decline due to damage and shutdowns affecting manufacturing facilities and offices.

Small

Risks/opportunities item

Introduction of greenhouse gas
emission regulations andcarbon taxes

Short term: within 2 years, Medium term: over 2 years to within 10 years, Long term: over 10 years

64see our website for details on disclosure based on the TCFD recommendations.
web Please
https://www.segasammy.co.jp/en/sustainability/esg/tcfd/

Carbon Pricing

each 1.5°C scenario and 4°C scenario to assess the impact ofcarbon pricing.
In 2030, the projected carbon tax burden was ¥530 million in
the 1.5°C scenario and ¥160 million in the 4°C scenario, and in
2050 it would be ¥950 million in the 1.5°C scenario and ¥340
million in the 4°C scenario. Our ongoing commitment is to reducegreenhouse gas emissions by around 50% by 2030 andachieving carbon neutrality by 2050 as a group-wide objective.

For carbon pricing, which can be quantitatively evaluated basedon the third-party assurance of greenhouse gas emissions, wehave calculated based on the following method.
In the future, we will continue to explore the possibility of
disclosing quantitative evaluations for items beyond carbon pricing.
Greenhouse gas emissions (Scope 1 and 2) were
calculated by multiplying the emission unit by the activity
volume and multiplying it by the assumed carbon tax price for
Scenario

2030

2050

1.5°C scenario–¥530 million–¥950 million

4°C scenario–¥160 million–¥340 million

Risk Management
The Company has identified climate change-related risks
expected to significantly affect the group as follows:Risks related to the “transition” to a low-carbon economy
Climate change policies, regulations, technological development,
market trends, and evaluations.

Risks related to “physical” changes caused by climate change
Acute or chronic damage caused by disasters brought about by
climate change
In addition, for climate change-related risks anticipated tohave a significant impact, we evaluate their importance based on
the impact assessment criteria using internal indicators.

Integrated Report 2023

*1 Assumed carbon tax price: (1.5°C scenario) US$140/t-CO2 in 2030, US$250/t-CO2 in 2050, (4°C scenario) US$42/t-CO2 in 2030, US$89/t-CO2 in 2050 (quoted from IEA (World Energy Outlook 2022)), assuming
an exchange rate of US $1=¥135 (adopting the AR at the time of our third quarter results for the fiscal year ended March 2023)*2 Assuming that Scope 1 and 2 are targeted, greenhouse gas emissions are the same as in the fiscal year ended March 2022.

Indicators and Targets
Metrics Used by the Organization to Assess Climate
Change-Related Risks and Opportunities in Line with its
Strategy and Risk Management Process
The Group has established greenhouse gas emissions (Scope
1, 2, 3) as a metric for managing climate change-related risks
and opportunities.

Scope 1, Scope 2, and, if Applicable, Scope 3 Greenhouse
Gas Emissions and Related Risks
The Group has been working on calculating the greenhouse gas
emissions of the entire group since FY2015/3.
For FY2022/3, the Group has obtained third-party assurance
from SOCOTEC Certification Japan for Scope 1, 2, and 3 greenhouse gas emissions.

SEGA SAMMY Group Scope 1, 2, and 3 Greenhouse Gas Emissions Performance for FY2023/3
Category

Scope 1

Emissions (t-CO2)

Share (%)

9,075

1.1

Scope 2

14,459

1.8

Scope 3

768,058

97.0

Total of Scope 1, 2 and 3

791,592*3

100.0*3 Figures predate third-party guarantees and may be subject to change.

65Addiction
Prevention of Addictions and Disorders

Main Activities and Milestones
Survey and research on gaming disorders conducted by
SEGA  four gaming-related organization in Japan

2030 Targets
Compliance with laws andregulations, voluntary rules related
to addiction, etc.

Sammy  Promotion of measures to combat addiction such as gambling,
primarily with Industry Organizations

Contributing to the sounddevelopment of the industry

SSHD*  Monitoring of industry-academia collaborative research results with
Kyoto University

Implementation ofindustry-academia collaborative
research on addiction* SEGA SAMMY HOLDINGS INC.

SEGA SAMMY HOLDINGS

Proactively Addressing the Increasing Impact of Negative Aspects as
the Business Expands
Compliance withlaws, regulations,
voluntary rules, etc.

Engagement in industry
organization initiatives

Implementing
SEGA SAMMY’s
own initiatives

Collaboration with Industry Groups
E

At the World Health Assembly in May 2019, the World Health Organization (WHO) recognized “gaming disorder” as a disease, defining it as a pattern of excessive online and video gaming. In Japan, the Computer Entertainment Supplier’s Association(CESA), the Japan Online Game Association (JOGA), the Mobile Content Forum (MCF), and the Japan eSports Union (JeSU)
jointly established a study group to conduct surveys and research relating to phenomena triggered by game play, and to educate
the public about appropriate ways to enjoy video games. In April 2023, a report entitled “Survey and Research Results on Gaming
Disorders” which this study group has outsourced to external experts and conducted by them was published.
The Group will continue to address these issues appropriately in cooperation with the study group aiming to foster the healthy
development of the video game industry.

66

E Entertainment Contents Business
P Pachislot and Pachinko Machines Business
R Resort Business
SS Group

Addiction Countermeasures in the Pachislot and Pachinko
Machines Business
P Support for the Recovery Support Network, the Telephone Helpline Services
The Group began to implement initiatives against addiction following the establishment of the Society for Research on Pachinko Addiction in
2003. The Recovery Support Network (RSN), founded in 2006 with the support of various groups within the industry, has also introduced awide range of initiatives, including awareness-raising activities and telephone helpline services.

P Activities during Pachislot and Pachinko Addiction Awareness Week
Pachislot and Pachinko Addiction Awareness Week is held in Japan every year from May 14 to May 20 with the aim of raising awareness aboutpachislot and pachinko addiction. Centered around Awareness Week, in addition to holding forums to broaden understanding of these issues,
industry organizations are also engaged in Awareness Week poster campaigns and other activities. The Group will continue to support andcontribute to the sound development of the industry through these activities.

2003	Establishment of the Society for Research on
Pachinko Addiction2019	Formulation of Basic Guidelines for Addressing
Pachinko Addiction

2006 Establishment of the Recovery Support Network (RSN)	Formulation of Basic Guidelines for the Pachinko andPachislot Industry for Addressing Addiction2017 Release of a statement on pachinko/pachislot addiction2018	Replacement of pachislot and pachinko machines withnew models that comply with revised regulations
	Establishment of the Advisory Council on Addiction
Countermeasures in the Pachinko and Pachislot Industry(a committee of independent experts)

Integrated Report 2023

Addiction Countermeasures in the Pachislot and Pachinko Industry

2020	National Police Agency expresses expectations forpromoting measures to address addiction and urges at a
meeting of the Board of Directors of the Japan Federationof Gaming Business Associations

Industry-Academia Joint Research Project on Gambling Addiction
SS SEGA SAMMY HOLDINGS and Kyoto University are jointly conducting a process research project* on gambling addiction, involving thecollection and analysis of data related to the progression of gambling behaviors. The goal of this research is to identify early warning signs ofdangerous gambling behavior by collecting and analyzing playing data from casinos.
The Group intends to utilize the findings from this research to establish systems for the early identification of players displaying signs of
addiction, aiming to prevent further escalation. Additionally, we plan to create facility operations that promote self-control and restraint
among users. This approach will help us build an integrated framework for addressing gambling addiction, covering education and prevention
and treatment in cooperation with medical institutions and other organizations.
To date, our studies have analyzed playing data, particularly concerning the influence of prior wins or losses on subsequent betting behavior in
the process of repeated gambling sessions. We have concentrated on analyzing playing data from the card game baccarat. Results from the joint
research showed that repeated gambling behavior results in a tendency to increase the size of bets, regardless of whether the gambler wins orloses, and that this pattern is especially pronounced after a win. It was also found that the percentage of individuals engaging in risky gamblingtends to rise after repeated wins. These findings were also published in the research journal International Gambling Studies.
* This research project is being conducted from December 2017 to March 2026 at the Kokoro Research Center Kyoto University

67

ESG Risks and Countermeasures in the Value Chain
Recognizing that the various ESG risks faced by different face-to-face markets and business models confront
different types of risk, our group has taken steps to address these risks and has identified key themes forcontributing to sustainable management.
ESG RisksE

Environmental Risks

S

Social Risks

G

Governance Risks

Key Themes for Contribution to Sustainable Management1

Human Resources

2 Products and Services

4 Addiction

5 Governance

SEGA SAMMY HOLDINGSEntertainment Contents Business2
Consumer Area

Planning and development

Excessive use by minors

S

Social problems associated with minors who
incur excessive fees when playing video games
based on the Gacha system, which encourages gambling aspects, are not infrequent.
Content vendors are required to take countermeasures for this issue.
Response

We provide safe and trusted
products and services. For certain titles, we haveapplied age authentication to set upper limits
on monthly fees, and we have established andimplemented in-house guidelines to avoid theuse of vague terms that can give players overly
high expectations and to prevent the charging ofexcessive fees. We also create experiences thatmove the heart for people worldwide by providing
various types of gameplay for diverse users.

68

3 Environment

4

Operations and additional
contents distribution

Distribution and sales

Customer support

2

S

Video games create continued contact points
between the provider and consumers. Therefore, the provision of ongoing support is necessary. Any shortcomings in such support could
harm brands.
Response Normally, we respond to customer inquiries through a player support helpdesk. If needed, however, we establish
dedicated helpdesks.

Game addiction

In-house
Outsourcing

S

The World Health Organization (WHO) has recognized gaming disorder as a mental disease.
Response Research has begun by external
experts with a fair, neutral, professional background, led by game organizations such as
CESA, JOGA, MCF, and JeSU.
With the support of the four groups, abench-marketing study has been launched tolook at appropriate measurement criteria andthe characteristics of game addiction to support further research, such as understanding
the scale of problem gaming, its causes andprotective factors.

Pachislot and Pachinko Machines Business
2

3
Planning anddevelopment

Regulator revisions, etc.

42Manufacturing

Addiction and improper
modifications or playing
techniques that undermine
the industry’s image

S

Before they can be sold, pachislot andpachinko machines must receive approvalthrough prototype testing, which determines
whether machines are compliant with the Act
on Control and Improvement of Amusement
Business, etc and other statutory laws andregulations. Therefore, regulatory revision cansignificantly affect the marketability and unit
sales of pachislot and pachinko machines.

Operations

Sales

S

Growing public criticism about pachislot andpachinko addiction and the improper modificationof pachislot and pachinko machines or
improper playing techniques, could harm theimage of this industry. There is a risk that this
could ultimately lead to a contraction in thepachislot and pachinko machines market.

We are taking steps to increase
efficiency with the aim of accelerating development so that we can swiftly respond to regulatory revisions, etc. In addition, we have toaddress the risk of a potential drop in the ratio of
products receiving approval through prototype
testing while also developing models withdiverse gameplay that a wide range of users canenjoy casually. Our goal is to improve the qualityof our products, in parallel with efforts to rapidly
address changes to regulations.

Environmental burden of raw
materials and the processing ofrecovered and surplus parts

E

Sammy’s manufacturing processes could giverise to surplus electrical parts and other parts.
We use natural resources, such as wood, andmaterials that could place a burden on theenvironment, such as adhesives. Appropriately
processing pachislot and pachinko machinesat the end of their service lives is an important
responsibility.
Response We are committed to the “3Rs”(reduce, reuse and recycle) throughout all ourbusiness processes. At the design and development stages, we are working to standardize
parts and share parts between pachislot andpachinko machines, and we reuse the parts
from machines we collected from Pachinkohalls. We are promoting the use of water-based
adhesives with less environmental impact.
Our reuse initiatives are aimed at mitigating
environmental impact, but a parallel objective isto improve the profitability of our businesses by
increasing efficiency through the use ofcommon parts to reduce parts costs.

Integrated Report 2023

Response To support the sustainable
development of this industry, we are actively
working with industry organizations to control
addictive behavior. We also provide backing for
Recovery Support Network and are developing
machines with more casual gameplay. In termsof efforts to prevent improper modifications, we
coordinate with industry associations in a voluntary drive to collect pachislot and pachinko
machines that have been improperly modified. In
addition, we have established an internal officetasked with preventing illegal acts, which gathers market information and contributes to the
manufacture of pachislot and pachinko
machines that are highly resistant to improper
modification. We also take measures to urge
caution in relation to strategy guides that are
unfounded.

Response

In-house
External

Resort Business
4
Facility operation and realizationof investment in Gaming area

Compliance violations

5
Accumulating facility
operation know-how

Careful assessment of investment
opportunities in the Gaming areaG

Measures against addiction

Any litigation filed against us or any penalties incurred from regulatory
authorities for violations of laws or ordinances may undermine our brandimage and possibly affect our participation in the facility operation or
Gaming businesses.
Response Under the Group Risk and Compliance Promotion Committee, we are working to build a corporate structure that fosters the development of sound corporate management in observance of laws, ordinances,and societal norms.

S

Lack of responsiveness to social demands for measures against gambling
addiction could invite public backlash and jeopardize business continuity.
Response Through industry-academia joint research with Kyoto
University, we are working to develop systematic measures against gambling addiction.
By analyzing behavioral data from players showing signs of gambling
addiction, we aim to establish a system that rapidly detects addiction andprevents behavior from escalating.

69

Non-Financial Data
Human Resources Data
Number of Employees

Number and Percentage of Female Managers

PeoplePeople / %

%

136

8,798
7,993

New Employee Turnover Rate

7,535

7,760

8,219

1.39
113
8.2

101
85
5.9

8.9

8.0

84

0.93

1.04

6.5

0.78

0.00
’19

’20

’21

’22

’23 (FY)

Note: The number of employees increased in fiscal year 2020,
mainly due to the transfer of temporary workers in the Entertainment Contents Business to permanent employment contracts.

SEGA SAMMY HOLDINGS

Employees Rehired after Retirement
People

’19

’20

’21

’22

’19

’20

’21

’22

’23 (FY)

Note: The new employee turnover rate indicates figures for
SEGA SAMMY HOLDINGS, SEGA, and Sammy only.

Number of female managers
Percentage of female managers

Employees Taking Childcare Leave andPercentage of Employees Returning toWork after Childcare Leave

Average Overtime Hours per Month
Hours

81

People / %

100

24.3
22.3

57

’23 (FY)

21.5

87.2

100

100

92.9

94.4

100
100

137

61

119

55

114

14.7

86
19

’19

24

’20

’21

’22

’23 (FY)’20

Other Indicators
Mid-Career Hires (People)
Hiring of Persons with Disabilities*1 (People)
Employees Taking Maternity Leave (People)
Days of Paid Leave Taken (Full-time employee) (Days)*2
Percentage of Paid Leave Taken*2 *3 (%)
Days of Volunteer Leave Taken (Days)
Employees Taking Volunteer Leave (People)
Difference in wages between male and female workers (all workers)

’21

’22

’23 (FY)

’20

’21

’22

’23 (FY)

Number of employees taking childcare leave Percentage of male employees returning to work afterchildcare leave Percentage of female employees returning to work afterchildcare leave
(FY)

2019

2020

2021

2022

2023

224
94
66
–
–
101
42
–

196
103
70
–
–
18
16
–

97
98
48
11.0
50.7
0
0
–

131
129
39
12.0
56.6
26
19
–

310
135
38
14.5
65.6
8
31
76.5

*1 Number of people with disabilities employed by Group companies subject to the Employment Rate System for Persons with Disabilities*2 Figures are shown from FY2021/3 due to a revised calculation method.
*3 Calculated by dividing the number of paid leave days taken by the number of statutory annual paid leave days. Includes statutory annual paid leave days at some Group companies.

Scope of Data and Aggregation Methods

	Fiscal year 2019: 15 domestic companies, fiscal year 2020: 14 domestic companies, fiscal year 2021: 12 domestic companies, fiscal year 2022: 10 domestic companies, fiscal year 2023: 11
domestic companies (SEGA SAMMY HOLDINGS, SEGA, Sammy, ATLUS, Sammy Networks, SEGA TOYS, SEGA Logistics Service, DARTSLIVE, TMS ENTERTAINMENT, PHOENIXRESORT, SEGA SAMMY CREATION)
	Number of employees indicates consolidated Group figures
	The wage difference between male and female workers is calculated for SEGA SAMMY HOLDINGS Inc. The calculation method used is average annual income of female employees divided
by average annual income of male employees.

70Environmental Data
CO2 Emissions (Scope 1)

CO2 Emissions (Scope 2)

t-CO2

CO2 Emissions (Scope 3)

t-CO2

9,075

7,199

84,498t-CO2

953,356

80,566

7,049
5,782

768,058

6,093

607,175
505,629

20,527 20,982
14,459

’19

’20

’21

’22

’23 (FY)

’20

’21

’22

’23 (FY)

Industrial Waste Discharge

MWh

’20

’21

’22

’23 (FY)

Water Usage

Integrated Report 2023

Electricity Usage

’19

m3

t

11,089172,918 171,020

855,791

823,099
767,880
711,227
603,287

52,201 52,847 51,411
1,112
’19

’20

’21

’22

’23 (FY)

’19

1,571

’20

’21

1,164

1,381

’22

’23 (FY)

’19

’20

’21

’22

’23 (FY)

Notes 1: Some data estimated based on total floor area
2: Decline in CO2 emissions mainly reflects reductions in the use of fuel and electricity
3: Coefficient for CO2 emissions from purchased electricity: Adjusted emission coefficients for each electricity provider for the fiscal year prior to each reporting fiscal year
4: There are changes from the previous year’s figures due to a review of the calculation method used when obtaining a third-party guarantee.

Number of Violations of Environmental Laws and Regulations(FY)

Environmental Indicators at Sammy’s Kawagoe Factory
Pachislot and pachinko machine recycle rate (total for pachislot and pachinko machines)

2020

2021

2022

2023

0

0

0

0

2020

2021

2022

2023

95.4

98.6

96.4

98.3

(FY)

Recycle rate (%)* Data on the use of environmentally friendly materials (amount of wood used) has not been disclosed from the fiscal year ended March 2023 onward, as we have switched to alternative materials.

Scope of Data	Fiscal year 2019: 15 domestic companies, fiscal year 2020: 13 domestic companies, fiscal year 2021: 19 domestic companies, fiscal year 2022: 19 domestic companies, fiscal year 2023: 19
domestic companies (SEGA SAMMY HOLDINGS, SEGA, Sammy, ATLUS, Sammy Networks, SEGA TOYS, SEGA Logistics Service, DARTSLIVE, TMS ENTERTAINMENT, PHOENIXRESORT, Sega of America, Inc., Sega Europe Ltd., Amplitude Studios SAS, Relic Entertainment, Inc., Sega Black Sea EOOD, Sega Publishing Europe Ltd., Sports Interactive Ltd., The Creative
Assembly Ltd., Two Point Studios Limited)

Please check the Company website for the latest ESG data.
https://www.segasammy.co.jp/en/sustainability/data/dataesg/

71Special Dialogue

Management succession

The SEGA SAMMY Group saw a dramatic turnaround in performance in the fiscal year ended March2023 in the wake of the COVID-19 pandemic, recording financial results that far exceeded our
expectations. The past ten years or so have been marked by a great deal of turbulence for the Group,
as it sought to navigate technological innovations and mounting competition in the consumer games
sector, as well as regulatory changes and contraction in the pachislot and pachinko machines market. In
the midst of this turmoil, the Group proceeded with the succession of a new President and Group CEO.
We sat down with Chairman Hajime Satomi and his son, the current President and Group CEO
Haruki Satomi, to get their thoughts about how the transition in management came about and what
led up to it.

SEGA SAMMY HOLDINGSHaruki Satomi

Hajime Satomi

President and Group CEO, Representative Director
SEGA SAMMY HOLDINGS INC.

Chairman, Representative Director
SEGA SAMMY HOLDINGS INC.

Lead-up to 2017, when Haruki Satomi became President and COO
First, Chairman Satomi, I would like to ask: What kind of
training opportunities did you provide for CEO Satomi tofoster him as someone fit to be a top manager?
Hajime: When Haruki joined Sammy Corporation in 2004, I felt heshould experience a range of challenging work environments. As acompany, Sammy was familiar to him from childhood, so, thefollowing year, I purposefully transferred him to SEGACORPORATION. I felt it would be effective to have him takecharge of a new business there and gain business experience.
Because he was stationed on the West Coast of the United States,
he began building his career in an environment where there were
no familiar faces around to help him out in a pinch. At his own

72

request, he also completed an MBA at UC Berkeley School ofBusiness while working. It was during this time that he learned thebasics of management. A typical MBA course takes two years ofintensive study, but Haruki took three years, attending school on
weekends and in the evenings while working at the office during
the day. I imagine it was a really tough time for him.
Haruki: Out on the West Coast, I was working on a new business
distributing SEGA games over the Internet. I had originally beeninterested in starting up a business, and after graduating fromuniversity, I worked for a while at a financial institution to gain
expertise. So, being allowed to start this new business was exactly

at SEGA SAMMY

Chairman Satomi, how did you view the transfer of staff tothe new company?
Hajime: As I observed a series of developments related tosmartphone games, I myself felt keenly that ICT was evolving, so I
was fully on board with addressing the emerging era of thesmartphone. Also, to accomplish anything it is extremely importantto have a manager who is really driven and willing to push himself
to the limit, so I also appreciated Haruki’s stance of taking initiativein setting up his own operation.
To be honest, though, for someone of my generation, I felt it
was difficult to properly gauge what was going on in the fastchanging digital world. So I think it was very fortunate for ourGroup to have young managers appear on the digital stage withthe determination to take on new challenges.

CEO Satomi, you were also responsible for undertaking
structural reforms at SEGA.
Haruki: That’s right. I started at SEGA in 2005 and became
Senior Vice President in 2014. At that time, SEGA’s businessperformance was in fairly bad shape, so I set out to build theCompany back up. We separated the various businesses into
separate companies to clarify earnings responsibilities,
established the Mission Pyramid, and aimed to bring theCompany together under a shared set of values.
Hajime: Sammy’s executives approached me around this timeand asked me to appoint Haruki as President of Sammy. I wasaware that he was helping SEGA bounce back from a very
trying situation, but I recall being surprised at how muchattention he was attracting within the Group as a whole, muchsooner than I expected.

Haruki became President of Sammy in April 2016. Aroundthat same time, we announced the establishment of ZEEG,
a joint venture with competitor Universal Entertainment.
The announcement that the two companies vying for the
top spot in the industry had come together in a tie-up musthave been a big surprise, even within the industry.
Haruki: In tandem with the structural reforms at SEGA, I
began laying the groundwork for ZEEG several years before
assuming the role of President at Sammy. I knew we could
expect this partnership to bring cost benefits through the useof common cabinets and parts and enhance the quality ofentertainment through technical collaboration. After a long
period of repeated discussions both in and outside the Group,
we finally reached this goal.

Integrated Report 2023

what I had hoped for. By the way, video game console software atthat time was still mainly sold as a package, and the Group still had
a conventional sales network. Getting involved in this business in adigitally advanced country like the United States was an invaluable
experience, which prepared me for the various technologicalinnovations that were to come.
Balancing the MBA studies and work was demanding andtough to be sure, but looking back now, those three years haveinformed my whole life.
In 2012, I started up SEGA Networks, a business company
specializing in smartphone games. As you know, SEGA’s focus
had been on developing games for home video game consoles
and amusement facilities. In those days of the flip phone, mobile
games still felt like a completely different industry, and not many
employees were interested in their development. But I wentaround to SEGA employees pitching the advanced
performance of smartphones, which were already becoming
more widespread overseas before they reached Japan, andemphasized the future potential of smartphone games. Then,
eventually, I was able to make SEGA Networks a separate
company. In its first year, the company was unable to achieve
its forecasts and ended up in posting a significant loss.
However, confident that this business would pan out, I asked
my whole team to transfer over from SEGA. At the time, mysense was that we couldn’t beat up-and-coming players in themobile game business without that degree of commitment.
After that, we put out a hit title and the business quickly started
turning a profit. I’m truly grateful to that team at SEGA Networks
who were supportive of my thinking.

Hajime: When I called Haruki in to speak with me around thattime, I got the impression that he knew much more about thebusinesses of both Sammy and SEGA than I did, including thedetails of what was going on. If that were the case, I thought, heshould take charge of managing the entire Group as COO
under my leadership. I brought his appointment as
Representative Director, President, and COO of SEGA SAMMYHOLDINGS to a discussion of the Board of Directors meeting in2017. Under the framework at that point, Haruki was at theforefront of the business, but as CEO I still had full responsibility
for management.

During your time as COO, I heard you felt that you were
under the most pressure ever in your career. How did you
overcome that?
Haruki: Being entrusted with all the businesses of the Group wasa lot of pressure. But I also had the habit for many years of playingout in my mind what it would be like in the future to become thePresident and writing down bullet points in my notebook about thekind of mission I ought to carry out. So, when I became COO, I
looked back at my notes and went about putting them into
practice one by one.

73

Haruki Satomi spearheading structural reforms in 2020
People attribute strong performance in the fiscal year
ended March 2023 to the structural reforms carried out
in 2020 in response to the pandemic, which yielded
great results.

SEGA SAMMY HOLDINGSHaruki: In our previous medium-term plan Road to 2020, which
covered the fiscal years ended March 2018 to March 2020, we
did not achieve our targets. However, by running a PDCA cycleon the plan, I think we were able to grasp the weak points andissues of the Group as a whole, which was a good outcome. As
you know, the impact of COVID-19 was enormous and ourbusinesses were hugely affected. I thought we should start out
by imagining the worst-case scenario and think about what weshould do from there.
In our worst-case scenario, we estimated a possible loss of¥45.0 billion. Even if that were to happen, the Company would not
be immediately insolvent, but I felt we should use this crisis as anopportunity to confront long-standing issues and undertake
structural reforms at a level that would have been impossible innormal times.
Overview of Structural Reforms
Review of business portfolio (transfer of Amusement Center
Operations area, resource reallocation from Amusement
Machine area to Consumer area)
Reduction of fixed expenses (call for voluntary retirement)
Review of non-business assets (disposal of owned assets)
Hajime: At the time, when I saw the proposed reforms, as CEO I
honestly wondered if we needed to go that far. The Amusement
Center Operations area was still profitable, so I thought it would be
a waste to sell it off at a low price. But Haruki and our CFO, Koichi
Fukazawa, told me that they didn’t want to shirk responsibility byhaving me choose from among several scenarios. Instead, theywanted to make their best choice and take responsibility forseeing it through. When I realized how committed they were, itcame across how seriously they were thinking about the Groupand its management, so I approved their proposed structuralreforms for the sake of the Group’s future.

74

Among the people who took voluntary retirement there were
nearly 400 Sammy employees who had supported me since theCompany’s founding. I set up the opportunity to talk directly withthe retiring employees, and did everything in my power to support
their career transitions.
Haruki: We carried out these reforms because we had Japan’s
Stewardship Code and Corporate Governance Code in mind. To
be honest, if the Group were not a listed company, we likely could
have maintained minimal earnings and gradually deteriorated
while carrying out business as usual. But that’s no way to beaccountable to shareholders and other stakeholders. Since we area listed company, the management team has a duty to elevate theGroup further toward a growth trajectory while achieving a certain
rate of return on capital. Otherwise, the management team would
quickly lose the trust of investors and we would no longer have areason to exist as a company.
Hajime: Along with the reforms, I also decided to step down as
CEO. In 2021, I discussed Haruki’s appointment with anindependent advisory board consisting of all of our outside
directors. No one objected.
Haruki: From a sustainability perspective, my personal opinion isthat the survival of a company is the most important thing. The
next important question is how we can increase earnings. It’s
possible to generate strong earnings in the short term without
considering any negative impact on society or the environment. In
fact, from time to time companies with such strategies appear,
both in the pachislot and pachinko machines sector and in the
consumer games sector.
But that kind of approach can’t guarantee a company’s future
prospects. All of the employees and business partners involved
with our Group can take pride in the fact that they contribute tosociety every day. In other words, a company’s value increases
only if its management takes the straight and narrow path. I’mconvinced that the structural reforms we carried out in 2020 wereabsolutely necessary measures for creating such a framework.

About management succession and leadership
In the INTEGRATED REPORT 2021, Kohei Katsukawa,one of the outside directors of SEGA SAMMY, said,“Haruki is someone who played a central role in the
structural reforms in 2020 and who is determined toachieve the goals of the new medium-term plan. That’s
why I feel that the Group under his leadership as CEO ismoving into a pivotal period, like a second founding.”
Chairman Satomi, what are your thoughts now that you
have stepped down as CEO?

Haruki: Clarifying the authority of the CEO is the essence ofcorporate governance. Within the scope of their authority, CEOsenhance corporate value and reward shareholders and otherstakeholders. The higher level body that oversees this is theBoard of Directors. I believe the Board ought to be a place wherea diverse range of outside directors evaluate the CEO’s
management from a variety of perspectives. I am also a Director,
but at Board meetings, my position is always to takeresponsibility for proposing management strategies as the headof the executive officers.
Hajime: Going forward, I will take part in management as one of
the Directors. Of course, as the Company’s founder, I have a strong

Chairman Satomi, tell us about the qualities you think arenecessary for a leader.
Hajime: I think the most important quality is being able to obtainbuy-in from others. Doing this calls for three things: setting anover-arching direction and not wavering from it; translating thisdirection into realistic measures and sharing them with employees;
and never giving up until you achieve greater success.
I also want leaders to have a bold vision. In 1965, I started selling
game machines because I thought I could have a bold vision for thatbusiness, considering the huge market potential and thecompetitive situation at the time. I want Haruki to become a leader
who shares that kind of vision with employees and stakeholders.

CEO Satomi, what did you learn from Chairman Satomi asa leader?

Integrated Report 2023

Hajime: For me, the title of CEO, even more than Chairman or
President, encouraged me to work hard to manage the Company
with a deep sense of responsibility. From that perspective, passing
on the CEO position was a big decision. Now that I have passed on
this responsibility, I do not interfere more than necessary inmanagement decision-making.
Although I stepped down as CEO, it is a well-known fact that I
founded the Company. If I give directions to the CEO, everyone will
feel like I’m still in charge. I’ve let Haruki assume full responsibility
for Group management. In Japan, you often see cases where acompany’s founder or a charismatic CEO continues to cling to thereins of management even after appointing a successor, andsometimes even dismisses their successor. But if someone
doesn’t want to cede authority, I think they should continue toshoulder responsibility as CEO.

desire to return the Group’s market capitalization to ¥1 trillion andmake SEGA SAMMY a world-leading entertainment company. So,
I want to put proactive governance in place that will encourage
people to take on this challenge. However, I mustn’t forget that I
have entrusted the realization of that vision to my successor. In
that sense, the Group truly is in a kind of second founding period.
Also, having integrity as a company is something I haveinsisted on since our founding. More than anyone, I know what
the Group has prioritized and how it has acted at various
turning points in our history. So, I will be taking a hard look atwhether or not the current management team keeps to the rightpath in this regard.

Haruki: I’ve been observing my father for a long time, and I feelthat his courage to believe in people is truly remarkable. People
never do exactly what you expect, but if you can believe in themto do their job, trusting your subordinates and business
partners, you can obtain greater buy-in. That’s something I’mlearning every day.
Hajime: My creed was never to mislead others, never to take out
my anger on others unnecessarily, and never to speak ill of others.
In other words, I’ve lived my life to this point with a clear sense of
how my behavior affects my family and my employees. Integrity
may also be an important quality for a leader. In business as well,
I’ve never sought to make a profit in a way that would cause people
to talk behind my back.
Haruki: We are passing on what I learned from my father’s
management style to employees in the form of five personal
skills: drive, initiative, resolve, control, and empathy. I also put ahigh value on integrity. In business, even if you have to make harddemands on employees or business partners, there should
always be integrity at the core. History clearly shows that if you
lose your humility and don’t act with integrity, you will stop being
able to obtain as much buy-in from others and will only go
downhill as a leader.

75

A Message from an External Director

Naoko Murasaki
Director, Audit andSupervisory Committee Member(External)

Evaluation of governance framework

SEGA SAMMY HOLDINGS

76

I have spent many years working in risk and crisis management andcompliance-related consultancy, and before that I was with the
National Police Agency. This background makes the general field ofrisk management my specialist area, and my radar is constantly
tuned to risk, whether from regulatory, geopolitical, or other sources.
My role at SEGA SAMMY involves giving advice and making suggestions mainly in the area of risk management, but also from theperspective of diversity as a woman.
One thing that I value highly about SEGA SAMMY’s management system is that it allows discussion to continue until the external
directors are satisfied. It is noteworthy in particular that there is abody set up especially to promote this approach, the Group Management Committee, which is a subcommittee under the Board of
Directors. The committee meetings focus on agenda items before
their presentation to the Board of Directors, allowing time to discussand examine them in thorough detail. Being able to discuss matters
adequately at the committee meetings means that the Board of
Directors is left with the clear role of taking the final decision, whichsmooths the decision-making process.
In fall 2022, a management camp was organized for directors
and executive officers. Eating and sleeping under the same roof andhaving the time to discuss a wide range of subjects at length gave us
the chance to share our individual ideas and personalities in a waythat is not possible at the regular meetings of the Board of Directors.
I think this very significant experience has helped improve teamwork among the directors and has also further enhanced the opportunities for external directors to contribute with their wide-ranging
experience and knowledge.
Looking ahead, one issue I see is the need for more in-depth
discussion of risk management.
In 2022, alongside the launch of the Group Governance Division, the Group Risk and Compliance Subcommittee was established, which reports to the Group Management Committee. This
has enabled detailed information and data on risk to be gatheredfrom the frontline for analysis by senior management. However,

although this does mean that a risk management framework is
taking shape, discussion somehow ends up centering on risk that isalready apparent, with discussion of potential risk an afterthought.
This makes me feel that further improvement is needed. Goingforward, the SEGA SAMMY Group may find itself encountering all
kinds of unaccustomed risk in the course of its business expansion. I
consider it essential to analyze and quantify this future potential risk.
If the impact of a potential risk on business is identified, a considered
response can be implemented if the risk does emerge, and if theextent of the risk is known, an appropriate level of risk can be
accepted as a potential path to growth.
I also would like to see Group governance strengthened. The
SEGA SAMMY Group has made rapid progress with globalization inrecent years and now has a large number of overseas subsidiaries.
To achieve further major advances in overseas markets from thisposition, the Group needs to strengthen the connection with headquarters and ensure that its values are shared across all Group
companies. To do so, I believe that SEGA SAMMY should further
increase opportunities for communication with its overseas organizations so that they acquire a firm understanding of the strategy andpolicies of Japan headquarters. From a defensive standpoint, theauditing systems of overseas subsidiaries are also critical. Given the
differences in language, business practices, and legal systems,
reliable audit of overseas subsidiaries is never easy, but the first step
must be to train up human resources able to carry out global audit.
As audit experience is a useful skill for corporate management, andnot only in the overseas context, I think it would be a good idea topromote it actively as a key accomplishment in the study programfor executive management candidates.
In the two years since I became involved in the management of
SEGA SAMMY, I have seen progress each year with strengtheningof governance. Being able to evolve rather than fearing change is
one of SEGA SAMMY’s most distinctive features. Going forward, I
would like to see it continuing to take rapid action in this area to put inplace a more advanced governance framework.

It is my strong impression that
the SEGA SAMMY Group is anorganization with a strong sense ofhonor and responsibility and the ability
to work together towards its goals.

Looking to sustainability activity to boost corporate value
are women, so the ability to offer products and services that appeal
to women is a major factor in achieving growth. I think that womenare naturally more likely to be attuned to other women’s values andsensibilities, which means that incorporating the unique perspectiveof female employees in business activities is a crucial point. The
SEGA SAMMY Group Mission is Constantly Creating, Forever
Captivating. To realize this mission, I believe that it is important tocreate an environment where employees can work with motivation.
Realizing a workplace that is supportive to female employees will
also have advantages for male employees, such as making it easierfor them to take childcare leave. Seen in this light, I think it has major
benefits for both men and women, and SEGA SAMMY is in fact
moving rapidly ahead with human resources initiatives that include
enhancing the workplace environment in this way. The executive
team is strongly committed to this and I hope to see focused initiatives continue in this area.

Integrated Report 2023

With the establishment of the Group Sustainability Subcommittee in2022, directors are kept informed of the status of initiatives toaddress material issues and of their progress as measured by key
performance indicators. With adequate opportunity now for related
discussion, the result is that sustainability governance has improved
with remarkable speed. One task going forward is to visualize theconnection between current sustainability activities and management strategy and to feed that in to long-term and sustainable corporate value increase. If this connection is made clear, it will boost
the confidence of shareholders and investors in the Group’s sustainability activity and also allow employees to devote themselves tothese activities wholeheartedly.
Meanwhile, I believe that creating a supportive work environment that promotes active career opportunities for women will
become an increasingly important issue for the SEGA SAMMY
Group. In the Group’s business areas, half of its potential customers

An exciting future for the SEGA SAMMY Group
Thanks to the concerted efforts of all its employees, the Sega
Sammy Group is making excellent progress with the medium-term
plan. However, so far this only reflects a small part of the Group’s
growth potential. I look forward to seeing the Company continue toforge ahead, overcoming issues one by one while keeping a firm gripon the reins.
The Entertainment Contents Business, where overseas development is just taking off, is expected to produce the long-awaited new
global IP that will be the growth engine of the Group. I think this advantage should be followed through with more active growth investment
in mergers and acquisitions and in acquiring new technology.
The Pachislot and Pachinko Machines Business has achieved amarked improvement in profitability by steadily driving structuralreform and implementing the initiatives of the medium-term plan. I
am very impressed by this achievement. I hope to see this sector
support the growth of the Group as a whole by continuing to generate stable profit. At the same time, I hope the Group will actively

embrace the challenge of developing new business fields.
One point that occurs to me in this connection is that, in the exploration of new businesses, I would definitely like to see more active
sharing of expertise and knowledge between SEGA SAMMY’s
business companies as members of the same corporate group. I
think that would result in further acceleration of growth for the Group
as a whole.
It is my strong impression that the SEGA SAMMY Group is anorganization with a strong sense of honor and responsibility and theability to work together towards its goals. Moreover, instead of
adopting a purely defensive approach, its corporate culture welcomes new challenges and takes them comprehensively on board.
To reinforce that culture, I am committed to working hard to fulfill myrole as external director, focusing on areas such as risk management where my experience and knowledge can be of benefit. I am
confident that all SEGA SAMMY stakeholders can look forward toseeing the Group make great advances from now on.

77

Governance
Governance Highlights
Transition to a Stronger System

FY2006/3
Launched the Group Internal Control Project
Purpose - To strengthen internal controls from a group-wide
perspective

Ratio of Independent External Directors

Independent External
Directors

Directors

50%

50%

FY2008/3
Appointed an External Director
Purpose - To strengthen management monitoring andsupervision functions and reflect rich insights into
management

FY2009/3
Increased External Directors to Two
Purpose - To strengthen management monitoring andsupervision functions and reflect rich insights into
management

Ratio of Female Directors

Male

Female67%

33%

FY2010/3
SEGA SAMMY HOLDINGS

Established Group Compliance Liaison Committee
Purpose - To establish an internal control system required
under the Japanese Version of the SOX Act

FY2016/3
 stablished Independent Advisory Committee
E
Assessed the Effectiveness of the Board of Directors
Disclosed Medium-Term Management Policies andTarget Management Indicators
Purpose - To provide opinions on major management issues
and exchange information for supervising theBoard of Directors
- To strengthen the functions of the Board of
Directors- To promote accountability to capital markets
and strengthen group management

Corporate
management

Entertainment
business creation

Finance andaccounting

ICT・DX

GlobalSustainability

Risk management
and compliance

FY2017/3

No. of Years Served as Internal Director*1 (as of August 2023)

 stablished the Position of CFO
E
Increased External Directors to Three
Disclosed Action Plan for Achieving Medium-Term Performance Targets

More than
10 years

Purpose - To drive growth strategies from a financial perspective and strengthen dialogue with capital
markets

FY2019/3
I ncreased External Directors to Four
Reviewed Compensation System for Directors
Adopted Stock Compensation Program with Restriction
on Transfer

One person

More than
1 yearThree people

Less thanNone
1 year*1 Includes directors who are Audit and Supervisory Committee members

Changes in Directors’ Compensation (SEGA SAMMY HOLDINGS INC.)
Millions of yen

FY2023/3

FY2021/3

Purpose - To strengthen governance- To strengthen sustainability management

Two people

More than
5 years

Purpose - To strengthen governance- To introduce incentives to improve corporate
value in the medium to long term
 ransitioned to a Company with an Audit & Supervisory
T
Committee
Established Group Sustainability Subcommittee
Established Group Risk and Compliance Subcommittee
Purpose78

Directors with Diverse Experience

FY2022/3
FY2023/3*2

544

46 5901,141

53 1,194

1,426Internal directors
External directors*2 All Audit and Supervisory Committee members are included for FY2023/3

85 1,511

Basic Stance Regarding Corporate Governance
The SEGA SAMMY Group positions corporate governance as themost important foundation for facilitating good corporate behavior.
The Group has the aim of “improving efficiency,” “securing soundness” and “enhancing transparency” of corporate management
as its “basic policy for corporate governance”. Based on this, theGroup has made decisions on important management issues,
including the appointment of director candidates, determination of
directors’ compensation, oversight of management, and determination of auditors’ compensation.

Securing Soundness
Amid significant changes in the business environment, to maximize
the Company’s corporate value, the Company and the Group willappropriately recognize and manage the various risks surrounding
the Company and the Group. The Company and the Group will
strive to secure sound management by establishing a system toensure compliance not just with laws and regulations, but withethical standards and societal norms (compliance system).

Enhancing Transparency
Improving Efficiency
By establishing a rapid and appropriate decision-making process
and improving the efficiency of corporate management, the Groupaims to maximize its corporate value, thereby striving to provide
appropriate returns to various stakeholders, including shareholders.

With the growing importance of information disclosure for companies, the Group will fulfill its accountability to all stakeholders,
including shareholders, and further improve disclosure throughproactive engagement in IR activities, thereby cultivating highly
transparent management. In addition, the Group proactively andvoluntarily develops its CSR activities, seeing them as helping
both the Group’s sustainable value creation and the sustainable
development of stakeholders.

Accelerating growth strategies and business reforms
with a transparent and sound governance system

To further promote productive discussions by the Board of
Directors and to strengthen its oversight functions, theCompany has chosen the structure of a company with an Audit
and Supervisory Committee. This will allow it to delegate aconsiderable portion of important decisions on businessexecution to executive directors.

MISSION / PURPOSE(Raison d’être)Integrated Report 2023

A corporate governance system for realizing our purpose

Constantly Creating,
Forever Captivating—Making life more colorful—

Board of Directors
The Board of Directors aims to achieve flexible management through thecurrent level of 12 directors. Certain important managerial matters at eachbusiness company are also resolved or reported at various bodies, including
the Company’s Board of Directors.

Audit and Supervisory Committee
The Audit and Supervisory Committee consists of four Audit and Supervisory Committee members. The committee assigns duties torespective Audit and Supervisory Committee members, and deliberates on key matters for consideration such as those involving the statusof establishing and operating the Group’s corporate governance and internal control systems, and evaluations of the independent auditor.

Voluntary Committees
Voluntary Committees are the bodies that discuss and inspect the specified matters regarding the management of the Group which are
specifically referred by the Board of Directors, and report and submit the results of such discussions and inspections to the Board of Directors. The following two Voluntary Committees have also been established: an Independent Advisory Committee and a Group Management
Strategy Committee (now the Group Management Strategies Committee). In addition, the Group Sustainability Subcommittee and theGroup Risk and Compliance Subcommittee are established as bodies that discuss and inspect further specialized matters.

79

Corporate Governance Systemucts, merchandise, services, etc., can generate prompt andoptimal management decisions, the Group companies havechosen the structure of a company with company auditors. The
Company and the Group also appoint external directors andstrengthen the executive officer and internal auditing systems,
thereby improving corporate governance from the aspects ofboth oversight and execution.

To further promote productive discussions by the Board of Directors and to strengthen its oversight functions, the Company has
chosen the structure of a company with an Audit and Supervisory
Committee. This will allow it to delegate a considerable portion ofimportant decisions on business execution to executive directors.
In addition, by considering that directors with a wealth of knowledge and experience regarding the industry, market trends, prodManagement/
Supervision

General Meeting of Shareholders
Appointment/
Dismissal

Independent
Advisory
Committee(nomination andcompensation)

Board of Directors

Consultation/
Reporting

Audit/
Oversight

Instruction/
Reporting

Coordination

Audit and Supervisory Board
Members and Internal Auditing Office
Liaison Committee
Coordination

SEGA SAMMY HOLDINGS

Instruction/
ReportingInternal Auditing OfficeGroup Risk and Compliance
Promotion Committee

Audit

Instruction/
Reporting

Each Organization

Execution

Holdings Audit Liaison Committee

ReportGroup Risk and Compliance
Subcommittee

Instruction/
Reporting

Audit and Supervisory
Committee OfficeGroup Audit Liaison Committee

Main Committee

Instruction/
ReportingInstruction/
SupportInstruction/
ReportingGroup Management Committee

Group Sustainability
Promotion Committee

Coordination

Audit and Supervisory
Committee members

Instruction/
ReportingInstruction/
Reporting

Independent Auditor

Audit and Supervisory
Committee

Board of Directors (excluding Audit andSupervisory Committee members)Group Sustainability
Subcommittee

Appointment/
Dismissal

Supervision/
Evaluations

Appointment/
Dismissal

Group Companies

Director Skill Matrix
Skill Matrix Definition

Item

The Company selected experienceand knowledge required as a publicly
traded company, along with thosethat are required to achieve the longterm vision of the Company.

Definition

Corporate management

Manager of a listed company or equivalent organization

Entertainment business creation

Experience as a business development manager or in starting a new business in the Group’s business segments

Finance and accounting

Professional experience at financial institutions, auditing firms, etc., or experience as an officer in charge of afinancial department at a major company

Risk management and compliance

Attorney, or other professional experience, or experience as an officer in charge of legal affairs, compliance oraudit at a major company

ICT/DX

Experience at IT companies, vendors, consulting firms, and other professional services, or experience as an
officer in charge of IT at a major company

GlobalExperience of living abroad, experience at an overseas operating company, or equivalent experience

Sustainability

Individuals who have insight into Environment and People (Diversity), which are part of the Company’s fivematerial issues to be addressed (materiality)*, and are expected to play an active role in the promotion ofsustainability by the Group* Human Resources, Products and Services, Environment, Addiction, and Governance

Skill Matrix
Name
Directors

Audit &
Supervisory
Committee
Members

Expertise and experience
Risk management
and compliance

GenderCorporate
management

Entertainment
business creation

Hajime Satomi

Male

●

●

Haruki Satomi

Male

●

●

Koichi Fukazawa

Male

●

●

Yukio Sugino

Male

●

●

Hideo Yoshizawa

Male

●

●

●

●

●

Kohei Katsukawa

External

Male●

Melanie BrockExternal

Female●Fujiyo Ishiguro

External

Female●Yukito Sakaue

Male

Kazutaka Okubo

External

Male

Shione Kinoshita

External

FemaleNaoko MurasakiExternal

Female●Finance andaccounting●

ICT/DX

GlobalSustainability

●

●

●
●

●
●

●

●

●

●

●

●

●

●
●

●
●

●

●
●

●

Note: The above table indicates up to four fields in which expertise and experience are particularly expected for each individual. The table is not an exhaustive list of all the insight and experience that each individual possesses.

80Policy for Appointment of Directors
whether he/she is capable of appropriately discharging his/herduty of care to serve as a responsible and prudent manager andto contribute to the Group’s sustainable growth and enhancement of corporate value, as entrusted by shareholders to the
management, thereby seeking to secure and improve the functions of the Board of Directors.

The Company has formulated a skills matrix based on the experience and knowledge required to manage a listed company andthe experience and knowledge required to achieve the Company’s long-term vision. In connection with the appointment of
directors, the Independent Advisory Committee evaluates eachdirector candidate based on the skills matrix to determine
Reasons for Appointment of Independent Directors
Name

Reasons for Appointment

Kohei Katsukawa

We chose to appoint Mr. Kohei Katsukawa as External Director as we expect that he will continue to provide valuable opinions and suggestions on the management of theCompany based on his wealth of experience and broad-ranging insight gained over many years as a corporate manager.

Melanie Brock

We chose to appoint Ms. Melanie Brock as External Director as we expect that she will continue to strengthen the Company’s corporate governance system and improve the qualityof management decision making based on her diverse range of ideas and values, making use of her extensive experience and career record as an international business leader.

Fujiyo Ishiguro

We chose to appoint Ms. Fujiyo Ishiguro as External Director as we expect she will continue to provide valuable opinions and suggestions on the management of the Company basedon her wealth of knowledge in corporate management and digital fields as a founder of Netyear Group Corporation and experience as an Outside Director of other listed companies.

Kazutaka Okubo

Mr. Kazutaka Okubo has many years of experience in audit services as a certified public accountant and deep insight about finance and accounting. We chose to appoint Mr.
Kazutaka Okubo as External Director serving as Audit and Supervisory Committee Member as we expect that he will appropriately guide and oversee the Company’s
management from an objective standpoint based on a wealth of knowledge in governance which he gained through experience as an Outside Director.

Shione Kinoshita

Ms. Shione Kinoshita has a high degree of expertise in labor laws which she gained through her experience as an attorney-at-law as well as a Vice Chairperson of the Labor
Legislation Committee, Dai-ichi Tokyo Bar Association. We chose to appoint Ms. Shione Kinoshita as External Director serving as Audit and Supervisory Committee Member
as we expect that she will appropriately guide and oversee the Company’s management from an objective standpoint based on her wealth of knowledge in governancegained through her experience as an Outside Director. Although she does not have experience in corporate management other than as an Outside Director, we judge that she
will be able to appropriately perform her duties as an External Director serving as Audit and Supervisory Committee Member for the reasons mentioned above.

Naoko Murasaki

Ms. Naoko Murasaki has a high degree of expertise in the field of the global risk and governance which she gained over many years in the National Police Agency, the Ministryof Foreign Affairs and risk consulting firms. We chose to appoint Ms. Naoko Murasaki as External Director serving as Audit and Supervisory Committee Member as we expectthat she will appropriately guide and oversee the Company’s management from an objective standpoint based on her wealth of knowledge in governance gained through her
experience as an Outside Director.

(1 ) All external officers satisfying the qualifications for independent officers are designated as independent officers.
(2) Independence is judged based on the requirements for qualification stipulated in the Companies Act and the criteria for independence established by Tokyo Stock
Exchange, Inc. The terms major client, large sums of money, and so forth are judged based on the criteria determined in accordance with the published appointment standards model for independent officers.

FOCUS

Integrated Report 2023

Policy for Appointing Independent Directors

Holding meetings of the Group Sustainability Subcommittee
The Group Sustainability Subcommittee has been set up within
the Group Management Committee to conduct management
discussions on matters such as formulating group policies andgoals, reviewing the status of each company's efforts and revisinggoals. Decisions on Group policies and goals are made by theCompany’s Board of Directors.
The policies and goals that have been decided upon areshared with each Group company through the Group Sustainability Promotion Committee. In the course of their business,

Group companies that have touchpoints with society take invarious requests and feedback from customers and users.
These are shared with other Group companies at the Group
Sustainability Promotion Committee. Initiatives that should beincorporated into Group policies and goals are reported to theGroup Sustainability Subcommittee, providing a framework fordiscussion.
The key organizations and their main functions are as follows.

Group Sustainability
Subcommittee(Group Management
Strategies Committee)

Recommendations on formulation and revisions of
the Group sustainability plan
Formulation of Group targets and monitoring of
progress
Evaluation and provision of recommendations andadvice on initiatives by Group companies.

Group Sustainability
Promotion Committee

Sharing of Group-wide policies
Monitoring of initiatives by Group companies,
cross-organizational roll-out of successful initiatives

Group companies

Establishment of a project promotion system
within each company
Planning and implementation of sustainability
plans at each company
Integration into business strategy

A meeting of the Group Sustainability Promotion Committee

81Evaluation of the Effectiveness of the Board of Directors
1 Purpose of evaluation

The Company performs analyses and evaluations of the effectiveness of the Board of Directors each year to ensure that the Boardof Directors effectively fulfills its roles and responsibilities to“improve efficiency,” “secure soundness,” and “enhance transparency” of the Company’s corporate management.
2 Method of evaluation

For the fiscal year ended March 2023, the Company provided
questionnaires to all directors and Audit and Supervisory Committee members.

In addition to confirming matters considered important in theeffective fulfillment of the Company’s Board of Directors’ roles andresponsibilities (including composition, operation, status of deliberations concerning strategy, and other matters put before the Boardof Directors), the Company confirmed such matters as the governance structure expected by the market and the roles of the Boardof Directors in issues related to sustainability, including the Board’s
involvement in initiatives related to human capital. To ensure objective evaluations, an external organization was contracted to design
the questionnaire and analyze and evaluate the responses.
At meetings of the Independent Advisory Committee and the

FOCUS
Management Training Camp Held for Frank Discussions
SEGA SAMMY HOLDINGSIn September 2022, the SEGA SAMMY HOLDINGS management camp was held at Phoenix Seagaia Resort (Miyazaki
Prefecture). It was attended by internal and external directors and exclusive officers of the Company, and executives ofmajor Group companies. This management camp was held to facilitate frank discussions of management issues suchas the Group's growth strategy and the top risks facing the Group to foster a common awareness among management.
Holding the talks in a setting away from the Company enabled participating members of the management team tofocus on the discussion in a way that is not generally possible in regular meetings.

Internal directors actively discuss various topics (highlights of comments)
Day1— Action Plan Based on the Results of the Effectiveness Evaluation —Content of discussion
 eliberate and follow-up on important projects such as
Dgrowth investments; conduct management that focuseson management indicators
 resentation by the person explaining the agenda;
P
towards free and open discussions
Directors’ training
Group Governance

Towards free and open discussions among membersof the Board of Directors
Brock: I would like for us to be able to receive clear summaries ofmeeting materials so that we could see at a glance the key points. Thatwould help develop the discussion. In addition, more training should beheld for external directors, including on-site inspections.
Murasaki: Sometimes the opinions of external directors may havealready been discussed internally, so it would be efficient if the minutesof internal discussions were shared before the Group Management
Committee was held.

82

Deliberation on important matters such as
growth investments
Sugino: Setting themes including mega-trends that cannot be
avoided in the future and systematically discussing them would spark
active discussions.
Kinoshita: The roles of management and execution should be madeclearer than they have been. Large investment policies should be
discussed at the Board of Directors, with follow-up responses thendelegated to the executive side.
Okubo: Listed companies have a responsibility to explain their investments to shareholders. Consideration should be given to the extent towhich investment strategies should be discussed at Board meetings.
Haruki Satomi: There is a need to consider what size of investment
should be discussed or reported to the Board of Directors. While theamount of investment is of course an important point of discussion,
there is also a need for management to discuss the areas in which theCompany should invest in the future.
Katsukawa: Investment in startups should be continued as these
could lead to future growth for the Group. However, CVC investments
often fail in the long run. They should be carried out only after fully
considering the advantages to the Company, such as areas that offer
synergies with existing businesses.

Board of Directors, deliberations took place based on the results of
the analysis of questionnaire responses. These concerned suchmatters as the effectiveness of the Board of Directors during the
fiscal year and where issues might lie.
3 Summary of evaluation results

As the result of these deliberations, the Board of Directors was
judged to be functioning effectively based on the diversity of independent external directors and their contributions to constructive
discussions. It was also favorably evaluated that deepening discussions on matters such as overall Group policies by the Board ofIntegrated Report 2023

Day2

Directors, pointed out as an issue in the previous fiscal year, saw an
improvement in more productive and fulfilling discussions from a
medium- to long-term business perspective.
To enhance effectiveness still further, the Board of Directors
recognizes the need to deepen discussions on matters such as
strengthening monitoring for the sophistication of the risk management structure for the entire Group and optimal allocation of
resources among the entire Group. Having acknowledged theseissues, the Company will strive to allow the Board of Directors tofunction even more effectively.

Risk Governance Discussions

Content of discussions
Top risk items deemed to be of high priority
1 Clarification of the definition of management and execution
2 Risk management

3 Supply chain

4 Regarding human resources

5 Information security

Risk management
Murasaki: We need to divide the conceivable situations into several
patterns, and decide on a minimum initial response.
Yoshizawa: Only a few of our officers have experience in dealing
with major crises. We need to put in place a system for the Company
as a whole.
Fukazawa: While urgent situations require immediate action, the right
response is not uniform because it depends on the case. So without
proper knowledge or experience it is hard to respond.
Chairman: The SEGA SAMMY Group has a culture of speaking
frankly. That is why we believe that we have an organization where wecan support each other rather than a system that relies on someone
when a risk incident occurs.

Supply chain
Kinoshita: Supply chain risks include human rights issues, so weshould carry out extensive due diligence.
Ishiguro: Large companies are diversifying their supply chains inlight of geopolitical risks. We also need to discuss and consider
geopolitical risks.
Haruki Satomi: Based on the geopolitical risks, we must consider
reducing our degree of dependence on certain regions of production.

A discussion in progress

Regarding human resources
Sakaue: There needs to be a consistent concept within the Group of
the differences between the roles and obligations of directors andexecutive officers. Training for executives in the Group should also
be enhanced.
Okubo: In terms of literacy education, we need to decide what kindof literacy to seek at what level and how much time should be devoted
to that. If we do not allocate enough time to it, there is no point in doing
it. When it comes to harassment in particular, I feel that awareness isstill low.
Ishiguro: To improve competitiveness, the concept of diversity is key.
The task for SEGA, as it aims to take its overseas business to the nextlevel, will be to hire excellent human resources overseas.

83

Risk Management
With regard to risks posed by our business operations, in cooperation with the Group Governance Division, the Group Risk and Compliance Subcommittee established within the Group Management
Strategies Committee seeks to identify important management
risks; discuss the formulation of policies related to Group risk andcompliance; and assess and advise on risk analysis by individual
related sections. These measures are intended to clarify the risk
management structure. Additionally, an internal audit section under
the direct jurisdiction of the Audit and Supervisory Committee
audits the state of risk management by each section and periodi-

cally reports its findings to management decision-making bodies
and management organizations involved in execution and oversight.
To grasp and appropriately manage both internal and external
important risks including cases requiring emergency measures,
we have established Group Management Policies, policies for risk
management, and guidelines for crisis management. Should any
conditions emerge that might materially affect the Group, crisis
management organizations of the Company and the Group companies work jointly to discuss the measures to be taken, and thenproceed to take prompt and appropriate action.

FOCUS
Strengthening Our Risk Governance System
SEGA SAMMY HOLDINGS

To strengthen our risk governance system, in April 2022 weestablished a new Group Governance Division, as well as aGroup Risk Compliance Subcommittee and Group Risk Compliance Promotion Committee.

Led by executives in charge of risk and compliance at Group
companies, the Group Risk Compliance Promotion Committee
discusses, verifies, and shares measures and information related
to risk and compliance within the Group.

Risk Governance System Chart
Board of Directors

Group Management Strategies Committee
Group Risk and Compliance Subcommittee
Chair:

Director in charge of Group Governance Division

Identification of key management risks

Members:

 irectors who meet the requirements for riskDmanagement and compliance in the skills matrix

Discussions on formulation of policies on Group risks and compliance

Secretariat: Group Governance Division

Evaluation and recommendations for risk analysis by each relevant department

Instruction / Reporting

Group Risk and Compliance Promotion Committee
Chair:

Head of Group Governance Division

Group Companies: Risk Management and Compliance Officer	Sharing, verification, and discussion of risk and compliance information and policies
within the Group

Secretariat:

	Proposal of measures, etc. for risk compliance by related departments

Group Governance Division

Instruction / Reporting

SEGA Group84

Sammy Group

Group Companies

Activities of the Group Management Committee
Strengthening governance through the Group Management Committee
The Group Management Committee has been established under
the Company’s Board of Directors and discusses and reviews
the improvement of profitability, efficiency, strategic investments,and other aspects of Group businesses. This Committee is composed of directors (excluding the Chairperson [Representative

Director]) and Audit and Supervisory Committee members, andmeets as appropriate.
Through the Group Management Committee, officers engage
in more in-depth discussions to strengthen governance.

Contents of the discussion (FY2023/3)
New projects   Sustainability goals   Group business plan   Compliance awareness survey report
Investment areas for formulating the next medium-term plan   Group Risk and Compliance Promotion Committee
Growth investment areas   Retirement plan restructuring project
Action plan based on the evaluation of the effectiveness of the Board of Directors   Risk governanceGroup Sustainability Subcommittee   Management discussions for formulating the next medium-term plan
Feedback from investors

Number of discussions and hours (FY2023/3)

External and internal directors actively discuss various topics (excerpt from the statement)
Compliance Awareness Survey(held on May 31, 2022)

Murasaki: We also have an increasing variety of examples of harassment, including harassment against men. These will require carefulattention. If women also do not clearly recognize what sexual harassment is, that could become a hindrance to their success in the future.
Brock: The results of an investigation into harassment must be taken
seriously and response measures must be thoroughly addressed.
Haruki Satomi: To address harassment, there should also be careful
investigation of the content of whistleblower reports. Expertise should begathered to enable responses on a case-by-case basis.
Okubo: It is important to distinguish between instructions that areexcessive and instructions that are just strict. If supervisors become
overly sensitive and afraid to give instructions, our organization will
become weaker. We are going to need leaders who can build relationships of trust between supervisors and subordinates.

Group Risk and Compliance Promotion
Committee(held on July 29, 2022)

Haruki Satomi: There are also risks that insider trading could occur
unintentionally due to a lack of awareness. It is vital that all employees
have a firm understanding of laws and regulations.

Kinoshita: We should enhance training by facilitating discussion
between employees with reference to case studies from other companies, such as near-misses regarding personal information leaks andincidents of harassment.

Integrated Report 2023

16 meetings during the year   Number of cases: 36  Discussion time: 32 hours 5 minutes

Fukazawa: The IT Division has already begun discussions about how toaggregate near-misses that have occurred, and how to address thesewith improvements.
Okubo: Training using practical examples is important. It is also important though to do training that sharpens powers of imagination, which are
key to handling the unexpected.

Group Sustainability Subcommittee(held on May 31, 2023)

Ishiguro: We should further promote support, including for the qualitative aspects, for departments where it has been hard for women to play
an active role in the past.
Okubo: Increasing the percentage of women in management positions
should not be the goal. We should discuss how to increase corporate
value as a result of that.
Kinoshita: We should focus even more on tackling the social issues
facing our main business. As we expand our products and services
there can be repercussions and it is very important not to turn a blindeye to that.

Katsukawa: Risk management at other companies is thorough, such as
conducting training to introduce changes and briefing employees on thetransition of numbers of near-misses and on case studies.

85

Compensation Amount for Officers and the Method for Calculating Such Compensation
Directors’ Bonuses

The Company’s compensation system for directors and Audit &Supervisory Board members is designed to ensure transparency
and provide greater incentive to increase corporate value.
The compensation system for directors (excluding directors
who are Audit and Supervisory Committee members and external
directors) is determined based on the following basic policy.
(1) The system must increase management’s focus on shareholderinterests and sharing value with shareholders.
(2) T he system must clarify the responsibilities of management in
improving the corporate value of the Group.
(3) T he system must function as an incentive to support the sustainable growth of the Group.
(4) The system must have compensation levels for ensuring andmaintaining excellent human resources appropriate for executing the roles and responsibilities of directors of the Company.

Directors’ bonuses are paid at the amount determined by multiplying by coefficients calculated based on a bonus table thatdefines the number of months for directors’ bonuses in accordance with the three elements of the level of the amount of ordinary income, the business plan achievement level, and theyear-on-year growth level.
PDF

For more details about the Company’s compensation system fordirectors and Audit & Supervisory Board members, please refer to theAnnual Securities Report (Japanese only).

https://www.segasammy.co.jp/cms/wp-content/uploads/pdf/ja/ir/
Annual_security_report_FY2303_ir.pdf

Stock Compensation with Restriction of Transfer

SEGA SAMMY HOLDINGSThe Company has introduced a stock compensation plan withrestriction of transfer (continuous service-based and performance-based stock compensation) for directors (excluding directors who are Audit and Supervisory Committee members andexternal directors) to incentivize efforts to continuously increase
corporate value and to further enhance the sharing of value with allshareholders. Specific payments and allocations are determined
at Board of Directors's meeting using a ratio of approximately 1:1:1
for fixed compensation, performance-based bonuses, and stockcompensation with restriction on transfer for a single fiscal year at
the time the medium-term management plan is achieved.
In the current medium-term management plan, the ratio ofcontinuous service-based shares with restriction on transfer andperformance-based shares with restriction on transfer is expected
to be approximately 1 :3

In addition, based on the basic policy, the compensation
system for directors of the Company (excluding directors who are
Audit and Supervisory Committee members and external directors) includes fixed compensation, and directors’ bonuses andstock compensation with restriction of transfer as performancebased compensation.

Fixed Compensation
The Company formulated compensation table which specifies thecompensation amounts for each component, namely, basic compensation and role-based compensation, and it shall provide thesum of these components as monthly fixed compensation.

Compensation for directors and Audit & Supervisory Board members for the fiscal year ended March 2023 is as follows.
Number of Directors /Audit & Supervisory
Board members

Position

Total compensation(Millions of yen)

Total compensation by type(Millions of yen)

Basiccompensation

Bonuses

Performance-based
shares with restriction
on transfer

Continuous servicebased shares withrestriction on transfer

Of the items on the left,
non-monetarycompensation, etc.

Directors (excluding Audit andSupervisory Committee members
and external directors)

5

1,408

594

641

72

100

172

Directors (Audit and Supervisory
Committee members)(excluding external directors)

1

18

18

—

—

—

—

Audit & Supervisory Board Members(excluding external Audit andSupervisory Committee members)

1

4

4

—

—

—

—

External directors

6

85

85

—

—

—

—

Notes:
1. The amounts of both bonuses and compensation of performance-based shares with restriction on transfer and continuous service-based shares with restriction on transfer in the table above are the amounts thatwere recorded as expenses in the current fiscal year.
2. B y a resolution of the ordinary general meeting of shareholders held on June 22, 2022, the Company transitioned from a Company with an Audit & Supervisory Board to a Company with an Audit and Supervisory
Committee. Amounts paid to Audit & Supervisory Board members (excluding external auditors) are for the period before the transition. Amounts paid to directors who are Audit and Supervisory Committee
members (excluding external directors) are for the period after the transition.
3. A
 s of the end of the fiscal year ended March 2023, the number of directors (excluding Audit & Supervisory Committee members and external directors) was five. The number of directors who are Audit & Supervisory Committee members (excluding external directors) was one and the number of external directors was six.

Directors who received ¥100 million or more in total compensation for the fiscal year ended March 2023 are as follows.
Name

86

Position

Total compensation, etc.
(Millions of yen)

Total compensation, etc. by type(Millions of yen)Company

Hajime Satomi

Director

532

The Company

216

247

Performance-based
shares with restriction
on transfer
28

Haruki Satomi

Director

562

The Company

237

255

30

40

70

Koichi Fukazawa

Director

135

The Company

60

53

7

13

21

Yukio Sugino

Director

105

The Company

45

53

—

6

6

Basic
compensation

BonusesContinuous servicebased shares withrestriction on transfer
39

Of the items on the left,
non-monetarycompensation, etc.
68Strategic Shareholdings Policy
The Company possesses shares for purposes other than investment only in cases in which the Company believes the possession thereof will enable business alliances, expand transactions,and will lead to an improvement in corporate value, thereby
benefitting shareholders.
The Company periodically examines the economic rationale,
future outlook, and other aspects regarding the possession ofsuch shares at its Board of Directors meetings and discusses
whether the future possession thereof is justifiable.
In general, the Company exercises the voting rights corresponding to such shares on all proposals based on whether
adopting such proposals will contribute to the sustainable growthand medium- to-long-term corporate value enhancement of both
the Company and the investee.

Value of Strategic Shareholdings (excluding non-listed stocks)(Millions of yen)

24,975

13,604

2019

61

51

55

2020

2021

2022

2023 (FY)

2

1

1

1

Number of companies

1

System for Supporting External Directors
Committee Office which report directly to the Audit and Supervisory Committee. Matters related to the appointment, transfer,
evaluation, etc. of the above staff require the prior consent of the
Audit and Supervisory Committee. This ensures independence
from directors who are not Audit and Supervisory Committee
members. In addition, we have established a communication
system through which the secretariat of each meeting bodyshares as appropriate information relating to meetings to beattended by external directors who are Audit and Supervisory
Committee members, so that they can fully examine the contentsof the proposal, etc. in advance.

Integrated Report 2023

We have established a communication system through which thesecretariat shares information to external directors as appropriate.
This allows for the contents of the agenda and other items for meetings of the Board of Directors to be fully considered in advance.
For newly appointed external directors, the secretariat provides individual orientations on details of the Group's businesses.
By enabling them to form a better understanding, this helps toensure the effectiveness of discussions at meetings of the Boardof Directors. Regarding the support system for external directors
who are members of the Audit and Supervisory Committee, in
addition to the above, assistance is also provided by the staff ofthe Management Audit Office and the Audit and Supervisory

Policy on Constructive Dialogue with Shareholders
To facilitate constructive dialogue with shareholders and investors,
the Company works from the basic position of appointing an executive officer in charge of Investor Relations (IR) & Shareholder
Relations (SR), establishing a department in charge of IR & SR, andimplementing the following efforts:
In facilitating constructive dialogue with shareholders andinvestors, the Company acts to ensure close and positive cooperation between and among internal departments, including thecorporate planning, finance and accounting, legal affairs, generalaffairs, and sustainability departments.
In line with the quarterly disclosure of operating results, theCompany holds online briefing sessions that primarily target institutional investors.
The President and Representative Director of the Company
and the Chief Financial Officer or others attend briefing sessions
on the settlement of accounts and actively engage in direct interactions. For shareholders and investors, the executive officer incharge of IR & SR and IR & SR personnel hold individual meetings
after the quarterly disclosure of operating results. In addition, in linewith the direction of the Company, small conferences or othergatherings may also be held as appropriate.

For overseas shareholders and investors, the President andRepresentative Director of the Company, the Chief Financial Officer
or others, or the executive officer in charge of IR & SR and IR & SR
personnel provide opportunities to engage in dialogue individuallymultiple times per year, both online and in person.
Regarding the status of dialogue with shareholders and investors, the Company provides prompt feedback on a regular basis or
as needed to the President and Representative Director, Chief
Financial Officer, and other directors or executive officers, andalso to external directors, executive officers, and business heads.
The Company strives to utilize that information for further sustainable growth and enhance corporate value of the Company in themedium to long term.
In accordance with the basic view that shareholders shouldbe treated equally, when engaging in dialogue with shareholders
with respect to the handling of unpublished important matters,
whether for briefing sessions on settlement of accounts or any
other meetings, the Company endeavors to manage informationin accordance with applicable laws, including the Financial Instruments and Exchange Act and the SEGA SAMMY Insider Trading
Prevention Regulations, which are internal regulations set for the
purpose of eliminating insider trading.

87

Directors, Audit & Supervisory Committee
Members, and Executive Officers(As of October 1, 2023)

Hajime Satomi

Haruki Satomi

Chairman(Representative Director)

President and Group CEO(Representative Director)

SEGA SAMMY HOLDINGS

1980 President, Representative Director of Sammy Industry Co., Ltd. (now Sammy Corporation)
2004 Chairman of the Board, Representative Director of SEGA CORPORATION
Chairman and CEO, Representative Director of Sammy Corporation
Chairman and CEO, Representative Director of SEGA CORPORATION
Chairman, President and CEO, Representative Director of the Company
2007 President, CEO and COO, Representative Director of SEGA CORPORATION
2008 Chairman and CEO, Representative Director of the above
2012 Chairman of the Board of Sammy Corporation2013 Chairman and CEO, Representative Director of the above
2015 Advisor to NDK (current position)2016 Chairman, President, CEO and COO, Representative Director of the Company
2017 Chairman and CEO, Representative Director of the Company
Chairman of the Board, Representative Director of Sammy Corporation (current position)
Honorary Chairman of the Board of SEGA Holdings Co., Ltd. (now SEGA CORPORATION)(current position)2018 Chairman and Group CEO, Representative Director of the Company
2021 Chairman, Representative Director of the Company (current position)
2022 Chief Advisor of PHOENIX RESORT CO., LTD. (current position)
Honorary Advisor of Japan Amusement Industry Association (current position)

Koichi Fukazawa

Yukio Sugino

Senior Executive Vice
President and Group CFO,
Director of the Board

Senior Executive Vice
President,
Director of the Board

1990 Joined The Sanwa Bank, Limited (now MUFG Bank, Ltd.)
2003 Joined Sammy Corporation
Vice President, Executive Officer and Managing Director of President’s Office of the above
2004 Vice President, Executive Officer and Managing Director of President’s Office of the Company
Vice President, Executive Officer and Managing Director of Chairman’s Office and President’s
Office of SEGA CORPORATION
2005 Senior Vice President, Director of the Board and Managing Director of Chairman’s
Office and President’s Office of the above
2007 President, Representative Director of SEGA SAMMY ASSET MANAGEMENT INC.
(now MARZA ANIMATION PLANET INC.)
Senior Vice President, Executive Officer and in charge of the Corporate Strategy andExternal Affairs of the Company
2008 Senior Vice President, Director of the Board and Managing Director of New Business
Division of SEGA CORPORATION
2009 Officer of KEIZAI DOYUKAI (Japan Association of Corporate Executives) (current position)
President, Representative Director of SEGASAMMY VISUAL ENTERTAINMENT INC.
(now MARZA ANIMATION PLANET INC.)
2014 Senior Executive Vice President, Representative Director of SEGA TOYS CO., LTD.
2015 Senior Vice President, Director of the Board of the Company
2016 Executive Vice President and CFO, Director of the Board of the Company
2018 Executive Vice President and Group CFO, Director of the Board of the Company
2020 Senior Executive Vice President and Group CFO, Director of the Board of the Company(current position)
2021 Senior Vice President, Director of the Board of Sammy Corporation (current position)

88

2004 Joined Sammy Corporation2005 Joined SEGA CORPORATION
2012 Senior Vice President, Director of the Board of the Company
Senior Vice President, Director of the Board of SEGA CORPORATION
2014 Senior Vice President, Director of the Board of Sammy Corporation
Deputy COO, Representative Director of SEGA CORPORATION
2015 Deputy COO, Representative Director of Sammy Corporation
2016 President and COO, Representative Director of the above
Executive Vice President, Director of the Board of the Company
2017 President and COO, Representative Director of the Company
President and CEO, Representative Director of Sammy Corporation (current position)
Chairman and CEO, Representative Director of SEGA Games Co., Ltd.
(now SEGA CORPORATION) (current position)2018 President and Group COO, Representative Director of the Company
Chairman of the Board of PHOENIX RESORT CO., LTD. (current position)
2021 President and Group CEO, Representative Director of the Company (current position)
Chairman of the Board of Sammy Networks Co., Ltd. (current position)
Officer of NDK (current position)
Officer of KEIZAI DOYUKAI (Japan Association of Corporate Executives) (current position)
2022 Chairman of the Board of TMS ENTERTAINMENT CO., LTD. (current position)
Chairman of the Board of Sunrockers, Ltd. (current position)

1993 Joined SEGA Enterprises, Ltd. (now SEGA CORPORATION)
2003 Vice President, Executive Officer and General Manager of Project Management Divisionof SEGA CORPORATION
2009 Senior Vice President, Director of the Board and General Manager of President’s Officeof the above
2010 Senior Vice President, Director of the Board and General Manager of Sega R&D/
Production of the above
2012 Executive Vice President, Director of the Board and General Managing Director ofConsumer Online Business Headquarters of the above
Director & Chairman of Sega of America, Inc.
Director & Chairman of Sega Europe Ltd.
2014 President, Representative Director of ATLUS. CO., LTD.
2015 Senior Vice President, Director of the Board of SEGA Holdings Co., Ltd.
(now SEGA CORPORATION)
President and CEO, Representative Director of SEGA Interactive Co., Ltd.
(now SEGA CORPORATION)
2017 Senior Executive Vice President, Director of the Board of SEGA Holdings Co., Ltd. (nowSEGA CORPORATION)
2020 President and COO, Representative Director of SEGA CORPORATION (current position)
Deputy COO, Representative Director of SEGA GROUP CORPORATION(now SEGA CORPORATION)
Executive Vice President, Executive Officer of the Company
Chairman, Representative Director of ATLUS. CO., LTD. (current position)
2021 Senior Vice President, Director of the Board of SEGA TOYS CO., LTD. (current position)
2022 Senior Executive Vice President, Director of the Board of the Company (current position)
2023 Senior Vice President, Director of the Board of DARTSLIVE Co., Ltd. (current position)
Chairman of the Board of MARZA ANIMATION PLANET INC. (current position)

Hideo Yoshizawa

Kohei Katsukawa

Senior Vice President,
Director of the Board

Director of the Board(External)

1974 Joined Sumitomo Bank (now Sumitomo Mitsui Banking Corporation)
2001 Executive Officer, Head of Osaka Corporate Banking Division II of
Sumitomo Mitsui Banking Corporation2005 Managing Executive Officer, Deputy Head of Wholesale Banking Unit
(in charge of East Japan) of the above
2007 Executive Vice President and Representative Director of NIF SMBC Ventures Co., Ltd.
(now SMBC Venture Capital Co., Ltd.)2010 President and Representative Director of SMBC Venture Capital Co., Ltd.
2014 President and Representative Director of GINSEN Co., Ltd.
Outside Director of Kyoto University Innovation Capital Co., Ltd. (current position)2016 Director of the Board (External) of the Company (current position)
Outside Director of ELECOM CO., LTD.
2021 Advisor of GINSEN Co., Ltd. (current position)
2022 Outside Director of DX Antenna Co., Ltd. (current position)
Outside Director of HAGIWARA Solutions Co., Ltd. (current position)
Outside Director of Logitec INA Solutions Co., Ltd. (current position)
2023 Outside Director of TESCOM CO., LTD. (current position)

Melanie Brock

Fujiyo Ishiguro

Director of the Board(External)

Director of the Board(External)

1987 Earned Bachelor of School of Humanities at The University of Western Australia
1990 Earned Master of Arts in Japanese, Conference Interpreting and Translation at
The University of Queensland
2003 CEO of AGENDA (now Melanie Brock Advisory Ltd.) (current position)2010 Board Member of Australia-Japan Foundation
Board Member of Australia Japan Business Co-operation Committee (current position)
Chair of Australian and New Zealand Chamber of Commerce in Japan
Regional Manager - Japan of Meat & Livestock Australia
2012 Chair of Australian Business Asia
2016 Chair Emeritus of Australian and New Zealand Chamber of Commerce in Japan(current position)
2019 Director of the Board (External) of the Company (current position)
Board Member of Australia-Japan Research Center (AJRC) (current position)
Global Ambassador of Advance, an initiative supported by Australian Government funding(current position)
2022 Outside Director of Mitsubishi Estate Co., Ltd. (current position)
2023 Outside Director, Member of the Board of Kawasaki Heavy Industries, Ltd. (current position)

Integrated Report 2023

1987 Joined Japan Leasing Corporation (now Sumitomo Mitsui Finance and Leasing Co., Ltd.)
1999 Manager of Financial Planning Department of the above
2001 Joined Sammy Corporation
2002 Vice President, Executive Officer and Deputy Managing Director of President’s Office of the above
2004 Senior Vice President, Director of the Board and Managing Director of Administration
Division of the above
Senior Vice President, Director of the Board and Managing Director of Corporate
Division and President Office of the above
2007 Senior Vice President, Executive Officer of the Company
2012 Senior Vice President, Director of the Board of PHOENIX RESORT CO., LTD.
2015 President, Representative Director of TAIYO ELEC Co., Ltd.
2016 Senior Vice President, Director of the Board of SEGA Holdings Co., Ltd.
(now SEGA CORPORATION)
Senior Vice President, Director of the Board and Managing Director of
Corporate Division of the above
Senior Vice President, Director of the Board of SEGA ENTERTAINMENT CO., LTD.
(now GENDA GiGO Entertainment Inc.)
Auditor of Sega Amusements Taiwan Ltd.
2017 Executive Vice President, Director of the Board and Managing Director of Corporate
Division of SEGA Holdings Co., Ltd. (now SEGA CORPORATION)
Audit & Supervisory Board Member of SEGA Games Co., Ltd. (now SEGA CORPORATION)
2018 Senior Vice President, Executive Officer and Managing Director of
Legal Division of the Company
2019 Director of the Board of the Company
2020 Senior Vice President, Director of the Board of the Company (current position)
Senior Vice President, Director of the Board of SEGA CORPORATION (current position)

1981 Joined BROTHER INDUSTRIES, LTD.
1988 Joined Swarovski Japan Ltd.
1994 President of Alphametrics, Inc.
1999 Director of Netyear Group, Inc.
Director of Netyear Group Corporation
2000 President & CEO of the above
2013 Outside Audit & Supervisory Board Member of Sompo Japan Insurance Inc.
2014 Outside Director of Hottolink, Inc.
Outside Director of Monex Group, Inc. (current position)2015 Outside Director of Sompo Japan Nipponkoa Insurance Inc.
(now Sompo Japan Insurance Inc.)
2021 Outside Director of WingArc1st Inc.
Director of Netyear Group Corporation (current position)
Director of the Board (External) of the Company (current position)
2022 External Director of The Shoko Chukin Bank, Ltd. (current position)
2023 External Director of MITSUI & CO., LTD. (current position)

89

SEGA SAMMY HOLDINGS

90

Yukito Sakaue

Kazutaka Okubo

Director, Audit andSupervisory Committee
MemberDirector, Audit andSupervisory Committee
Member (External)

1975 Joined The Sanwa Bank, Limited (now MUFG Bank, Ltd.)
2003 Joined Sammy Corporation as Director of Audit Office
2004 Director of Legal Department of Administration Division of the above
2006 Director of Audit & Supervisory Board Members’ Office of the Company
2014 Audit & Supervisory Board Member of the Company
Standing Audit & Supervisory Board Member of SEGA CORPORATION
2015 Audit & Supervisory Board Member of SEGA Interactive Co., Ltd.
(now SEGA CORPORATION)
Standing Audit & Supervisory Board Member of SEGA Holdings Co., Ltd.
(now SEGA CORPORATION)
Audit & Supervisory Board Member of SEGA Games Co., Ltd. (now SEGA CORPORATION)
Audit & Supervisory Board Member of TMS ENTERTAINMENT CO., LTD.
Audit & Supervisory Board Member of SEGA ENTERTAINMENT Co., LTD.
(now GENDA GiGO Entertainment Inc.)
Audit & Supervisory Board Member of MARZA ANIMATION PLANET INC.
2017 Audit & Supervisory Board Member of ATLUS. CO., LTD.
2019 Audit & Supervisory Board Member of SEGA Logistics Service Co., Ltd.
Audit & Supervisory Board Member of DARTSLIVE Co., Ltd.
2020 Audit & Supervisory Board Member of SEGA CORPORATION (current position)
2021 Audit & Supervisory Board Member of SEGASAMMY BUSINESS SUPPORT CO., LTD.
(current position)
Audit & Supervisory Board Member of PHOENIX RESORT CO., LTD. (current position)
Standing Audit & Supervisory Board Member of the Company
2022 Audit & Supervisory Board Member of SEGA SAMMY CREATION INC. (current position)
Audit & Supervisory Board Member of Sammy Corporation (current position)
Director, Standing Audit and Supervisory Committee Member of the Company(current position)

1995 Joined Century Audit Corporation (now Ernst & Young ShinNihon LLC)
2003 Director of Shinnihon Integrity Assurance, Inc.
(now Ernst & Young Shinnihon Sustainability Co., Ltd.)2005 Managing Director of the above
2006 Partner of Ernst & Young ShinNihon (now Ernst & Young ShinNihon LLC)
2012 Senior Partner of Ernst & Young ShinNihon LLC
2016 Senior Executive Board Member of the above
2019 Audit & Supervisory Board Member (External) of the Company
President and Representative Director of Okubo Associates Inc. (current position)
Outside Director of Sun Frontier Fudousan Co., Ltd. (current position)
Outside Audit & Supervisory Board Member of BrainPad Inc.
Outside Director of LIFULL Co., Ltd. (current position)2020 Outside Director of SALA Corporation (current position)
Outside Director of The Shoko Chukin Bank, Ltd. (current position)
Outside Director (Audit and Supervisory Committee Member) of
Musashi Seimitsu Industry Co., Ltd. (current position)
President and Representative Director of K.K. SS Dnaform (current position)
2021 Outside Director (Audit and Supervisory Committee Member) of BrainPad Inc.
(current position)
2022 Director, Audit and Supervisory Committee Member (External) of the Company(current position)

Shione Kinoshita

Naoko Murasaki

Director, Audit andSupervisory Committee
Member (External)

Director, Audit andSupervisory Committee
Member (External)

1985 Registered as an attorney-at-law
Joined Hashimoto Joint Law Office
1986 Joined Daiichifuyo Law Office (current position)
2004 Vice-President of Dai-ichi Tokyo Bar Association2010 Visiting Professor of The University of Tokyo Graduate Schools for Law and Politics
2011 Outside Audit & Supervisory Board Member of SURUGA bank Ltd.
2013 Vice President of Tokyo Institute of Technology (current position)2014 Director of Japan Labor Law Association (current position)2018 Director of Japan Securities Research Institute (JSRI) (current position)
Outside Director of SURUGA bank Ltd.
2021 Audit & Supervisory Board Member (External) of the Company
2022 Director, Audit and Supervisory Committee Member (External) of the Company(current position)

1995 Joined the National Police Agency
2001 Northeast Asia Division, Asian and Oceanian Affairs Bureau of Ministry of Foreign Affairs
2003 Chief of 2nd Criminal Investigation Division,
Criminal Investigation Department of Shizuoka Prefectural Police Headquarters
2005 Chief of Foreign Affairs Division, Security Department of
Hyogo Prefectural Police Headquarters
2006 Foreign Affairs Division, Foreign Affairs and Intelligence Department,
Security Bureau of National Police Agency
2007 Security Planning Division, Security Bureau of National Police Agency
2008 Bain & Company Japan Incorporated
2010 Senior Director of Kroll International Inc. (Japan Office)2013 Associate Managing Director of the above
2015 Head of Japan of the above
2016 Managing Director and Head of Japan of the above2018 President and Representative Director of Nobligier Co., Ltd. (current position)
Senior Advisor of Kroll International Inc. (Japan Office) (current position)
2021 Outside Director of Sansei Landic Co., Ltd. (current position)
Director of the Board (External) of the Company
2022 Outside Director (Audit and Supervisory Committee Member) of Riraku Co., Ltd.
(current position)
Director, Audit and Supervisory Committee Member (External) of the Company(current position)
2023 Director (Audit and Supervisory Committee Member) of VISIONARYHOLDINGS CO., LTD.
(current position)

Executive Officers

Executive Vice President, Executive Officer

Vice President, Executive Officer

Makoto Takahashi

Takaharu Kato

Yuka Ichiki

Yoichi Owaki

Hironobu Otsuka

Yukio Kawasaki

Koji Takeyama

Natsue IshidaFinancial Information

Integrated Report 2023

©SEGA

91

Management’s Discussion and Analysis
Consolidated Statements of Income and Comprehensive IncomeLong-Term Trends
Both sales and profits are trending upward in the Entertainment Contents Business, supported by growth in the number of platformers andincreasingly diverse business models. We forecast continued growth going forward.
The Pachislot and Pachinko Machines Business is recovering in both sales and profits due to the market environment, which has improved
with a softening of regulations, and also due to increased business efficiency driven mainly by cost improvements.
Main Causes of the Decline in Earnings

Improvement in Profitability

Declining Earnings within Existing Businesses
amid Market Contraction

Earning Growth in Consumer Area

Sammy Unit Sales / Pachislot and Pachinko Market Size

Billions of yen

Consumer Area Net Sales

Thousands of units / Billions of yen

187.9

515.7

410.5
125.5

279.4

243.4
SEGA SAMMY HOLDINGS

140

103

85

94

’18

’19

’20

’21

’22

’23

’20

’23

(FY)

Pachislot machine unit sales
Pachinko machine unit sales (SEGA SAMMY unit sales)
Pachislot machine market size
Pachinko machine market size
(Settlement dates from July to June: Market size)

Entertainment Contents BusinessProfitability Improvement

Source: Yano Research Institute Ltd. “Pachinko Manufacturer Trends 2023” (Research of Japanese Market)

Pachislot and Pachinko Machines Business
Operating Income

Entertainment Contents Business Operating Income
Billions of yen

Billions of yen

20.9

38.7

20.0
14.8

’16

’17

’18

’19

’20

’21

’22

’23

’18

(FY)

’19

’20

’21

’22

’23

(FY)

Long-Term Trends in Net Sales and Operating Income
Billions of yen

389.6
321.4

46.7
19.0

92

’13

’14

Net sales

Operating income

’15

’16

’17

’18

’19

’20

’21

’22

’23

(FY)

財務情報
Comparing FY2022/3 and FY2023/3(FY2023/3)

389.6 billion

49.4 billion

Net sales: ¥Ordinary income: ¥Ordinary income margin:

12.7%

Billions of yen

389.6
49.4
12.7%

Q1

Through Q2

Through Q3

Full year

Q1

Through Q2

FY2022/3
Net sales

Ordinary income

Full year

FY2023/3

Ordinary income margin2022

Billions of yen

2023 YoY Change

320.9

389.6

21.4%

Entertainment Contents Business

235.9

282.8

19.9%

Pachislot and Pachinko Machines Business

75.8

94.2

24.3%

Resort Business

8.6

11.5

33.7%

Other and eliminations

0.6

1.1

83.3%

Cost of sales

193.0

231.5

19.9%

Gross profit

127.8

158.0

23.6%

Selling, general and administrative(SG&A) expenses

95.8

111.2

16.1%

Operating income

32.0

46.7

45.9%

Net sales

Entertainment Contents Business

33.9

38.7

14.2%

Pachislot and Pachinko Machines Business

9.3

20.0

115.1%

Resort Business

–2.5

–1.1

–

Other and eliminations

–8.7

–10.9

–

10.0%

12.0%

2.0pt

Non-operating income

5.9

4.9

–16.9%

Non-operating expenses

4.6

2.2

–52.2%

Ordinary income

33.3

49.4

48.3%

Extraordinary income

5.2

0–100.0%Extraordinary losses

0.6

2.4

300.0%

Income before income taxes

37.9

47.0

24.0%

Total income taxes

0.9

1.1

22.2%

Profit attributable to owners of parent

37.0

45.9

24.1%

    Operating income margin

40

59

–

Net income per share (Yen)

158.85208.07–

Net assets per share (Yen)

1,311.72 1,498.75–

Operating income (Entertainment Contents Business)
The Consumer area contributed to a year-on-year increase in operating income.

Integrated Report 2023

Summary of Consolidated Financial Statements

Cash dividends per share (Yen)

Through Q3

Operating income (Pachislot and Pachinko Machines Business)
In particular, sales of pachislot machines (No. 6.5 model) were firm,
resulting in significant year-on-year growth in profits.
Total income taxes
Income taxes decreased due to the recognition of deferred tax
assets at a U.S. subsidiary, a decrease in taxable income from net
loss carried forward, and a tax credit related to research anddevelopment at a U.K. subsidiary.

Change in Segment Operating Income
Billions of yen

Pachislot andPachinko
Machines
Business+10.7

ResortBusiness+1.4

Other andeliminations

–2.2

46.7

+4.8

32.0

Entertainment
Contents Business

FY2022/3

FY2023/3
Consolidated: +¥14.7 billion

93

Consolidated Financial Position
Long-Term Trends
From the fiscal year ended March 2013, total assets started trending
upwards due to an increase in goodwill accompanying acquisitionsin the Entertainment Contents Business, the Group’s initiatives in
preparation for participation in the Integrated Resort (IR) business,
and an increase in investment securities accompanying new investment in growth areas, etc. In recent years, however, total assets haveagain been trending downward, reflecting a decrease in cash anddeposits accompanying relocation of the head office, a decrease in
securities, and the redemption of bonds.
Despite earnings volatility stemming from the presence orabsence of hit products, which is the nature of the Group’s businesses, the equity ratio remained steady and the Group continued
to invest in growth areas and pay stable dividends.

Total Assets and Equity Ratio
Billions of yen / %

528.5

501.5
66%

59%

’13

’14

Total assets

’15

’17

’18

’19

’20

’21

’22

’23

(FYE)

SEGA SAMMY HOLDINGS

Comparing FY2022/3 and FY2023/3
Assets Billions of yen

2022

2023

74.1 13.1 60.3

287.7

–0.2 0.1 0.1

+ +

+66.1

73.9 13.2 60.4

353.8

Total investments
and other assets

Total intangible
assets–¥0.2 billion+¥0.1 billion

Liabilities and Net Assets Billions of yen

435.4

292.6

+38.7

501.5

Total property,
plant and equipment

331.3

Total current
assets

435.4

142.8

+27.4

170.2

Total net assets

501.5

Total liabilities+¥0.1 billion +¥66.1 billion +¥38.7 billion +¥27.4 billion
Cash and deposits, tradenotes and accounts
receivable, and inventory
assets each increased

94

’16

Equity ratio

Although total shareholders’ equity fell due to cash
dividends paid and thepurchase of treasury stock,
the Company recorded
profit attributable to ownersof parent. This, among
other factors, caused anincrease in total net assets.

Accounts payable andcontract liabilities
increased.

Consolidated Cash Flows
Long-Term Trends
With the exception of certain fiscal periods, the Group has continued to record net cash outflows in investing activities due to M&As
in growth areas and strategic investments to raise production
capacity. Since the fiscal year ended March 2013, the Group has
been investing in organizational restructuring, including making
three listed subsidiaries into wholly owned subsidiaries, as well as
investing actively in growth areas such as the Consumer area.
Through a cash management system, the Group uses internal
capital efficiently. Also, the Group uses a range of methods to support liquidity and meet investment needs flexibly, including borrowings and bond issuance.

Cash Flows
Billions of yen

44.742.3

–2.3
’13

’14

’15

’16

’17

’18

’19

’20

’21

’22

’23 (FY)

Cash flows from operating activities
Cash flows from investing activities
Free cash flows

Cash and cash equivalents at the end of the fiscal year ended
March 2023 were ¥179,509 million, up ¥27,049 million from theprevious fiscal year-end.

Income before income taxes
Increase in trade notes and accounts receivable
Increase in inventories

Net cash provided byoperating activities+44.7

Increase in contract liabilities

Net cash used ininvesting activities

152.4

Billions of yen

Cash Flows from Operating Activities
Depreciation and amortization

Consolidated Cash Flows
Billions of yen

Breakdown of Cash Flows

–2.3

179.5
Net cash used infinancing activities

Others

47.0
10.6
–13.4
–22.4
15.5
7.4

Integrated Report 2023

FY2023/3 Cash Flows

Cash Flows from Investing Activities–15.3

Purchase of property, plant and equipment
Purchase of intangible assets
Others

–4.9
–5.8
8.4

Cash Flows from Financing Activities

10.0
–10.1
–4.9
–8.8
–1.5

Proceeds from long-term debt
Repayment of long-term loans
Cash andcash equivalents

Cash andcash equivalents

2022*

2023

Acquisition of treasury stocks
Payment of dividends
Others* The balance of cash and cash equivalents as of end of March 2022 includes the effect offoreign exchange rate changes on cash and cash equivalents.

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities+¥44.7 billion–¥2.3 billion–¥15.3 billion

Net cash provided by operating activities for the fiscal
year ended March 2023 was ¥44,704 million yen(¥39,607 million for the fiscal year ended March 2022).
This was mainly due to the recording of income before
income taxes of ¥47,069 million and depreciation of¥10,669 million, and an increase in contract liabilities of¥15,545 million, which outweighed an increase ininventories of ¥22,481 million and an increase in tradereceivables of ¥13,493 million.

Net cash used for investing activities was ¥2,351 million(compared with an outflow of ¥8,794 million in theprevious fiscal year). This was mainly due to outflows of¥4,944 million for the purchase of property, plant andequipment and ¥5,875 million for the purchase ofintangible assets, despite an inflow of ¥3,510 million
from distributions from investment partnerships.

Net cash used for financing activities was ¥15,358
million (compared with an outflow of ¥35,970 million in
the previous fiscal year). This was mainly due to outflows of ¥10,191 million for the repayment of long-term
debt, ¥8,865 million for cash dividends paid, and ¥4,987
million for the purchase of treasury stock despite an
inflow of ¥10,000 million from long-term debt.

95

Non-Financial Assets
Human Capital
Consolidated Employee Numbers
At the end of the fiscal year ended March 2023, the consolidated number of employees was 8,219, up 459 from the previous fiscal year-end, as
the Company actively augmented development resources, mainly in the Consumer area of the Entertainment Contents Business.
Consolidated Employee Numbers

Employee Numbers by Segment

PeoplePeople8,798＊1
7,008

SEGA SAMMY HOLDINGS

’13

7,472

7,888

7,606 7,639 7,726

7,993

7,535 7,760

8,219
640

’14

’15

’16

’17

’18

’19

’20

’21

’22

’23

(FYE)

458＊2 707

474
699

445

664

419

628

5,328

6,168

5,369

5,630

6,035

1,567

1,449

1,022

1,047

1,108

’19

’20

’21

’22

’23

Pachislot and Pachinko Machines BusinessResort BusinessCorporate

448

(FYE)

Entertainment Contents Business*1 Total employees in the Entertainment Contents Business increased due to the conversion of fixed-term to permanent labor contracts (about 440 people).
*2 Increase in seconded employees due to cross-group organizational restructuring centered on management functions.

Intellectual Property
R&D Expenses and Content Production Expenses
We are actively investing in R&D and content production to reinforce and enhance its intellectual property—the source of the Group’s competitiveness. In recent years, we have stepped up our focus on investing in the Consumer area to expand the product and service lineup over the
medium term. In the fiscal year ended March 2023, R&D and content production expenses were ¥80.4 billion, up ¥11.5 billion year on year.

Reference

Recognition of R&D Expenses and Content Production Expenses by Product and Service
Entertainment Contents Business (CS/full games)Entertainment Contents Business (AM)

Recorded as inventory assets or intangible fixed assets during
development and as costs after launch. Amortized at 25% in
the first month, following which the remaining amount is amortized on a straight-line basis over 23 months (total amortization
period is 24 months).

Recorded as inventory assets during development and as costs
after launch. Amortized on straight-line basis at 15% for each of
the first two months of the launch and at 7% for each of thefollowing 10 months (total amortization period is 12 months).

Entertainment Contents Business (CS/F2P)

Not recorded as assets but as costs on an accrual basis (outsourced processing costs are recorded at the time of receipt
and inspection)

Amortized at a fixed rate for 24 months or 36 months from thelaunch month.

Consumer area

* Since CS/full games can be expected to be sold over a longer period of time compared to the past due to prolonged product lifecycles, the amortization rules have been revised to the above starting withnew games released in the fiscal year ending March 2024.

96Basic Data
2100
130

-1000
0

Market Sizes and Number of Pachinko and Pachislot Players
1,710

1,660

1,580

1,450

1,720

1,670
1,260

1,110

970

1,150

1,070

940

900

950

890

710

720

51.5

51.8

51.8

51.2

48.7

49.0

46.7

46.5

47.4

48.5

49.2

49.3

50.4

51.2

52.3

40.6

41.1

34.8

33.6

30.1

28.8

28.2

25.9

25.4

25.6

25.0

24.5

23.2

22.7

21.4

20.7

20.0

14.6

14.6

’05

’06

’07

’08

’09

’10

’11

’12

’13

’14

’15

’16

’17

’18

’19

’20

’21

Pachinko and pachislot machine market (Trillions of yen)

Other leisure market (Trillions of yen)

Pachinko and pachislot players (ten thousands)(CY)

Source: White Paper on Leisure Industry 2022, Japan Productivity Center

25000
510

418.7

427.7

435.3

443.3

451.0

458.8

411.9

356.2

371.9

378.0

387.8

395.4

349.8

365.0

405.0

12,937

12,652

12,47912,323

12,14911,893

11,627

11,31010,986

10,596

10,060

9,639

9,035

8,458

7,665

’08

’09

’10

’11

’12

’13

’14

’15

’16

’17

’18

’19

’20

’21

’22

Number of pachinko halls (Halls)(FY)

Number of installed pachinko and pachislot machines per pachinko hall (Machines)

Source: National Police Agency

Integrated Report 2023

0

Numbers of Pachinko Halls and Installed Pachislot and Pachinko Machines per Pachinko Hall

Pachislot Machines: Number of Installed Machines, Unit Sales, and Annual Turnover
0.63

0.57

0.70

1,448

1,347

1,390

913

’08

766

’09

0.85

0.86

1,549
1,474
1,326
1,259

979

0.87

0.75

0.58

0.52

0.36

0.27

0.34

0.31

0.46

1,687
1,691
1,661
1,643
1,602
1,392
1,233
968
887

1,665

1,637

1,572

1,475

604

’10

’11

’12

Number of installed pachislot machines (Thousands of machines)

’13

’14

’15

’16

Pachislot machine unit sales (Thousands of machines)

’17

452
’18

562

’19

487

’20

673

’21

Pachislot machine annual turnover (Times)

0.51

1,358
698

’22
(FY)

Sources: National Police Agency and Yano Research Institute Ltd. “Pachinko Manufacturer Trends 2023” (Research of Japanese Market)

Pachinko Machines: Number of Installed Machines, Unit Sales, and Annual Turnover
1.09

1.06

0.92

0.84

0.82

0.69

0.68

0.65

0.54

0.51

0.52

0.38

0.42

0.48

0.48

3,339
3,332
3,158
3,163
3,076
3,042
3,009
2,954
2,9003,107
2,918
2,833
2,749
2,637
2,603
2,557
2,494
2,432
2,338
2,205
2,065
2,019
1,886
1,542
1,408
1,377
1,131
1,056
1,011
963

’08

’09

’10

’11

’12

Number of installed pachinko machines (Thousands of machines)

’13

’14

’15

’16

Pachinko machine unit sales (Thousands of machines)

’17

’18

’19

’20

Pachinko machine annual turnover (Times)

’21

’22
(FY)

Sources: National Police Agency and Yano Research Institute Ltd. “Pachinko Manufacturer Trends 2023” (Research of Japanese Market)

97

150

Results of Pachislot Machine Prototype Testing
30.4%
19.7%

28.0% 28.7%

33.8%
23.6%

94
79

76

89

24.1%21.6% 29.3%

92

0

5

6

27

21

15
7

8

27

21
9

10

86

75

73
54

24

17.4%19.8%

90

80

75

33.3%

27.4%

13

11

12

20.9%

81

29.5% 32.1%
18.9%
95

72

67

1

22

11
2

16

3

24

17

4

5

17

14

6

7

8

FY2022/3
Pachislot machine prototypes issued

17.2% 15.7% 17.1%
99
89
82

22.2% 23.5% 25.3%

68

19.7%

88

81

78

75

11.4%

76

51

30

20

29.6%

14
9

16

14
10

11

12

26

23

19

16
1

2

18

3

4

FY2023/3

Number of pachislot machines approved

15

10
5

6

FY2024/3

Pachislot machine approval rate

Source: Security Communications Association

Results of Pachinko Machine Prototype Testing
31.7%

41.9%
25.6% 27.0% 25.0%

31.9% 37.0%
91

78
63

68

63

SEGA SAMMY HOLDINGS

20

20

5

6

81

8

29

9

10

24.6% 26.2% 25.8% 26.3% 27.0% 20.5%

79

72
57

26

17

35.1% 30.4% 30.4%

93

62

17
7

26.4%

30

20

12

1

24

17
2

3

89

17
4

24

17
5

6

24

20
7

8

17
9

30.4%

10

62

53
21

11

12

18
1

21

9
2

3

21
4

FY2023/3

Number of pachinko machines approved

92

69

68

15

14

24.4% 16.1% 22.8%
86

84
65

FY2022/3
Pachinko machine prototypes issued

23.1% 25.0% 26.5% 17.0%

83

83

76

65

56

19

11

69

16.9%

21

10
5

6

FY2024/3

Pachinko machine approval rate

Source: Security Communications Association

Video Game Contents Market Size

212.4

$ billion

93.8

37.8

31.1
12.3

13.8

’15
Japan

Asia

30.6

36.8

37.2

45.3

48.8

52.0

8.4
22.2

7.1
21.1
27.6

5.9
19.5
25.1

9.4
26.7

10.1
27.2

16.2

’16

’17

N. America

Europe

17.1
’18

51.0

47.6

71.3

65.7

17.3
’19

14.5
34.1

12.9
33.2

19.8
’20

21.8
’21

17.4

18.7

19.8
41.1

15.2
33.3

16.0
34.4

36.6

39.2

49.7

51.6

54.5

58.3

65.6

66.6

67.7

68.9

Others

19.7

19.1

19.1
’22

61.2

70.0

20.0

20.3

’23

’24

’25

’26

(Forecast)(Forecast)(Forecast)(Forecast)(CY)

Source: Created based on Newzoo Global Games Market Data July 2023

Domestic Amusement Machine Sales and Revenues from
Amusement Facilities Operations

Number of Amusement Facilities and Amusement Machine
Units Installed

Billions of yen

362,099 354,463 349,835 340,383 342,211
433.8

462.0

485.9

520.1

540.8

156.9

157.4

152.9

161.7

164.7

2015

2016

2017

2018

2019

Amusement machine sales

107.3
2020

Revenues from amusement center operations

Source: Japan Amusement Industry Association

98

418.7

449.2

4,542

4,381

4,193

2016

2017

2018

334,239 340,454

4,022

3,931

3,882

3,894

2019

2020

2021

2022

152.0
2021

(FY)

Number of amusement facilities
Source: National Police Agency

Number of amusement machine units installed(CY)Company Profile / Stock Information
Company Profile
Company name

SEGA SAMMY HOLDINGS INC.

Address

Sumitomo Fudosan Osaki Garden Tower, 1-1-1 Nishi-Shinagawa, Shinagawa-ku,
Tokyo 141-0033, Japan

URL

https://www.segasammy.co.jp/en/

Established

October 1, 2004

Capital¥29,953 million (As of March 31, 2023)

Principal business

Management of SEGA SAMMY Group as the holding company

Stock Information (As of March 31, 2023)
Number of shares authorized for issue

800,000,000

Total shares issued and outstanding

241,229,476
60,659Number of shareholders

Name of shareholder

Shares held

Shares ratio

HS Company

36,008,000

14.92%The Master Trust Bank of Japan, Ltd. (Trust account)

27,345,000

11.33%SEGA SAMMY HOLDINGS INC.

20,476,041

8.48%

FSC Co., Ltd.

13,682,840

5.67%

Custody Bank of Japan, Ltd. (Trust account)

13,173,200

5.46%

Hajime Satomi

7,202,938

2.98%

STATE STREET BANK AND TRUST COMPANY 505001

5,684,392

2.35%

KOREA SECURITIES DEPOSITORY­– SAMSUNG

5,649,300

2.34%

Haruki Satomi

3,905,461

1.61%

THE BANK OF NEW YORK MELLON 140044

2,888,091

1.19%

Integrated Report 2023

Major Shareholders (As of March 31, 2023)

Breakdown of Shareholders
Treasury stock

Financial institutions

Treasury stock

Financial institutions

16.3%

19.6%

8.5%

18.3%

Japanese
individuals andother

Securities
companies

Japanese
individuals andother

Securities
companies

16.6%
Foreigninstitutions andindividuals

25.0%

As of March 31,
2022

1.7%
Other companies

20.9%

17.9%
Foreigninstitutions andindividuals

As of March 31,
2023

2.4%
Other companies

23.1%

29.8%
99

Consolidated Financial Statements
SEGA SAMMY HOLDINGS INC. and Consolidated Subsidiaries
As of March 31, 2022 and 2023
Millions of yen

2022

2023

AssetsCurrent assets¥152,459¥179,509

Notes, accounts receivable—trade, and contract assets (Note 7 (1))

38,95253,370

Merchandise and finished goods

9,336

18,503Work in process

42,14550,689Raw materials and supplies

16,044

20,269

Income taxes receivable

11,814

15,620Other

17,36016,205

(323)

(304)

287,789

353,862

Cash and deposits

Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant, and equipment

76,57877,630

Accumulated depreciation(47,823)(49,664)

Buildings and structures, net

28,75527,966

Machinery, equipment, and vehicles

8,836

8,505

Accumulated depreciation(7,518)(7,190)Machinery, equipment, and vehicles, net

1,318

1,314

Buildings and structures

SEGA SAMMY HOLDINGS

Amusement machines and facilities
Accumulated depreciation
Amusement machines and facilities, net
Land (Note 7 (4))

7,049

7,232

(6,347)(6,632)701

599

18,522

18,581657

534

46,75549,343

Accumulated depreciation(36,352)(37,857)

Other, net

10,403

11,48560,35860,482

Construction in progress
Other

Total property, plant, and equipment
Intangible assets
Goodwill

3,460

2,592

Other

9,722

10,654

Total intangible assets

13,183

13,247

40,69939,538Investments and other assets
Investment securities (Note 7 (3))
Long-term loans receivable

428

247

Lease and guarantee deposits

7,164

6,924

Net defined benefit assets

2,984

5,362

Deferred tax assets

13,446

16,499

Other

9,826

5,785

Allowance for doubtful accounts

(387)

(383)

Total investments and other assets

74,16173,973

147,703147,703¥435,492¥501,566

Total noncurrent assets
Total assets
See accompanying notes.

100Millions of yen

2022

2023

Liabilities
Current liabilities¥ 24,455¥ 30,556

Short-term borrowings

10,00017,000Accrued expenses

20,36019,865

Notes and accounts payable—trade

Income taxes payable

2,069

4,776

Contract liabilities

10,25725,852

Provision for bonuses

8,383

9,689

Provision for directors’ bonuses

1,189

1,187

Provision for point card certificates

115

187

199

—

Other

9,954

11,216

Total current liabilities

86,986

120,332

Bonds payable

10,00010,000Long-term borrowings

32,00025,000

Lease obligations

4,013

5,352

Net defined benefit liability

4,395

3,877

Asset retirement obligations

Noncurrent liabilities

Asset retirement obligations
Provision for dismantling of fixed assets

469

754

2,560

2,607

420

420

Other

2,009

1,874

Total noncurrent liabilities

55,86949,886

142,855

170,218

29,95329,953

Total liabilities

Integrated Report 2023

Deferred tax liabilities

Net assets
Shareholders’ equity
Capital stock
Capital surplus

117,689

72,213Retained earnings

224,684

261,840

Treasury stock(77,886)(37,251)

Total shareholders’ equity

294,440

326,755

2,270

2,626

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land (Note 7 (4))

(33)

382

(1,109)(1,109)Foreign currency translation adjustment

41

3,730

Remeasurements of defined benefit plans(3,199)(1,531)

Total accumulated other comprehensive income(2,028)

4,099

Share acquisition rights

176

468

Non-controlling interests

49

24

Total net assets
Total liabilities and net assets

292,637

331,347¥435,492¥501,566

See accompanying notes.

101Consolidated Statements of Income and Comprehensive Income
SEGA SAMMY HOLDINGS INC. and Consolidated Subsidiaries
Years ended March 31, 2022 and 2023
Millions of yen

2022

2023

Net sales (Note 8 (1))¥320,949¥389,635

Cost of sales (Notes 8 (2) and (3))

193,081

231,568

Gross profit

127,868

158,067

95,825111,278

32,042

46,789Interest income

112

433

Dividends income

498

516

Gain on investments in partnership

3,052

1,929

Foreign exchange gains

1,337

1,354

Interest expenses

(301)

(321)

Selling, general and administrative expenses
Operating income
Other income (expenses)(2,778)(520)

Commission fee

(102)

(146)

Loss on investments in partnership

(479)

(563)
(285)

Equity in losses of affiliates

Loss on retirement of noncurrent assets(469)

Gain on sales of noncurrent assets (Note 8 (4))

1,988

3

Gain on sales of investment securities

2,516

—

SEGA SAMMY HOLDINGS

Gain on sales of stocks of subsidiaries and affiliates

698—

Loss on sales of noncurrent assets (Note 8 (5))

(50)

(0)

Impairment loss (Note 8 (6))

(430)

(446)

0

(81)

Loss on valuation of investment securities
Loss on COVID-19
Loss on business restructuring (Note 8 (7))
Other, net

(113)

—

—

(1,783)

401

191

Subtotal

5,878

279

Income (loss) before income taxes

37,92147,069

Income taxes—current

1,989

4,137

Income taxes—deferred(1,086)(3,000)

903

1,136

37,01845,93237,02745,938(8)(6)

Valuation difference on available-for-sale securities

334

345

Deferred gains or losses on hedges

(14)

—

Foreign currency translation adjustment

3,526

2,873

Remeasurements of defined benefit plans, net of tax(2,844)

1,677

Share of other comprehensive income of entities accounted for using equity method

1,203

1,227

Total income taxes
Profit(Breakdown)
Profit attributable to owners of parent
Profit attributable to non-controlling interests
Other comprehensive income

Total other comprehensive income (Note 8 (8))
Comprehensive income

2,206

6,124

39,22452,057(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests
See accompanying notes.

102

52,06639,230
¥

(5)

¥

(9)

Consolidated Statements of Changes in Net Assets
SEGA SAMMY HOLDINGS INC. and Consolidated Subsidiaries
Years ended March 31, 2022 and 2023

Prior fiscal year (from April 1, 2021 to March 31, 2022)

Millions of yen
Shareholders’ equity

Balances as of April 1, 2021
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2022

Capital stock

Capital surplus

Retained earnings

Treasury stock¥29,953¥118,048¥(53,561)

29,953

118,048¥200,551(2,067)
198,484(53,561)(9,411)37,027(25,036)711(90)(1,317)
(97)

(186)
(82)
—
¥29,953(358)¥117,689

Total shareholders’equity¥294,991(2,067)
292,924(9,411)37,027—(25,036)621—(1,317)(284)(82)

26,200¥224,684(24,325)¥(77,886)

1,515¥294,440
Millions of yen

Accumulated other comprehensive income

Balances as of April 1, 2021
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2022

Revaluation
reserve for land

Foreigncurrencytranslation
adjustment

Remeasurementsof defined benefit
plans¥(725)¥(1,109)¥(3,867)¥ (459)

1,930

(725)

(1,109)(3,867)(459)¥(4,231)—(4,231)340
340¥2,270692
692¥ (33)—¥(1,109)

3,909
3,909
¥
41

(2,739)(2,739)¥(3,199)

2,203
2,203
¥(2,028)

Deferred
gains or losses
on hedges¥1,930Total accumulated
othercomprehensive
incomeIntegrated Report 2023

Valuationdifference on
available-for-salesecurities

Millions of yen
Share acquisitionrightsBalances as of April 1, 2021
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2022

Non-controllinginterests

¥ —

¥ 496

—

496

Total net assets¥291,256(2,067)289,189(9,411)37,027—(25,036)621—(1,317)
(284)

176
176
¥176

(447)
(447)
¥ 49

(82)
1,932
3,448
¥292,637

See accompanying notes.

103Consolidated Statements of Changes in Net Assets

Current fiscal year (from April 1, 2022 to March 31, 2023)

Millions of yen
Shareholders’ equity

Balances as of April 1, 2022
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2023

Capital stock

Capital surplus

Retained earnings

Treasury stock¥29,953¥117,689¥224,684¥(77,886)

29,953

117,689

224,684(77,886)(8,873)45,93890(4,987)142
45,48031(45,480)(27)—¥29,953(45,475)¥ 72,213

Total shareholders’equity¥294,440—
294,440(8,873)45,93890(4,987)
174
—
—
—
(27)

37,155¥261,840

40,635¥(37,251)

32,315¥326,755
Millions of yen

Accumulated other comprehensive income

SEGA SAMMY HOLDINGS

Valuationdifference on
available-for-salesecurities

Balances as of April 1, 2022
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2023

Deferred
gains or losses
on hedges

Revaluation
reserve for land

¥2,270¥ (33)¥(1,109)

2,270

(33)

356
356
¥2,626

415
415
¥382

Balances as of April 1, 2022
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2023
See accompanying notes.

104

Non-controllinginterests

¥176

¥ 49

176

49

(1,109)41(3,199)¥(2,028)—(2,028)—¥(1,109)

3,688
3,688
¥3,7301,667
1,667¥(1,531)

6,128
6,128
¥ 4,099¥292,637—
292,637(8,873)45,93890(4,987)
174
—
—
—

292
292
¥468

(25)
(25)
¥ 24

Total accumulated
othercomprehensive
income¥(3,199)

Total net assets

(27)
6,395
38,710¥331,347¥

Remeasurementsof defined benefit
plans

41

Millions of yen
Share acquisitionrightsForeigncurrencytranslation
adjustment

Consolidated Statements of Cash Flows
SEGA SAMMY HOLDINGS INC. and Consolidated Subsidiaries
Years ended March 31, 2022 and 2023
Millions of yen

2022

2023

¥ 37,921¥ 47,069

11,406

10,669Net cash provided by (used in) operating activities
Income (loss) before income taxes
Depreciation and amortization
Impairment loss
Loss (gain) on sales of noncurrent assets
Loss on retirement of noncurrent assets

430

446

(1,937)

(4)

469

285
—

0

81

Loss (gain) on investments in partnership(2,573)(1,365)

Amortization of goodwill

2,311

2,178

Increase (decrease) in allowance for doubtful accounts

(25)

(41)

Increase (decrease) in provision for directors’ bonuses

437

(15)

Increase (decrease) in net defined benefit liability

96

(170)

Increase (decrease) in provision for bonuses

(116)

1,223

Interest and dividends income

(610)

(950)

Interest expenses

301

321

Foreign exchange losses (gains)(1,112)

1,152

Equity in (earnings) losses of affiliates

2,778

520

338

(13,493)(15,354)(22,481)

Loss (gain) on valuation of investment securities

Decrease (increase) in notes and accounts receivable—trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable—trade

6,495

5,908

Increase (decrease) in contract liabilities

10,201

15,545

Increase (decrease) in guarantee deposits received(1,589)(76)

Other, net(4,240)1,806

Subtotal

43,13848,611

664

987

(300)

(291)

Interest and dividends income received
Interest expenses paid
Extra retirement payments(2,236)—

Income taxes paid

(5,078)(6,743)

Income taxes refund
Net cash provided by (used in) operating activities

3,419

2,140

¥ 39,607¥ 44,704

Integrated Report 2023

(2,489)Loss (gain) on sales of investment securities

See accompanying notes.

105

Consolidated Statements of Cash Flows

Millions of yen

2023

2022

Net cash provided by (used in) investing activities
Payments into time deposits¥ (5,000)¥—

Proceeds from withdrawal of time deposits

5,000

—

Purchase of short-term investment securities(20,000)—

Proceeds from redemption of securities

20,717—Purchase of trust beneficiary rights(1,309)—Proceeds from sales of trust beneficiary rights

1,167

382

Purchase of property, plant, and equipment(5,983)(4,944)

Proceeds from sales of property, plant, and equipment

2,141

7

Purchase of intangible assets(4,569)(5,875)

0

—
(669)

Proceeds from sales of intangible assets
Purchase of investment securities(196)

Proceeds from sales of investment securities

2,565

1

Payments for investment in partnerships(821)(1,226)

Proceeds from distribution of investment in partnerships

SEGA SAMMY HOLDINGS

2,596

3,510

Purchase of shares of subsidiaries resulting in change in scope of consolidation

—

(448)

Proceeds from purchase of shares of subsidiaries resulting in change in scope of consolidation

—

31

212

—

(4,903)(155)

Payments of loans receivable(769)(1,907)

Collection of loans receivable

2,381

2,586

—

1,200

(238)

(26)

Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation
Purchase of shares of subsidiaries and affiliates

Reduction of investments in trusts
Payments for lease deposits

514

767

Other, net(2,300)4,413

Net cash provided by (used in) investing activities(8,794)(2,351)

Collection of lease deposits

Net cash provided by (used in) financing activities
Proceeds from long-term borrowings—

10,000

Repayment of long-term borrowings—(10,191)(25,036)(4,987)Purchase of treasury stock
Purchase of treasury stock of subsidiaries

(98)

—

Purchase of shares of subsidiaries not resulting in change in scope of consolidation

—

(50)

(9,410)(8,865)(93)—

Cash dividends paid
Cash dividends paid to non-controlling interests
Other, net(1,331)(1,263)

Net cash provided by (used in) financing activities(35,970)(15,358)

3,029

162

Effect of exchange rate change on cash and cash equivalents(2,128)27,156

154,540

152,459

Increase in cash and cash equivalents from newly consolidated subsidiaries

47—

Increase (decrease) in cash and cash equivalents resulting from change in accounting periodof consolidated subsidiaries

—

(107)

¥152,459¥179,509

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at start of period

Cash and cash equivalents at end of period (Note 10 (1))
See accompanying notes.

106Notes to Consolidated Financial Statements
SEGA SAMMY HOLDINGS INC. and Consolidated Subsidiaries
Years ended March 31, 2022 and 2023

1 Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of SEGASAMMY HOLDINGS INC. (the “Company”) and its consolidated
subsidiaries have been prepared in accordance with the provisions
set forth in the Financial Instruments and Exchange Law of Japan andits related accounting regulations, and in conformity with accounting
principles generally accepted in Japan (“Japanese GAAP”), which
are different in certain respects as to application and disclosure
requirements from International Financial Reporting Standards (“IFRS”).
The accounts of the Company’s overseas subsidiaries are basedon their accounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective countriesof domicile. However, necessary adjustments are made upon consolidation for 2022 and 2023. The accompanying consolidated
financial statements have been restructured and translated into
English (with certain expanded disclosure) from the consolidated

financial statements of the Company prepared in accordance withJapanese GAAP and filed with the appropriate Local Finance Bureauof the Ministry of Finance as required by the Financial Instruments
and Exchange Law of Japan. Certain supplementary information
included in the statutory Japanese-language consolidated financial
statements is not presented in the accompanying consolidated
financial statements. Each amount of the accompanying consolidated
financial statements is rounded down to the nearest one million yen.
In preparing the accompanying consolidated financial statements,
certain reclassifications have been made in order to present them ina form which is more familiar to readers outside of Japan. Certain
reclassifications have been made to the 2022 consolidated financial
statements to conform to the classifications used in 2023. Thesechanges had no impact on previously reported results of operations
or shareholders’ equity.

2 Summary of Significant Accounting Policies
3. Accounting policies(1) Number of consolidated subsidiaries: 61(1) Valuation and accounting treatment for important assets(2) Number of non-consolidated subsidiaries: 11
Non-consolidated subsidiaries are excluded from the scope of
consolidation because the combined amount of each of assets, net
sales and net income corresponding to the percentage of equity
interest held by the Company, and the combined amount of retained
earnings corresponding to the percentage of equity interest held by
the Company, do not have a significant effect on the consolidated
financial statements.

2. Application of the equity method(1) Number of non-consolidated subsidiaries accounted forunder the equity method: —(2) Number of affiliated companies accounted for under theequity method: 8(3) Number of non-consolidated subsidiaries and affiliatedcompanies which are not accounted for under the equity
method: 13
Some of the Company’s non-consolidated subsidiaries and affiliates
are not accounted for under the equity method because the combined
amount of net income corresponding to the percentage of equity
interest held by the Company, and the combined amount of retained
earnings corresponding to the percentage of equity interest held by
the Company do not have a significant effect on the consolidated
financial statements even if they are excluded from the scope ofthe equity method and have no significance as a whole.

1) Held-to-maturity debt securities
Held-to-maturity debt securities are stated at the amortized cost
method (the straight-line method)2) Available-for-sale securitiesThose other than securities without available fair market value:
Fair value method (The difference between acquisition cost andfair value is accounted for as the valuation difference on availablefor-sale securities in net assets, with cost of sales determined by
the moving-average method.)With respect to compound financial instruments whose fair value
cannot be categorized and measured for each embedded derivative,the entire compound financial instrument is appraised by fair value.
Unrealized gains or losses are reported as profit or loss for the current
fiscal year.
Securities without available fair market value:
Securities without quoted market prices are carried at cost, which isdetermined by the moving-average method.
The net amount of equity included in the Company’s financial
statements (from limited liability investment partnerships and similar
investments, regarded as marketable securities under Article 2-2 ofthe Financial Investment and Exchange Law of Japan) is calculated
based on the relevant financial statements for the partnership available
as of the reporting date stipulated in the partnership agreement.
3) Derivatives
Derivatives are stated at fair market value.

Integrated Report 2023

1. Scope of consolidation

107Notes to Consolidated Financial Statements

4) Inventories
Inventories are stated at cost, cost being determined mainly by thegross-average method (or at the net realizable value (NRV) calculated
by writing down the book value to reflect a decrease in the NRV).
Work in process is also stated at cost, cost being determined by
the specific identification method (or at the NRV calculated by writing
down the book value to reflect a decrease in the NRV).

(2) Depreciation and amortization for important assets

SEGA SAMMY HOLDINGS

1) Property, plant and equipment (excluding lease assets)
Depreciation is calculated primarily using the straight-line method.
Range of useful life for the assets is as follows:
Buildings and structures: 2–50 years
Machinery, equipment and vehicles: 2–12 years
Amusement machines and facilities: 2–5 years
2) Intangible assets (excluding lease assets)
Amortization is calculated using the straight-line method. The software
used in the Company is amortized by the straight-line method basedon the useful lives within the Company (within five years).
3) Lease assets
Finance leases which transfer ownership:
Depreciation method for such assets is the same as that whichapplies to property, plant and equipment owned by the Company.
Finance leases which do not transfer ownership:
Depreciated by using the straight-line method assuming the useful life
equals to the lease period with a residual value of zero.
4) Right-of-use assets
The lease period or the useful life of the asset, whichever is shorter, isused as the useful life, and the residual value is calculated as zero.

(3) Accounting for deferred assets
Bond issue cost: All expenses are expensed when incurred.

(4) Accounting for allowances and provisions
1) Allowance for doubtful accounts
Allowance for doubtful accounts is provided in the amountsufficient to cover possible losses based on a historical write-off ofgeneral receivables.
Receivables with default possibility and bankrupt receivables arecalculated based on an individual assessment of the possibilityof collection.
2) Provision for bonuses
The estimated amount of bonuses was recorded to meet the paymentof employee bonuses, an amount corresponding to the current
fiscal year.
3) Provision for directors’ bonuses
The estimated amount of bonuses was recorded to meet the payment
of Directors and Audit & Supervisory Board Members’ bonuses,
an amount corresponding to the current fiscal year.
4) Provision for point card certificates
To provide for use of points granted to customers, the estimated future
usage amount as of the end of the current fiscal year is recorded.

1085) Provision for dismantling of fixed assets
To provide for expenses for dismantling unused decrepit buildings,
estimated future expenses are recorded.

(5) Accounting method for retirement benefits
1) Attribution method for projected retirement benefits:
In calculating retirement benefits obligations, benefit-formula
attribution is adopted for the purpose of attributing projected retirement benefits to the period up to the end of the fiscal year ended
March 31, 2023.
2) Treatment of actuarial gains and losses and prior service costs:
Prior service costs are amortized equally over a certain number ofyears (10 years in principle) within the average remaining years ofservice for the employees at the time of accrual, or are charged toincome collectively at the time of accrual. Actuarial gains and losses
are amortized by the straight-line method over a certain number ofyears (10 years in principle) within average remaining years ofservice for the employees at the time of accrual in each fiscal year,
commencing from the following fiscal year after the accrual for each
employee or are charged to income collectively in the following fiscal
year after the accrual.

(6) Accounting for significant hedge
1) Hedge accounting
The Group adopts deferred hedge accounting. However, special
treatment is used for qualifying interest rate swap transactions.
Moreover, allocation hedge accounting is applied to qualifying
currency swap transactions and forward exchange contracts.
2) Hedging instruments and hedged items
Hedging instrument: Currency swaps, interest rate swaps, and forward
exchange contracts
Hedged item: Interest on borrowings, receivables and payables
denominated in foreign currencies
3) Hedge policy
Derivative instruments are used to mitigate risks associated withforeign exchange and interest rate fluctuations.
As a rule, hedging is only used for items in which actual demand exists,
and not for speculative purposes.
4) Evaluation of hedge effectivenessHedge effectiveness is evaluated through comparative analysis of the
cumulative fluctuations in the market between the hedged item andthe hedging instrument. Evaluation of hedge effectiveness at fiscal
year-end is omitted for currency swap transactions, as material conditions for the notional principal of hedging instruments and those forhedged items are the same and these transactions are deemed tooffset the market fluctuations.
Evaluation of hedge effectiveness at fiscal year-end is omitted also
for interest rate swap transactions applied to special treatment.

(7) Accounting policy for recognition of significant revenues
and expenses
Accounting policy for recognition of significant revenues is as follows.
Compensation for individual performance obligations was receivedwholesale. The Group’s performance obligation is to deliver finishedproducts or merchandise in accordance with a sales contract or the
like with the customer. The Group determines that the performanceobligation is satisfied when it delivers the finished products ormerchandise and the customer assumes control over said finishedproducts or merchandise, with the revenue recognized at the point ofdelivery. With regard to revenue from sales from consignment typesales of certain merchandise, if after the role (as the principal or
agent) in the provision of goods or services is determined, the Groupis involved in the sale of the merchandise as an agent, the revenue isrecognized using the net amount after deducting the amount paid tothe supplier from the amount received from the customer.
(iii) Resort facility sales
Revenues of resort facilities in the Resort Business is from the operationof hotels and golf courses, with the Group’s performance obligation
to provide accommodation, eating and drinking, and space to playon the golf course at each facility. The Group determines that theperformance obligation is satisfied and the revenue is recognized
upon the completion of the provision of the various services tothe customers.

(8) Amortization method and period of goodwill
If the duration of the effect of goodwill can be rationally estimated,
amortization is made over the estimated number of years by thestraight-line method. In other cases, amortization is made over a
five-year-period by the straight-line method.

(9) Cash and cash equivalents in the consolidated statementsof cash flows

Integrated Report 2023

within roughly two months after their fulfillment and did not include
significant financial elements.
(i) Digital content
With regard to revenue from the granting of game distribution rights
in the Entertainment Contents Business, the Group provides gamecontent primarily to platform operators along with distribution rights,
and the Group’s performance obligation is to provide game content.
The Group determines that the performance obligation is satisfied by
the provision of game content to the platform operators, and if thecontract is one in which usage fees are collected based upon thesales of the platform operator, the revenue is recognized when thesales of the platform operators are recorded, and in other cases, it isrecognized when the game content is provided.
With regard to revenue from sales from game downloads in theEntertainment Contents Business, the Group’s performance obligation
is to provide game content to customers. The Group determines thatthe performance obligation is satisfied by the provision of the gamecontent to the customer and recognizes the revenue when the gamecontent is provided.
With regard to revenue from sales of F2P items in the Entertainment
Contents Business, and Pachislot and Pachinko Machines Business,
the Group’s performance obligation is to provide the services specified
for each item to the customer. Depending on the nature of the item,
the Group determines that the performance obligation is satisfied
when the item is used by the customer or over the course of theestimated usage period calculated based on past usage data forsimilar items, whereupon the revenue is recognized.
With regard to the annual update service for amusement machines
in the Entertainment Contents Business, the Group’s performanceobligation is to consistently provide updates to content throughout
the contract period. Therefore, the Group determines that the performance obligation is satisfied over the course of the contract period,
with the revenue recognized over the period of the contract.
(ii) Sales of products and merchandise
Revenue from the sales of products and merchandise in theEntertainment Contents Business and Pachislot and Pachinko
Machines Business is primarily from sales through manufacture or

In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term highly liquid investmentswith maturities not exceeding three months at the time of purchaseare considered to be cash and cash equivalents.

(10) Application of the group tax-sharing system
The Company applies the group tax-sharing system.

3 Significant Accounting Estimates(1) Valuation for inventories, etc., in the Entertainment
Contents Business(i) Carrying amounts in the consolidated financial statements in thecurrent fiscal year

Millions of yen

Work in process“Other” under intangible assets

2022

2023

¥39,098¥47,043

5,801

6,410

(ii) C alculation method of the carrying amount in the consolidated
financial statements in the current fiscal year
Work in process and software, etc., amounts posted on account of
production of game contents, etc., in the Entertainment Contents
Business are stated at acquisition cost and are expensed or amortizedsystematically considering the forecasted sales volume and expected
service period. However, if the future recoverable amount is less thanthe carrying amount of work in process and software, etc., the carrying
amount is reduced to the recoverable amount and the resulting
decrease in the carrying amount is recorded in the cost of sales forthe current fiscal year.

109

Notes to Consolidated Financial Statements(iii) Key assumptions used in the calculation of carrying amount in the
consolidated financial statements in the current fiscal year
The future recoverable amount is estimated based on the forecasted
sales for the following fiscal years.
(iv) Impact on the consolidated financial statements in the following
fiscal year
In case of possible discrepancy between the forecasts and actual
results due to the timing of release of new products from rival
companies in the same market and the nature of hit businesses,
there may be an impact on profit and loss.

(2) Valuation of raw materials in the Pachislot and Pachinko
Machines Business(i) Carrying amount in the consolidated financial statements in thecurrent fiscal year

Millions of yen

Raw materials

2022

2023

¥10,594¥16,136

SEGA SAMMY HOLDINGS(ii) Calculation method of the carrying amount in the consolidated
financial statements in the current fiscal year
Raw materials are posted using the acquisition cost, but in the eventthat anticipated future raw material usage falls below stock, the surplus
is posted to cost of sales.
(iii) Key assumptions used in the calculation of carrying amount in the
consolidated financial statements in the current fiscal year
Raw material usage forecasts are estimated based on the projectedvolume of Pachinko and Pachislot machines sales for the following
fiscal years.
(iv) Impact on the consolidated financial statements in the following
fiscal year
In case of possible discrepancy between the forecasts and actual
results due to the timing of release of new products from rival
companies in the same market and the nature of hit businesses, there
may be an impact on profit and loss.

(3) Valuation of shares of affiliates with regard to PARADISESEGASAMMY Co., Ltd.
(i) C arrying amount in the consolidated financial statements inthe current fiscal year

Millions of yen

Shares of subsidiaries
and affiliates

110

2022

2023

¥18,542¥17,867(ii) C alculation method of the carrying amount in the consolidated
financial statements in the current fiscal year
PARADISE SEGASAMMY Co., Ltd. (PSS) is an affiliate of the Company
accounted for using the equity method. Investments into PSS aretreated under equity method accounting.
PSS applies International Financial Reporting Standards (IFRS), andif there is any indication of impairment in its cash generating units, it
performs an impairment test. For the cash generating units including
goodwill, PSS performs an impairment test on an annual basis, inaddition to when there is any indication of impairment. As a result of
its impairment tests, in the event that the recoverable amount is lessthan its carrying amount the book value in the PSS financial statements
is reduced to the recoverable amount is less than its carrying amount,
this exerts an impact on the amount of shares of affiliates of theCompany through equity method accounting.
PSS has posted ¥125,811 million in noncurrent assets, including
goodwill of ¥7,771 million.
(iii) Key assumptions used in the calculation of carrying amount in
the consolidated financial statements in the current fiscal year
PSS performs an impairment test on its cash generating units including
goodwill, and its cash generating units that show any indication of
impairment, and makes calculations for recoverable amount basedon value in use or on fair value less cost of disposal.
Key assumptions that utilize measurements of value in use are madebased on the business plans, etc., which are fundamental to calculations of future cash flows, as well as growth rates and discount rates.
Business plans, etc., have been made based on the number of casino
visitors and the drop amount (the amount of chips purchased attables), premised on demand recovering gradually through the following
fiscal year. When establishing growth rates for after the target periodof the business plans, etc., figures that reflect consideration of businessgrowth are used. In addition, the discount rate is calculated using
weighted average cost of capital as a basis and by reflecting the risk
associated with businesses, which is determined based on external
and internal information.
Fair value less cost of disposal mainly uses the real estate appraisal
value (under depreciated replacement cost approach) of external
experts who take into consideration the repurchase cost of the relevant
asset and related depreciation factors.
(iv) Impact on the consolidated financial statements in the following
fiscal year
Estimates of future cash flows are made based on best estimatesfrom management. However, in the event of trends in the number ofusers which cause estimates to vary from actual results, there may be
an impact on profit and loss.

4 Changes in Accounting Policies(1) Application of Implementation Guidance on AccountingStandard for Fair Value Measurement
The Company has applied the “Implementation Guidance on
Accounting Standard for Fair Value Measurement” (ASBJ Guidance
No. 31, June 17, 2021; hereinafter “Fair Value Measurement Guidance”)
since the start of the current consolidated fiscal year. The new
accounting policies stipulated by the Fair Value Measurement Guidance
are applied to current and future accounts in accordance with thetransitional treatment provided in Paragraph 27-2 of the Fair Value
Measurement Guidance. This has had no impact on the consolidated
financial statements for the current fiscal year. The notes on investment
trusts in the fair value information by level within the fair value hierarchyin the notes on financial instruments are not shown for the previous

5

consolidated fiscal year, in accordance with Paragraph 27-3 of the
Fair Value Measurement Guidance.

(2) Application of “Leases” (U.S. GAAP Topic 842)
Subsidiaries that apply U.S. GAAP have applied “Leases” (U.S. GAAP
Topic 842) since the start of the current consolidated fiscal year. This
standard calls for the lessee to record all leases as assets and liabilities
on the balance sheet, in principle. The application of U.S. GAAP
Topic 842 is in accordance with the transitional treatment, and theCompany employs the method of recognizing the cumulative effectof the change in accounting policies on the starting date of its
application. This has had only a minor impact on the consolidated
financial statements for the current fiscal year.

Unapplied New Accounting Standards(1) Overview
These standards cover handling of categories for recording income
taxes on other comprehensive income and tax effects related to saleof stock in subsidiaries and other instruments when applying group
corporate income taxation.

• Practical Solution on the Accounting for and Disclosure of the Issuanceand Holding of Electronically Recorded Transferable Rights thatMust be Indicated on Securities, etc. (ASBJ Practical Solution
No. 43, August 26, 2022)(1) Overview
This standard sets out accounting and disclosure of issuance or
holding by a joint stock company of electronically recorded transferable rights that must be indicated on securities, etc., as described in
Article 1, paragraph 4, item 17 of the Cabinet Office Order on Financial
Instruments Business, etc. (Cabinet Office Order No. 52 of 2007).

Integrated Report 2023

The Company and its domestic consolidated subsidiaries• Accounting Standard for Current Income Taxes(ASBJ Statement No. 27, October 28, 2022)• Accounting Standard for Presentation of Comprehensive Income(ASBJ Statement No. 25, October 28, 2022)• Guidance on Accounting Standard for Tax Effect Accounting(ASBJ Guidance No. 28, October 28, 2022)(2) Scheduled date of application(2) Scheduled date of application

The accounting standard will apply from the beginning of the fiscal
year ending March 31, 2024.

The guidance will apply from the beginning of the fiscal year ending
March 31, 2025.

(3) Effects of application of the accounting standard(3) Effects of application of the accounting standard

The effects of the application are under assessment at the time of
preparing these consolidated financial statements.

The effects of the application are under assessment at the time of
preparing these consolidated financial statements.

111

Notes to Consolidated Financial Statements

6

Changes in Methods of Presentation(1) Consolidated Balance Sheet(2) Consolidated Statement of Cash Flows“Contract liabilities,” which had been included in “Other” undercurrent liabilities in the previous consolidated fiscal year, are separately
presented beginning with this consolidated fiscal year, since theyaccount for more than 5% of total liabilities and net assets. The consolidated financial statements for the previous consolidated fiscal
year have been restated to reflect this change in presentation methods.
As a result, ¥20,211 million presented as “Other” under current liabilities
on the Consolidated Balance Sheet for the previous consolidated
fiscal year has been restated as ¥10,257 million of “Contract liabilities”
and ¥9,954 million of “Other.”“Increase (decrease) in contract liabilities,” which had been included
in “Other, net” under cash flows from operating activities in the previous
consolidated fiscal year, is separately presented beginning with thisconsolidated fiscal year, since it has increased in importance. The
consolidated financial statements for the previous consolidated fiscal
year have been restated to reflect this change in presentation methods.
As a result, ¥5,960 million presented as “Other, net” under cash flows
from operating activities on the Consolidated Statement of Cash
Flows for the previous consolidated fiscal year has been restated as¥10,201 million of “Increase (decrease) in contract liabilities” and¥(4,240 million) of “Other, net.”

7 Notes to Consolidated Balance Sheets(1) Receivables from contracts with customers and contract assets
SEGA SAMMY HOLDINGSThe amount of receivables from contracts with customers and the amount of contract assets, included in “Notes, accounts receivable—trade, andcontract assets” on the consolidated balance sheets, are provided in “Note 22 Revenue recognition 3. (1) Receivables from contracts with customers;
the balances of contract assets and contract liabilities” of the notes to consolidated financial statements.

(2) Assets pledged as collateral
Assets pledged as collateral are as follows:
Millions of yen

Shares of subsidiaries and affiliates
Total

2022

2023

Note 1 ¥18,542

Note 2 ¥17,867

18,542

17,867

Notes: 1. For a loan of ¥70,107 million (KR₩725,000 million) from financial institutions to the equity method affiliate PARADISE SEGASAMMY Co., Ltd. at the end of the previous
fiscal year, the shares of this company are pledged as collateral.
2. For a loan of ¥73,007 million (KR₩725,000 million) from financial institutions to the equity method affiliate PARADISE SEGASAMMY Co., Ltd. at the end of the current
fiscal year, the shares of this company are pledged as collateral.

(3) Investment securities to non-consolidated subsidiaries and affiliated companies
Millions of yen

Investment securities (Shares)
Investment securities (Capital Contributions)(4) Revaluation reserve for land
Consolidated subsidiary SEGA CORPORATION has revalued landfor business, pursuant to the Act on Revaluation of Land (Law No. 34,
March 31, 1998) and Amendments to the Law Concerning Revaluationof Land (Law No. 19, March 31, 2001).
Accordingly, SEGA CORPORATION has recorded an item for therevaluation reserve for land under net assets.

112

2022

2023

¥20,866¥19,432

978824

Revaluation method
SEGA CORPORATION computed the value of land based on themethodology regarding rational adjustments to valuation of fixed
assets stipulated in Article 2-3, and appraisals by licensed real estateappraisers prescribed in Article 2-5 of the Enforcement Ordinance
No. 119 (March 31, 1998) pertaining to the Law Concerning Revaluationof Land.
Date of revaluation: March 31, 2002.
Difference between the fair value at the end of the fiscal year andthe book value after revaluation of revalued land: ¥(425) million

(5) Overdraft account and commitment line contract
The Company and its consolidated subsidiaries entered into overdraft account contracts and commitment line contracts with banks for the purposeof efficient procurement of operating capital.
The balance of unexecuted borrowings based on these contracts are as follows.
Millions of yen

Total amount of limit of overdraft account and commitment line contract

2022

2023

¥239,068¥294,654——

239,068

294,654

Balance of borrowings
Balance of unrealized borrowings

8 Notes to Consolidated Statements of Income and Comprehensive Income(1) Revenue from contracts with customers
Net sales combine revenue from contracts with customers and revenue from other sources. The amount of revenue from contracts with customers
is provided in “Note 22 Revenue recognition 1. Disaggregation of revenue from contracts with customers” of the consolidated financial statements.

(2) The book value devaluation of inventories held for normal sales purpose based on decline in profitability

Cost of sales

2022

2023

¥6,636¥9,871(3) Research and development expenses included in selling, general and administrative expenses and manufacturing cost
Millions of yen

2022

2023

¥47,127¥51,410Integrated Report 2023

Millions of yen(4) Gain on sales of noncurrent assets
Millions of yen

2022

2023

Machinery, equipment, and vehicles¥    2¥3

Other property, plant, and equipment

1,985

0

Total

1,988

3

(5) Loss on sales of noncurrent assets
Millions of yen

2022

2023

¥14

¥—

Machinery, equipment, and vehicles

0—

Amusement machines and facilities

33

0

Other property, plant, and equipment

2

0

Total

50

0

Buildings and structures

113

Notes to Consolidated Financial Statements(6) Impairment loss
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Use

Location

Type

Assets for business

Shinagawa-ku, Tokyo and 2 other locations

Buildings and structures

Based on business segments, assets or asset groups whose cash
flows can be estimated separately are grouped independently. Of
these, the book values of assets or asset groups whose market
values declined significantly or that are projected to consistently
generate negative cash flows arising from operating activities are

Amount¥ 11

Amusement machines and facilities

11

Other property, plant, and equipment

320

Other intangible assets

86

Total

430

reduced to their recoverable values. The amount of this reduction isrecorded as an impairment loss under other expenses.
Recoverable values are calculated based on memorandum values, as
no future cash flows are expected.

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen

SEGA SAMMY HOLDINGS

Use

Location

Type

Assets for businessState of Nevada in the U.S. and 2 other locations Buildings and structures¥141

Amusement machines and facilities

2

Other property, plant, and equipment

297

Other intangible assets
Total
Based on business segments, assets or asset groups whose cash
flows can be estimated separately are grouped independently. Of
these, the book values of assets or asset groups whose market
values declined significantly or that are projected to consistently
generate negative cash flows arising from operating activities are

Amount5446

reduced to their recoverable values. The amount of this reduction isrecorded as an impairment loss under other expenses.
Recoverable values are calculated based on memorandum values, as
no future cash flows are expected.

(7) Loss on business restructuring
This loss is primarily related to the game contents for which development was suspended in connection to the restructuring of the European business.

114

(8) Reclassification adjustments and the related tax effects concerning other comprehensive income
Millions of yen

2022

2023

¥  620¥  43326—

Before adjustments to tax effects

647

433

The amount of tax effects

(312)

(87)

Valuation difference on available-for-sale securities

334

345

Valuation difference on available-for-sale securities
The amount arising during the period
Reclassification adjustments

Deferred gains or losses on hedges
The amount arising during the period
Reclassification adjustments
Before adjustments to tax effects
The amount of tax effects
Deferred gains or losses on hedges

6

—

(28)

—

(22)

—

7

—

(14)

—

3,524

2,873

Foreign currency translation adjustment
The amount arising during the period
Reclassification adjustments
The amount of tax effects
Foreign currency translation adjustment

2

—

3,526

2,873

—

—

3,526

2,873

(2,920)1,760

Remeasurements of defined benefit plans, net of tax
The amount arising during the period
Reclassification adjustments
Before adjustments to tax effects
The amount of tax effects
Remeasurements of defined benefit plans, net of tax

165

(34)

(2,754)

1,726

(89)

(49)

(2,844)

1,677

1,203

1,277

Integrated Report 2023

Before adjustments to tax effects

Share of other comprehensive income of entities accounted for using equity method
The amount arising during the period
Reclassification adjustments
Share of other comprehensive income of entities accounted for using equity method
Total other comprehensive income

—

—

1,203

1,227

¥2,206¥6,124115

Notes to Consolidated Financial Statements

9 Notes to Consolidated Statements of Changes in Net Assets
Prior fiscal year (From April 1, 2021 to March 31, 2022)

1. Number of outstanding common stock
SharesType of stock

As of April 1, 2021

Increase

Decrease

As of March 31, 2022

266,229,476——

266,229,476

As of April 1, 2021

Increase

Decrease

As of March 31, 2022

31,142,581

12,578,815

413,466

43,307,930

Common stock

2. Number of outstanding treasury stock
SharesClass of shares

Common stock

SEGA SAMMY HOLDINGS(Outline of causes of change)
Increase
Increase due to market purchases pursuant toBoard of Directors resolutions:
12,560,300 shares
Increase due to purchase of odd-lot stock:
7,215 shares
Increase due to free acquisition upon retirement of individuals subject
to stock compensation with restriction on transfer:
11,300 shares

Decrease
Decrease due to sales of odd-lot stock:
Decrease due to stock compensation withrestriction on transfer:

166 shares
413,300 shares

3. Subscription rights to shares
Number of stocks (Shares)
Company nameBreakdownType of stock

As of April 1,
2021

Increase

—

—

—

—

—

The Company Subscription rights to shares as stock options
Total

Decrease

As of March 31,
2022

Balance at
March 31, 2022
Millions of yen

—

—

¥176

—

—

176

4. Dividends(1) Dividends
Total dividend(Millions of yen)

Dividend pershare (Yen)Common stock¥4,701

Common stock

4,709

Resolution

Class of shares

Board of Directors’ Meeting held on
May 13, 2021
Board of Directors’ Meeting held on
November 8, 2021

Record date

Effective date¥20

March 31, 2021

June 4, 2021

20

September 30, 2021

December 1, 2021

(2) Of the dividends in which the record date is in the fiscal year ended March 31, 2022 but the effective date is in the following
fiscal year

116

Resolution

Class of shares

Resource of dividend

Total dividend(Millions of yen)

Dividend pershare (Yen)

Board of Directors’ Meeting held on
May 13, 2022

Common stock

Retained earnings¥4,458¥20

Record date

Effective date

March 31, 2022

June 2, 2022

Current fiscal year (From April 1, 2022 to March 31, 2023)

1. Number of outstanding common stock
SharesType of stock

As of April 1, 2022

Increase

Decrease

As of March 31, 2023

266,229,476—

25,000,000

241,229,476

Common stock(Outline of causes of change)
The causes of the decrease are as follows:
Decrease due to cancellation of treasury stock:

25,000,000 shares

2. Number of outstanding treasury stock
SharesClass of shares

As of April 1, 2022

Increase

Decrease

As of March 31, 2023

43,307,930

2,246,395

25,078,284

20,476,041

Common stock

2,240,700 shares
5,695 shares

Decrease
Decrease due to sales of odd-lot stock:
84 shares
Decrease due to stock compensation with restriction on transfer:
78,200 shares
Decrease due to cancellation of treasury stock 25,000,000 shares

3. Subscription rights to shares
Number of stocks (Shares)
Company nameBreakdownType of stock

As of April 1,
2022

Increase

—

—

—

—

—

The Company Subscription rights to shares as stock options
Total

Decrease

As of March 31,
2023

Balance at
March 31, 2023
Millions of yen

—

—

¥468

—

—

468

Integrated Report 2023

(Outline of causes of change)
Increase
Increase due to market purchases pursuant toBoard of Directors resolutions:
Increase due to purchase of odd-lot stock:

4. Dividends(1) Dividends
Total dividend(Millions of yen)

Dividend pershare (Yen)Common stock¥4,458

Common stock

4,415

Resolution

Class of shares

Board of Directors’ Meeting held on
May 13, 2022
Board of Directors’ Meeting held on
October 31, 2022

Record date

Effective date¥20

March 31, 2022

June 2, 2022

20

September 30, 2022

December 1, 2022

(2) Of the dividends in which the record date is in the fiscal year ended March 31, 2022 but the effective date is in the following
fiscal year
Resolution

Class of shares

Resource of dividend

Total dividend(Millions of yen)

Dividend pershare (Yen)

Board of Directors’ Meeting held on
May 12, 2023

Common stock

Retained earnings¥8,609¥39

Record date

Effective date

March 31, 2023

June 2, 2023

117

Notes to Consolidated Financial Statements

10 Notes to Consolidated Statements of Cash Flows(1) Reconciliation of cash and cash equivalents at end of year and the amount recorded on the consolidated balance sheets
Millions of yen

2022

2023

Cash and deposits¥152,459¥179,509

Cash and cash equivalents

152,459

179,509

11 Information for Certain Leases
1. Finance leases that do not transfer ownership prior to the initial year of application of the Accounting Standard
for Lease Transactions(1) A summary of assumed amounts of acquisition cost, accumulated depreciation, accumulated impairment loss and net bookvalue for the years ended March 31, 2023 and 2022, with respect to the finance leases accounted for in the same manner as
operating leases, is as follows:
Prior fiscal year (As of March 31, 2022)
Millions of yen

SEGA SAMMY HOLDINGS

Acquisition cost

Accumulated
depreciation

Accumulated
impairment loss

Net book value

Buildings¥2,103¥968¥1,135

¥—

Total

2,103

968

1,135

—

Current fiscal year (As of March 31, 2023)
Millions of yen
Acquisition cost

Accumulated
depreciation

Accumulated
impairment loss

Net book value

Buildings¥2,103¥968¥1,135

¥—

Total

2,103

968

1,135

—

(2) Future lease payments and accumulated impairment loss on leased assets
Future lease payments as of March 31, 2022 and 2023
Millions of yen

2022

2023

Due within one year

¥151

¥151

Due after one year

164

12

Total

315

164

Accumulated impairment loss on leased assets as of March 31, 2021 and 2022
Millions of yen

Accumulated impairment loss on leased assets

118

2022

2023

¥233

¥120

(3) A summary of assumed amounts of lease payments, reversal of allowance for impairment loss on leased assets, depreciation,interest expenses and impairment loss for the years ended March 31, 2022 and 2023, with respect to the finance leases
accounted for in the same manner as operating leases, is as follows:
Millions of yen

2022

2023

Lease payments

¥151

¥151

Reversal of allowance for impairment loss on leased assets

115

113

Depreciation

124

124

9

5

Interest expenses(4) Method of calculating depreciation equivalent(5) Method of calculating interest expenses equivalent

The straight-line method is applied under the assumptions that theuseful life equals the lease period and the residual value is zero.

Interest expenses equivalent are calculated as the difference
between total lease charges and acquisition cost equivalent of leased
items and are allocated to each fiscal year using the interest method.

2. Finance lease transactions(2) The methods of depreciation for lease assets

Leased assets primarily consist of offices and other related facilities(“machinery, equipment, and vehicles”; “other property, plant, andequipment”; and “other intangible assets”).

• Leased assets in finance leases that transfer ownership:
Depreciated using the same method applied to property, plant, andequipment owned by the Company.
• Leased assets in finance leases that do not transfer ownership:
Depreciated using the straight-line method based on the assumptionthat useful life equals the lease period, with a residual value of zero.

3. Lease transactions under IFRS
(1) Details of leased assets (right-of-use assets)(2) Depreciation method of right-of-use assets

Leased assets (right-of-use assets) primarily consists of items related
to leased offices of certain overseas consolidated subsidiaries.

The lease period or the useful life of the assets, whichever is shorter,is used as the useful life, and the residual value is calculated as zero.

Integrated Report 2023

(1) Details of lease assets

4. Operating lease transactions
Future lease payments for operating lease transactions which cannot be canceled as of March 31, 2022 and 2023 are as follows:
Millions of yen

2022

2023

Due within one year

¥ 4,316¥ 3,992

Due after one year

11,670

6,468

Total

15,987

10,460Notes: 1. Major factors for the increase or decrease in operating lease transactions includes the payment of lease payables for offices leased for the Group’s headquarters andthe extension of lease periods (upon contract renewal) for leased offices in certain headquarters.
2. Subsidiaries that apply U.S. GAAP have applied “Leases” (U.S. GAAP Topic 842) since the start of the current consolidated fiscal year. As a result, the subsidiary's leaseobligations will be included in the consolidated balance sheet. Therefore, it is not included in future lease payments for the current consolidated fiscal year.

119Notes to Consolidated Financial Statements

12 Financial Instruments
1. Outline of financial instruments(1) Policy for financial instruments
The Group has signed an agreement concerning commitment lines
with financial institutions to secure medium- to long-term funds liquidity
with the Company as a holding company. This is intended to serve asa safety net for the entire Group. In addition, the Group raises necessary
funds for each business based on the financial plan through bankborrowings or bond issues, while operating a Cash Management
System for the purpose of making efficient use of Group funds. Most
funds are invested primarily in low-risk and high-liquidity financial
assets (some are invested in compound financial instruments) suchas bonds, to further efficient funds management. Derivatives are notused for speculative purposes, but mainly used to manage exposure
to financial risks as described below.

(2) Details of financial instruments and their risks

SEGA SAMMY HOLDINGS

Notes and accounts receivable trade, which are operating receivables,
are exposed to customer credit risks. Additionally, operating receivables
denominated in foreign currencies are exposed to exchange rate
fluctuation risks. Securities and investment securities are composed
mainly of bonds and stocks related to business alliances with business
partners. The latter are exposed to market price fluctuation risk.
Of notes and accounts payable—trade (which are operating payables)
are denominated in foreign currencies and are exposed to exchange
rate fluctuation risks. With respect to a portion thereof, the Grouphedges risks using forward exchange contracts. Borrowings andbonds are primarily sought to procure funds necessary for operating
capital and capital expenditures. All of these are procured at fixedinterest rates.
Derivative transactions are forward exchange contracts to hedge
exchange rate fluctuation risk associated with operating payables
denominated in foreign currencies, and interest rate swap transactions to hedge interest rate fluctuation risk associated withborrowings of consolidated subsidiaries and affiliates accounted forby the equity method.
Additionally, further information on hedge accounting (including
hedging instruments and hedged items, hedge policy, and evaluationof hedge effectiveness) is provided in the aforementioned “(Significant
matters forming the basis for preparing consolidated financial
statements) 4. Accounting Policies (6) Accounting method forsignificant hedge”.

(3) Risk management system for financial instruments
1) Management of credit risk (risk related to contractual nonperformanceby business partners)
For operating receivables, (in accordance with the credit management
and other rules of each company that serve as the responsible

120

department) regularly monitors the status of major business partners,
managing due dates, and balances for each business partner whileworking to detect in advance to mitigate any concerns about collection
due to deteriorating financial positions and other factors.
As major debentures generally have high ratings, the credit risk is minimal.
In principle, the Group enters into derivative transactions only with its
financial institutions.
The maximum amount of credit risk as of the end of the current fiscal
year is represented as the amounts recorded in the consolidatedbalance sheets for financial assets exposed to credit risks.
2) Management of market risk (risk of fluctuations in foreignexchange or interest rates)
For certain borrowings with variable interest rates for consolidated
subsidiaries and affiliates accounted for by the equity method, theGroup uses interest rate swap transactions, etc., to control the risk offluctuating interest rates on loans.
Fair value and the financial condition of issuers (business partners) ofsecurities and investment securities are periodically ascertained andreported to the Board of Directors meetings of each company. The
holding status of principal stocks held are reviewed on an ongoingbasis, in consideration of the relationship with business partners. In
regards to certain compound financial instruments, etc., the Group
periodically ascertains their fair value and reviews the holding status
on an ongoing basis.
Derivatives transactions are executed and managed mainly by thefinancial department or the accounting department upon obtaining
internal approval in compliance with the derivative transactions
management and other rules of each company. Furthermore, reportson the status of the derivative transactions is presented to the Boardof Directors at each company as appropriate.
3) Management of liquidity risk related to fund procurement (risk ofinability to make payments on due date)
Operating payables and borrowings are exposed to liquidity risk.
At the Group, liquidity risk is managed by having each company set
an adequate fund balance and update its financial plan monthly tomaintain a fund balance exceeding the predetermined balance ateach company and by having the Company confirm the cash
management of each company.

(4) Supplementary remarks on the fair value, etc., offinancial instruments
Since calculations of the fair value of financial instruments incorporate
factors that vary, the fair value may vary depending on the assumptions
made. Additionally, contract amounts concerning derivative transactions
presented in the “(Derivatives)” section do not represent the market
risk of the derivative transactions.

2. Matters related to market values, etc., of financial instruments
Consolidated balance sheet amounts, fair values, and their differences are as follows:
Prior fiscal year (As of March 31, 2022)
Millions of yen(1) Notes and accounts receivable—trade

Consolidated balance
sheet amount

Fair value

Valuation gains(losses)¥34,958¥34,958

¥

106

106

2,936

2,936

—

813

690

(122)

38,81538,692(122)——(2) Short-term investment securities and investment securities:
1) Held-to-maturity debt securities
2) Available-for-sale securities
3) Stocks of affiliates
Total assets

0(1) Notes and accounts payable—trade24,45524,455(2) Short-term borrowings

10,00010,000—(3) Long-term borrowings

32,00031,95544(4) Bonds payable

10,0009,929

70

Total liabilities

76,45576,341

114

Derivative transactions
—

—

—

(33)

(33)

—

(33)

(33)

—

Total derivative transactions

Notes: 1. Notes are omitted for cash and deposits because they are settled over short timespans and their fair values approximate their book values.
2. Notes concerning securities are as described in the “Note 13 Investment Securities.” Notes concerning derivatives are as described in the “Note 14 Derivative Transactions.”
3. Securities without available fair market value
Millions of yen
Category

2022

Investments in unlisted stocks, etc.

¥ 3,849

Investments in investment limited partnerships, etc.

11,962

Stocks of non-consolidated subsidiaries
Stocks of affiliates
Investments in capital of subsidiaries and affiliates

Integrated Report 2023

1) Derivative transactions to which hedge accounting is not applied2) Derivative transactions to which hedge accounting is applied809
19,243
978The above items are not included in “(2) Short-term investment securities and investment securities,” since no market price exists, future cash flows cannot be
estimated, and determining their fair values is deemed extremely difficult.
4. Statement of investments in partnerships and similar business organizations for which amounts corresponding to equity are recorded in net amounts on theConsolidated Balance Sheet is omitted. The amount of such investments recorded on the Consolidated Balance Sheet is ¥12,940 million.

121

Notes to Consolidated Financial Statements

Current fiscal year (As of March 31, 2023)
Millions of yen
Consolidated balance
sheet amount

Fair value

Valuation gains(losses)¥52,673¥52,673¥ —(1) Notes and accounts receivable—trade(2) Short-term investment securities and investment securities:
1) Held-to-maturity debt securities
2) Available-for-sale securities

104

104

(0)

4,654

4,654

—
—

—

—

Total assets

57,43257,432(0)(1) Notes and accounts payable—trade30,55630,556—3) Stocks of affiliates(2) Short-term borrowings

17,00017,000—(3) Long-term borrowings

25,00024,91584(4) Bonds payable

10,0009,814

185

Total liabilities

82,55682,287

269

—

—

—

Derivative transactions
1) Derivative transactions to which hedge accounting is not applied2) Derivative transactions to which hedge accounting is applied
SEGA SAMMY HOLDINGS

Total derivative transactions

382

382

—

382

382

—

Notes: 1. Notes are omitted for cash and deposits because they are settled over short timespans and their fair values approximate their book values.
2. Notes concerning securities are as described in the “Note 13 Investment Securities.” Notes concerning derivatives are as described in the “Note 14 Derivative Transactions.”
3. Securities without available fair market value
Millions of yen
2023

Category
Investments in unlisted stocks, etc.

¥ 4,538
9,984

Investments in investment limited partnerships, etc.

846

Stocks of non-consolidated subsidiaries
Stocks of affiliates

18,586

Investments in capital of subsidiaries and affiliates

824

The above items are not included in “(2) Short-term investment securities and investment securities.”
4. Investments in partnerships and similar business organizations for which amounts corresponding to equity are recorded in net amounts on the Consolidated Balance
Sheet and are not included under (2) Short-term Investment Securities and Investment Securities. The amount of such investments recorded on the Consolidated
Balance Sheet is ¥10,808 million.
Note 1: Redemption schedule of monetary receivables and securities with maturity after the consolidated balance sheet date
Prior fiscal year (As of March 31, 2022)
Millions of yen
Cash and deposits
Notes and accounts receivable—trade

Within one year

One to five years

Five to ten years

Over ten years¥152,459

¥ —

¥—

¥—

34,958————

Short-term investment securities and investment securities:
Held-to-maturity debt securities (Bonds)*

—

100

—

Available-for-sale securities with maturities (Negotiable certificates of deposit)

—

—

—

—

Available-for-sale securities with maturities (Other)*

—

—

—

—

187,418

100

—

—

Total

* Receivables with early settlement provisions, etc., are presented in the scheduled redemption amount based on the assumption that they are held to maturity with early settlement provisions,etc., not applied.

122

Current fiscal year (As of March 31, 2023)
Millions of yen
Within one year

One to five years

Five to ten years

Over ten years¥179,509

¥ —

¥—

¥—

52,673———

Held-to-maturity debt securities (Bonds)*

—

100

—

—

Available-for-sale securities with maturities (Negotiable certificates of deposit)

—

—

—

—

Available-for-sale securities with maturities (Other)*

—

—

—

—

232,182

100——

Cash and deposits
Notes and accounts receivable—trade
Short-term investment securities and investment securities:

Total* Receivables with early settlement provisions, etc., are presented in the scheduled redemption amount based on the assumption that they are held to maturity with early settlement provisions,etc., not applied.

Note 2: Repayment amounts of bonds payable, long-term borrowings, lease obligations, and other interest-bearing debts after the consolidated balance sheet date
Prior fiscal year (As of March 31, 2022)
Millions of yen
Category

Within one year

One to two years

Two to three years

Three to four years

¥

¥

¥

Short-term borrowings¥10,000

Long-term borrowings—

17,000Bonds payable——

Over five years—¥ —15,000

—

—

¥

—
—

—

—

—

—

10,000

1,123

949

709

540

407

1,407

30

24

18

16

16

40

Within one year

One to two years

Two to three years

Three to four years

Four to five years

—

¥ —

¥ —

Other interest-bearing debt:
Accounts payable–facilities
Current fiscal year (As of March 31, 2023)
Millions of yen
Category¥17,000

Long-term borrowings—

15,000——10,000—Bonds payable

—

—

—

—

—

10,000

1,377

1,184

993

861

795

1,518

29

22

20

20

20

34

Lease obligations

¥

¥

—

Over five years

Short-term borrowings¥

Integrated Report 2023

Lease obligations—

Four to five years—

Other interest-bearing debt:
Accounts payable–facilities

3. Fair value information by level within the fair value hierarchy
The fair value of financial instruments is classified into the following three levels according to the observability and materiality of inputs used tomeasure fair value.
Level 1 fair value: Fair value measured using (unadjusted) quoted prices in active markets for the same assets or liabilities
Level 2 fair value: Fair value measured using directly or indirectly observable inputs other than Level 1 inputs
Level 3 fair value: Fair value measured using material unobservable inputs
If multiple inputs are used (that are material to the fair value measurement), the fair value is categorized in the lowest priority input level in the fairvalue measurement.

123Notes to Consolidated Financial Statements(1) Financial assets and financial liabilities measured at fair value
Prior fiscal year (As of March 31, 2022)
Millions of yen

Category

Consolidatedbalance sheet
amountLevel 1

Level 2

Level 3

Total

¥1,958¥1,958¥ —¥—¥1,958Fair value

Short-term investment securities and investment securities
Available-for-sale securities
StocksDebt securities

537

—

537

—

537

Other

439

—

439

—

439

2,936

1,958

977

—

2,936

Total assets
Derivative transaction*
Currency-related

—

—

—

—

—

Interest rate-related

(33)

—

(33)

—

(33)

(33)

—

(33)

—

(33)

Total derivative transaction* Net receivables and payables resulting from derivative transactions are presented on a net basis. Items for total net obligations are indicated in parentheses.

Current fiscal year (As of March 31, 2023)

SEGA SAMMY HOLDINGS

Millions of yen

Category

Consolidatedbalance sheet
amountLevel 1

Level 2

Level 3

Total

¥4,082

Fair value

Short-term investment securities and investment securities
Available-for-sale securities¥4,082¥4,082¥ —¥—Debt securities

290

—

290

—

290

Other

280

—

280

—

280

4,654

4,082

571

—

4,654

StocksTotal assets
Derivative transaction*
Currency-related

—

—

—

—

—

Interest rate-related

382

—

382

—

382

382

—

382

—

382

Total derivative transaction* Net receivables and payables resulting from derivative transactions are presented on a net basis. Items for total net obligations are indicated in parentheses.

124

(2) Financial assets and financial liabilities not to be measured at fair value
Prior fiscal year (as of March 31, 2022)
Millions of yen

Category

Notes and accounts receivable—trade

Consolidatedbalance sheet
amountLevel 1

Level 2

Level 3

Total

¥34,958¥ —¥34,958¥—¥34,958

Fair value

Short-term investment securities and investment securities
Held-to-maturity debt securities
Bonds receivable

106

—

106

—

106

Stocks of affiliates

813

690

—

—

690

Total assets

35,878690

35,065—35,756

Notes and accounts payable—trade24,455—24,455—24,455

Short-term borrowings

10,000—10,000—10,000Long-term borrowings

32,000—31,955—31,955

Bonds payable
Total liabilities

10,000

—

9,929

—

9,929

76,455—76,341—

76,341

Current fiscal year (as of March 31, 2023)

Category

Notes and accounts receivable—trade

Level 1

Level 2

Level 3

Total

¥52,673¥—¥52,673¥—¥52,673

104

Fair value

Short-term investment securities and investment securities
Held-to-maturity debt securities
Bonds receivable

104

—

104

—

Stocks of affiliates

—

—

—

—

—

52,778—52,778—52,778

Total assets
Notes and accounts payable—trade30,556—30,556—30,556

Short-term borrowings

17,000—17,000—17,000Long-term borrowings

25,000—24,915—24,915

Bonds payable
Total liabilities

10,000

—

9,814

—

9,814

82,556—82,287—82,287

Integrated Report 2023

Millions of yen
Consolidatedbalance sheet
amountNote: A description of the valuation techniques and inputs used in fair value measurement
Short-term investment securities and investment securities:
Listed stocks, debt securities, and bonds receivable are valued based on quoted prices. Since listed stocks are traded in active markets, their fair value is assigned to Level 1. The fairvalue of debt securities and bonds receivable held by the Group are assigned to Level 2 because they are infrequently traded in markets and are not considered to have quoted prices in
active markets.
Derivative transactions:
The fair value of interest rate swaps and forward exchange contracts is measured using the present discounted value method based on observable inputs, such as interest rates andexchange rates, and is assigned to Level 2.
Notes and accounts receivable—trade:
The fair value of these items is measured using the present discounted value method based on the amount of receivables, time to maturity, and an interest rate reflecting credit risk foreach grouping of receivables in a specified period and is assigned to Level 2.
Notes and accounts payable—trade:
The fair value of these items is measured using the present discounted value method based on future cash flows, time to maturity, and an interest rate reflecting credit risk, for eachgrouping of payables in a specified period, and is assigned to Level 2.
Short-term borrowings and long-term borrowings:
The fair values of short-term borrowings and long-term borrowings are measured using the present discounted value method based on the sum of principal and interest, time to maturity,
and an interest rate reflecting credit risk, and are assigned to Level 2.
Bonds payable:
The fair value of bonds payable issued by the Company is measured using the present discounted value method based on the sum of principal and interest, time to maturity, and aninterest rate reflecting credit risk, and is assigned to Level 2.

125Notes to Consolidated Financial Statements

13 Investment Securities
1. Held-to-maturity debt securities
Prior fiscal year (As of March 31, 2022)(1) Securities whose market value exceeds the consolidated balance sheet amountMillions of yen
Consolidated balance
sheet amount

Fair value

Valuation gains(losses)

1) Government / municipal bonds

¥ —

¥ —

¥—

2) Corporate bonds

Category

106

106

0

3) Other

—

—

—

Total

106

106

0

Consolidated balance
sheet amount

Fair value

Valuation gains(losses)

1) Government / municipal bonds

¥—

¥—

¥—

2) Corporate bonds

—

—

—

3) Other

—

—

—

Total

—

—

—

Consolidated balance
sheet amount

Fair value

Valuation gains(losses)

1) Government / municipal bonds

¥—

¥—

¥—

2) Corporate bonds

—

—

—

3) Other

—

—

—

Total

—

—

—

(2) Securities whose market value is equal to or lower than the consolidated balance sheet amountMillions of yen
Category

SEGA SAMMY HOLDINGS

Current fiscal year (As of March 31, 2023)(1) Securities whose market value exceeds the consolidated balance sheet amountMillions of yen
Category(2) Securities whose market value is equal to or lower than the consolidated balance sheet amountMillions of yen
Consolidated balance
sheet amount

Fair value

Valuation gains(losses)

1) Government / municipal bonds

¥ —

¥ —

¥—

2) Corporate bonds

Category

126

104

104

(0)

3) Other

—

—

—

Total

104

104

(0)

2. Available-for-sale securities
Prior fiscal year (As of March 31, 2022)(1) Securities whose consolidated balance sheet amount exceeds the acquisition cost
Millions of yen
Consolidated balance
sheet amount

Acquisition cost

Valuation gains(losses)¥1,313¥286¥1,027———3) Other

439

400

39

Total

1,753

686

1,066

Consolidated balance
sheet amount

Acquisition cost

Valuation gains(losses)¥  644¥  701

¥(56)

537

549

(11)

Category

1) Shares
2) Debt securities(2) Securities whose consolidated balance sheet amount is equal to or lower than the acquisition cost
Millions of yen
Category

1) Shares
2) Debt securities
3) Other

—

—

—

Total

1,182

1,250

(67)

(1) Securities whose consolidated balance sheet amount exceeds the acquisition cost
Millions of yen
Consolidated balance
sheet amount

Acquisition cost

Valuation gains(losses)¥3,899¥963¥2,9352) Debt securities

—

—

—

3) Other

—

—

—

Total

3,899

963

2,935

Consolidated balance
sheet amount

Acquisition cost

Valuation gains(losses)

¥183

¥241

¥ (58)

Category

1) Shares

Integrated Report 2023

Current fiscal year (As of March 31, 2023)(2) Securities whose consolidated balance sheet amount is equal to or lower than the acquisition cost
Millions of yen
Category

1) Shares
2) Debt securities

290

339

(49)

3) Other

280

400

(119)

Total

755

982

(226)

Amount of proceeds

Total gains on sales

Total losses on sales

3. Available-for-sale securities sold during the fiscal year
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Category

1) Shares¥2,565¥2,516¥262) Debt securities

—

—

—

3) Other

—

—

—

Total

2,565

2,516

26

127

Notes to Consolidated Financial Statements

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
Amount of proceeds

Total gains on sales

Total losses on sales

1) Shares

Category

¥1

¥—

¥—

2) Debt securities

—

—

—

3) Other

—

—

—

Total

1

—

—

4. Impairment loss on securities
Prior fiscal year (From April 1, 2021 to March 31, 2022)
The Group recognized impairment loss on available-for-sale securities in the amount of ¥0 million.
Current fiscal year (From April 1, 2022 to March 31, 2023)
The Group recognized impairment loss on available-for-sale securities in the amount of ¥81 million.

14 Derivative Transactions
SEGA SAMMY HOLDINGS

1. Derivative transactions to which hedge accounting is not applied(1) Currency-related derivatives
Prior fiscal year (As of March 31, 2022)
Not applicable
Current fiscal year (As of March 31, 2023)
Not applicable(2) Compound financial instruments
With respect to compound financial instruments whose fair values cannot be categorized and measured for each embedded derivative, the certain
compound financial instruments are appraised by fair value and are included in “2. Available-for-sale securities” in “Note 13 Investment Securities.”

2. Derivative transactions to which hedge accounting is applied(1) Currency-related derivatives
Prior fiscal year (As of March 31, 2022)
Not applicable
Current fiscal year (As of March 31, 2023)
Not applicable(2) Interest rate-related derivatives
Prior fiscal year (As of March 31, 2022)
Millions of yen
Hedge accounting method

Classification

Primary method (Note) Interest rate swaps:
Floating rate into fixed rate
Total

Major hedged items

Long-term borrowings

Contract value

Contract value due
after one year

Fair value¥30,460¥30,460¥(33)

30,46030,460(33)

Note: Primary method represents interest rate swaps transactions to long-term borrowings that are used by entities accounted for using the equity method. Contract amount andfair value are multiplied by the equity interest held by the Company.

128

Current fiscal year (As of March 31, 2023)
Millions of yen
Hedge accounting method

Classification

Primary method (Note) Interest rate swaps:
Floating rate into fixed rate
Total

Major hedged items

Long-term borrowings

Contract value

Contract value due
after one year

Fair value¥31,720¥—¥382

31,720—382

Note: Primary method represents interest rate swaps transactions to long-term borrowings that are used by entities accounted for using the equity method. Contract amount andfair value are multiplied by the equity interest held by the Company.

15 Retirement Benefits
1. Overview of retirement benefit plans
The Company and some of its consolidated subsidiaries have adopted a defined benefit corporate pension plan, a lump-sum retirement benefit
plan, or a defined contribution pension plan to provide retirement benefits to the employees. In addition, the Company and certain consolidated
subsidiaries have introduced selective defined contribution pension plans.
Under the lump-sum retirement benefit plan held by certain consolidated subsidiaries, net defined benefit liability and retirement benefit expenses
are determined using a simplified method.
Integrated Report 2023

129

Notes to Consolidated Financial Statements

2. Defined benefit pension plan
(1) Reconciliation of the difference between the amounts of projected benefit obligations(excluding pension plan using the simplified method)
Millions of yen

Projected benefit obligations at the beginning of the period
Service costs–benefits earned during the year

2022

2023

¥29,669¥33,552

1,920

2,149

102

174

Actuarial differences accrued

2,277(5,479)Retirement benefit paid

(483)

(460)

Prior service costs accrued

—

2,359

Other

66

121

33,55232,418Interest cost on projected benefit obligations

Projected benefit obligations at the end of the period(2) Reconciliation of the difference between the amounts of plan assets
Millions of yen

SEGA SAMMY HOLDINGS

Plan assets at the beginning of the period
Expected return on plan assets

2022

2023

¥30,238¥32,947604

658

Actuarial differences accrued(642)(1,358)Contribution of employer

3,147

2,893

Retirement benefit paid

(400)

(375)

Other
Plan assets at the end of the period——

32,94734,766(3) Reconciliation of the difference between the amounts of net defined benefit liability under pension plans using the simplified method
Millions of yen

2022

2023

¥734

¥806

Retirement benefit expenses

110

102

Retirement benefit paid

(17)

(48)

Net defined benefit liability at the beginning of the period

Other
Net defined benefit liability at the end of the period

(22)

2

806

862

(4) Reconciliation of the difference between the amount of projected benefit obligations and plan assets and net defined benefit
liability and net defined benefit asset recorded in the consolidated balance sheet
Millions of yen

2022

2023

Funded projected benefit obligations¥ 31,483¥ 30,355

Plan assets(32,947)(34,766)(1,463)(4,411)

Unfunded projected benefit obligations

2,875

2,926

Net amount of liabilities and assets recorded in the consolidated balance sheet

1,411(1,485)Net defined benefit liability

4,395

3,877

Net defined benefit asset(2,984)(5,362)

Net amount of liabilities and assets recorded in the consolidated balance sheet

1,411(1,485)

Note: Retirement benefit scheme applying the simplified method is included.

130

(5) Breakdown of retirement benefit expenses
Millions of yen

2022

2023

Service costs–benefits earned during the year

¥1,920¥2,149Interest cost on projected benefit obligations

102

174

Expected return on plan assets

(604)

(658)

Amortization of actuarial difference

165

(34)

Amortization of prior service cost

—

—

110

102

Retirement benefit expenses using the simplified method
Other
Retirement benefit expenses of defined benefit pension plan

14

2

1,709

1,735

(6) Remeasurements of defined benefit plans, net of tax
Items included in the remeasurements of defined benefit plans are as follows (before tax effect deduction).
Millions of yen

2022

2023

¥

—

¥(2,359)(2,754)

4,086

Total

(2,754)

1,726(7) Remeasurements of defined benefit plans
Items included in the remeasurements of defined benefit plans are as follows (before tax effect deduction).
Millions of yen

2022

2023

Unrecognized prior service costs¥—¥(2,359)

Unrecognized actuarial difference(3,311)

775

Total

(3,311)(1,584)

2022

2023

Debt securities

46%

27%

Share of stock

16

17

Cash and deposits

27

44

General account

6

7

Other

1

3

Total

100

100

Integrated Report 2023

Prior service costs
Actuarial difference(8) Matters concerning plan assets
1) Breakdown of plan assets
Ratio of main classes of plan assets

2) Long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Company and its consolidated subsidiaries consider the current and projectedasset allocations as well as current and future long-term rate of returns for the various assets which make up the plan assets.

131

Notes to Consolidated Financial Statements(9) Matters concerning basis for the actuarial calculation
Basis for the actuarial calculation

Discount rateLong-term expected rate of return on plan assets

2022

2023

0.1–0.8%

0.2–0.9%
2.0%

2.0%

Salary increase ratio (Note)

Principally, salary increase index byages as of March 31, 2021 is used.

Principally, salary increase index byages as of March 31, 2021 is used.

Note: Some consolidated subsidiaries do not use the salary increase ratio for the calculation of retirement benefits obligations.

3. Defined contribution pension plans
The required contribution amounts to the defined contribution plan of the Company and its consolidated subsidiaries were ¥1,106 million in the priorfiscal year and ¥1,432 million in the current fiscal year.

16 Stock Option Plan
1. Account title and the amount of stock options recorded as expenses
Millions of yen

SEGA SAMMY HOLDINGS

132

Selling, general, and administrative expenses—other

2. Contents, scale and movement of stock options
Prior fiscal year (From April 1, 2021 to March 31, 2022)(1) The following table summarizes the contents of stock options.
Company name

The Company

Date of the resolution

August 2, 2021

Position and number of grantees (persons)

The Company’s employees: 168
The Company’s subsidiaries’ directors: 12
The Company’s subsidiaries’ executive
officers: 25
The Company’s subsidiaries’
employees: 1,411

Class and number of stock (shares)

Common stock 2,844,500

Date of issue

September 1, 2021

Condition of settlement of rights

Continue to work from September 1, 2021
to June 30, 2024

Period in which grantees provide service
in return for stock options

September 1, 2021 to June 30, 2024

Period subscription rights are to be exercised

July 1, 2024 to June 30, 2026

2022

2023

¥176

¥292

(2) The following table summarizes the scale and movement of stock options
SharesCompany name

The Company

Date of the resolution

August 2, 2021

Not exercisable stock options
Stock options outstanding at April 1, 2021—

Stock options granted

2,884,500

Forfeitures

32,500Conversion to exercisable stock options—

Stock options outstanding at March 31, 2022

2,852,000

Exercisable stock options
Stock options outstanding at April 1, 2021—

Conversion from not exercisable stock options—

Stock options exercised—

Forfeitures—

Stock options outstanding at March 31, 2022—

The following table summarizes the price information of stock options
Yen

The Company

Date of the resolution

August 2, 2021

Exercise price¥1,500

Average market price of the stock at the timeof exercise—

Fair value of the stock option
at the date of grant300

Integrated Report 2023

Company nameCurrent fiscal year (From April 1, 2022 to March 31, 2023)(1) The following table summarizes the contents of stock options.
Company nameDate of the resolution

The Company
August 2, 2021

Position and number of grantees (persons)Company employees: 168
Subsidiary directors: 12
Subsidiary executive officers: 25
Subsidiary employees: 1,411

Class and number of stock (shares)

Common stock 2,884,500

Date of issue

September 1, 2021

Condition of settlement of rights

Continue to work from
September 1, 2021 to June 30, 2024

Period in which grantees provide service
in return for stock options

September 1, 2021 to June 30, 2024

Period subscription rights are to be exercised

July 1, 2024 to June 30, 2026

133

Notes to Consolidated Financial Statements(2) The following table summarizes the scale and movement of stock options.
SharesCompany name

The Company

Date of the resolution

August 2, 2021

Not exercisable stock options
Stock options outstanding at April 1, 2022

2,852,000

Stock options granted—

Forfeitures

56,500Conversion to exercisable stock options—

Stock options outstanding at March 31, 2023

2,795,500

Exercisable stock options
Stock options outstanding at April 1, 2022—

Conversion from not exercisable stock options—

Stock options exercised—

Forfeitures—

Stock options outstanding at March 31, 2023—

The following table summarizes the price information of stock options.
SEGA SAMMY HOLDINGS

YenCompany name

The Company

Date of the resolution

August 2, 2021

Exercise price¥1,500

Average market price of the stockat the time of exercise—

Fair value of the stock option
at the date of grant300

3. Estimation of fair value of the stock options
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Method for estimating fair value per share of stock options granted by the reporting company(1) Valuation techniques applied
Black-Scholes equation(2) Major basic figures and estimation methods
Stock price variability (Note 1)
Estimated remaining period (Note 2)
Estimated dividends (Note 3)
Risk-free interest rate (Note 4)

31.535%
3.83 years¥30 per share(0.130)%Notes: 1. Calculated based on actual stock prices from November 2017 to August 2021.
2. Due to the absence of sufficient cumulative data and the difficulty of forming reasonable estimates, this estimate assumes that the options will be exercised at
the midpoint of the exercise period.
3. Based on actual dividends for the fiscal year ended March 31, 2021.
4. This is the national government bond yield corresponding to the estimated remaining period.

Current fiscal year (From April 1, 2022 to March 31, 2023)
Not applicable

4. Estimation of number of exercisable stock options
As it is difficult to reasonably estimate the number of stock options that will be forfeited in the future, the number here reflects only stock options
that have actually been forfeited.

134

17 Stock Compensation with Restriction on Transfer
1. Details of stock compensation with restriction on transfer
Continuous service-based shares withrestriction on transfer in 2021

Continuous service-based shares withrestriction on transfer in 2022

Categories and number of grantees (persons)Company directors
Company executive officers
Subsidiary directors
Subsidiary executive officers

Company directors
Company executive officers
Subsidiary directors
Subsidiary executive officers

Class and number of shares granted (shares)

Common stock: 28,500

Common stock: 78,200

Grant dateAugust 5, 2021

August 19, 2022

Conditions for canceling restriction on transfer(Notes) 1, 2

(Notes) 1, 2

Period of restriction on transfer

From August 5, 2021 to August 4, 2024

From August 19, 2022 to August 18, 2025

—
—
15
14

4
9
18
22

Performance-based shares withrestriction on transfer in 2021
Categories and number of grantees (persons)Company directors
Company executive officers
Subsidiary directors
Subsidiary executive officers

Class and number of shares granted (shares)

Common stock: 384,800

Grant dateAugust 5, 2021

Conditions for canceling restriction on transfer(Notes) 1, 3

Period of restriction on transfer

From August 5, 2021, until the closureof the Company’s first Ordinary General
Meeting of Shareholders to arrive after
the end date of the medium-term plan

4
8
19
21
Integrated Report 2023

Notes: 1. If grantees resign as directors and executive officers of the Company or Company subsidiaries (limited to those in which the Company holds at least 50% of all shares;
such subsidiaries and the Company shall hereinafter be referred to as “Group companies”) on or before the day preceding the day of the Company’s first Ordinary
General Meeting of Shareholders arriving after the start of the period of restriction on transfer (or, if the grantees are Company executive officers or Group company
officers, etc., on or before the day preceding the Company’s first fiscal year-end date arriving after the start of the period of restriction on transfer). The Company shallacquire, by right, the allotted shares gratis (except in cases in which the reasons for such resignation are deemed valid by the Company Board of Directors, such as the
expiration of term of office - except for “performance-based shares with restriction on transfer”), the attainment of the mandatory retirement age and death. The
Company shall also acquire, by right, the allotted shares gratis for which the restriction on transfer is not canceled under the provisions of 2 and 3 below as of the
expiration of the period of restriction on transfer.
2. Subject to the condition that grantees including Group company officers continue to serve as Group company directors or executive officers until the day preceding the
day of the Company’s first Ordinary General Meeting of Shareholders arriving after the start of the period of restriction on transfer (or, if the grantees are Company
executive officers or Group company officers, etc., until the day preceding the Company’s first fiscal year-end date arriving after the start of the period of restriction ontransfer), as of the expiration of the period of restriction on transfer, the restriction will be canceled for all allotted shares. However, should such directors resign as
directors and executive officers of Group companies before the expiration of the period of restriction on transfer for reasons deemed valid by the Company Board of
Directors (for example, expiration of term of office, attainment of mandatory retirement age or death), the number of allotted shares for which the restriction on transfer
is canceled and the timing of such cancellation are to be reasonably adjusted on an as-needed basis.
3. Subject to the condition that grantees continue to serve as Group company directors or executive officers until the day preceding the day of the Company’s first Ordinary
General Meeting of Shareholders arriving after the start of the period of restriction on transfer (or, if the grantees are Company executive officers or Group company
officers, etc., until the day preceding the Company’s first fiscal year-end date arriving after the start of the period of restriction on transfer), the number of shares forwhich the restriction on transfer will be canceled and the timing of such cancellation are to be reasonably adjusted on an as-needed basis in accordance with the lengthof their service in such roles during the medium-term plan period (at the restriction cancellation rate) which is linked to performance goal achievements in the mediumterm plan. However, should such directors resign as directors and executive officers of Group companies before the expiration of the period of restriction on transfer forreasons deemed valid by the Company Board of Directors (for example, attaining mandatory retirement age and death or reassignment to other positions during the
medium-term plan period), the number of shares for which the restriction on transfer is canceled shall be reasonably adjusted within the performance condition.

135

Notes to Consolidated Financial Statements

2. Volume and changes in stock compensation with restriction on transfer(i) Expensed amount and account title
Millions of yen

2022
Selling, general, and administrative expenses—other

2023
¥198

¥393

(ii) Number of shares
SharesContinuous service-based shares withrestriction on transfer in 2021

Continuous service-based shares withrestriction on transfer in 2022

Before cancellation of restriction
At end of prior period

26,800—Granted—78,200Acquired for free——

Restriction canceled——

26,80078,200Restriction valid

Performance-based shares withrestriction on transfer in 2021
SEGA SAMMY HOLDINGS

Before cancellation of restriction
At end of prior period

375,200

GrantedAcquired for free—
14,700Restriction canceled
Restriction valid—
360,500(iii) Per share price
Yen

Fair value per share at grant dateContinuous service-based shares withrestriction on transfer in 2021

Continuous service-based shares withrestriction on transfer in 2022

¥1,502¥2,228Performance-based shares withrestriction on transfer in 2021
Fair value per share at grant date

¥1,502

Note: To prevent arbitrary price decisions, we use the closing price of the Company’s common stock on the Tokyo Stock Exchange on the business day immediately before
the date of the Board of Directors resolution regarding the granting of shares with restriction on transfer.

136

18 Income Taxes
1. Significant components of deferred tax assets and liabilities
Millions of yen

2023

2022

Deferred tax assets:
Exclusion of provision of allowance for doubtful accounts from deductible expenses

¥

¥

349

263

Exclusion of loss on valuation of inventories from deductible expenses

3,173

2,564

Exclusion of provision for bonuses from deductible expenses

2,828

3,039

1,766

1,692

Excess of maximum depreciation and amortization

17,136

19,019Exclusion of loss on valuation of investment securities from deductible expenses

408

329

Impairment loss

543

493

Other

17,76920,712

Loss carried forward

36,01926,866

Subtotal deferred tax assets

79,99474,981

Valuation allowance for tax loss carried forward (Note 2)(32,685)(20,307)

Valuation allowance for deductible temporary difference(20,685)(23,015)

Subtotal valuation allowance (Note 1)(53,371)(43,322)

Offset to deferred tax liabilities(13,175)(15,159)

13,446

16,499(1,336)(1,530)Total deferred tax assets
Deferred tax liabilities:
Valuation difference on available-for-sale securities(12,309)(14,383)

Subtotal deferred tax liabilities(13,645)(15,913)

Offset to deferred tax assets

13,17515,159

Other

(469)

(754)

12,977

15,745

Total deferred tax liabilities
Net deferred tax assets

Integrated Report 2023

Net defined benefit liability

Notes: 1. The valuation allowance fell by ¥10,048 million. The major factors for this decrease were due to decreases in valuation allowance of ¥12,378 million for tax loss carryforwards
and an increase in valuation allowance for a deductible temporary difference of ¥2,330 million.
2. Amount of tax loss carried forward and their deferred tax assets by carryforward period are as follows.

Prior fiscal year (As of March 31, 2022)
Millions of yen
Withinone year

One totwo years

Two tothree years

Three tofour years

Four tofive years

Overfive years

Total

Tax loss carried forward (a)¥ 5,063¥ 2,394¥ 1,789¥ 1,185¥ 752¥ 24,833¥ 36,019

Valuation allowance(4,230)(2,369)(1,768)(1,179)(750)(22,387)(32,685)

Deferred tax assets

832

25

20

5

2

2,445

(b) 3,333(a) The amount of tax loss carried forward is the amount under the normal effective statutory tax rate.
(b) Regarding the amount of tax loss carried forward of ¥36,019 million (amount given by the normal effective statutory tax rate), deferred tax assets of ¥3,333 million wererecorded. The Company deemed that a partial amount of tax loss carried forward can be recovered mainly in the following fiscal year due to the estimated amount of
taxable income.

137

Notes to Consolidated Financial Statements

Current fiscal year (As of March 31, 2023)
Millions of yen
Withinone year

One totwo years

Two tothree years

Three tofour years

Four tofive years

Overfive years

Total¥2,369¥ 1,718¥ 1,143¥ 747—¥ 20,887¥ 26,866

Valuation allowance(886)(1,441)(1,058)(722)—(16,197)(20,307)

Deferred tax assets

1,483

276

85

24

—

4,689

(b) 6,559

Tax loss carried forward (a)(a) The amount of tax loss carried forward is the amount given by the normal effective statutory tax rate.
(b) Regarding the amount of tax loss carried forward of ¥26,866 million (the amount under the normal effective statutory tax rate), deferred tax assets of ¥6,559 million wererecorded. The Company deemed that a partial amount of tax loss carried forward can be recovered mainly in the following fiscal year based on estimates of taxable income.

2. Breakdown of major causes of the significant difference between the statutory tax rate and the effective tax
rate for financial statement purposes, if any, by item, for the fiscal years ended March 31, 2022 and 2023
Normal effective statutory tax rate

2022

2023

30.6%

30.6%

(30.0)(21.3)

1.9

1.2(Adjustment)
Changes in valuation allowance
Permanently non-deductible expenses including entertainment expenses
SEGA SAMMY HOLDINGS

Amortization of goodwill

1.0

0.7

Tax rate difference between the Company and consolidated subsidiaries

(1.4)

(0.4)

Tax credit for experimental and research expenses(12.1)(11.8)Tax loss carried forward

12.6

7.9

Impact of consolidation adjustments

(3.2)

(2.6)

Other

2.9

(1.9)

Effective tax rate after tax effect accounting

2.4

2.4

3. Accounting for corporation tax and local corporation tax and tax effect accounting
The Company and some of its domestic consolidated subsidiaries have adopted the group tax sharing system from the fiscal year ended
March 31, 2023. In addition, corporation tax and local corporation tax, as well as their tax effects, are accounted for and disclosed under Practical
Solution on the Accounting and Disclosure under the Group Tax Sharing System (PITF No.42, August 12, 2021).

19 Business Combination
This information is omitted due to immateriality

20 Asset Retirement Obligations
Prior fiscal year (As of March 31, 2022)
The information is omitted due to the immateriality of the total amountof the asset retirement obligations.

138

Current fiscal year (As of March 31, 2023)
The information is omitted due to the immateriality of the total amountof the asset retirement obligations.

21 Rental Property and Other Real Estate
Prior fiscal year (As of March 31, 2022)
The information is omitted due to the immateriality of the total amountof the rental property and other real estate.

Current fiscal year (As of March 31, 2023)
The information is omitted due to the immateriality of the total amountof the rental property and other real estate.

22 Revenue Recognition
1. Disaggregation of revenue from contracts with customers
The Group operates an Entertainment Contents Business, Pachislot and Pachinko Machines Business, and a Resort Business. Main goods orservices primarily handled by these businesses are digital content, products and merchandise, and resort facilities. Shown below are the sales ofgoods or services by each business:
Prior fiscal year (from April 1, 2021 to March 31, 2022)
Millions of yen
Reporting segment

Product and merchandise sales
Resort facility sales

Pachislot
Pachinko
Machines¥129,773¥ 3,799

74,673

ResortSubtotal

Other

Total

—

¥133,572¥ —¥133,572

70,156—

144,829—

144,829

¥

—

—

8,663

8,663

—

8,663

Other sales

31,491

1,912—

33,403480

33,884

Revenue from contracts with customers

235,937

75,868

8,663

320,469480

320,949

Sales to external customers

235,937

75,868

8,663

320,469480

320,949

Integrated Report 2023

Digital content sales

Entertainment
Contents

Current fiscal year (from April 1, 2022 to March 31, 2023)
Millions of yen
Reporting segment
Entertainment
Contents

Pachislot
Pachinko
Machines¥145,132¥ 4,153

95,320—

Other sales

ResortSubtotal

Other

Total

—

¥149,285¥ —¥149,285

87,254—

182,575—

182,575—

11,540

11,540—

11,54042,4282,845—

45,274960

46,234

Revenue from contracts with customers

282,881

94,253

11,540388,675960

389,635

Sales to external customers

282,881

94,253

11,540388,675960

389,635

Digital content sales
Product and merchandise sales
Resort facility sales¥

139Notes to Consolidated Financial Statements

2. Basic information for understanding revenue fromcontracts with customers(1) Information on contracts, performance obligations, andwhen performance obligations are satisfied
Information on contracts, performance obligations, and when
performance obligations are satisfied is as presented in “Note 2
Summary of Significant Accounting Policies 3. Accounting Policies(7) Accounting policy for recognition of significant revenues
and expenses.”(2) Information on calculating allocation amounts for
performance obligations
When selling sets of multiple pieces of game content as part of granting
game distribution rights or download sales in the Entertainment

Contents Business, the provision of each piece of content is identified
as a separate performance obligation, and the transaction price isallocated to each performance obligation. For bundled sales within
the Entertainment Contents Business of amusement machines andannual content update services, the amusement machine sales andannual content update services are identified as separate performance obligations and the transaction prices are allocated to eachperformance obligation.
In cases such as these, stand-alone selling prices on the transaction day (in the contract of the individual goods or services that serveas the basis for each performance obligation are calculated) thetransaction prices are allocated based on the ratio of said stand-alone
selling prices.

3. Information for understanding revenue amounts of the current fiscal year and the following fiscal years
Prior fiscal year (from April 1, 2021 to March 31, 2022)(1) Receivables from contracts with customers; the balances of contract assets and contract liabilities
The breakdown of receivables from contracts with customers, contract assets, and contract liabilities is as follows:
SEGA SAMMY HOLDINGS

Millions of yen
Beginning balance forthe prior year

Ending balance forthe prior year

¥38,176¥34,958

—

3,993

9,333

10,257

Receivables from contracts with customers
Notes and accounts receivable—trade
Contract assets
Contract liabilities

Note: Of the revenue recognized in the prior fiscal year, the amount included in the contract liabilities balance at the beginning of the period is ¥8,135 million.

(2) Transaction price allocated to remaining performance obligations
The total transaction price allocated to the remaining performance obligations and the time frame in which the Company expects to recognize theamount as revenue are as follows:
Millions of yen

Within one year

¥ 8,877

Over 1 year but within 2 years

915

Over 2 years

465

Total

10,257

Current fiscal year (from April 1, 2022 to March 31, 2023)(1) Receivables from contracts with customers; the balances of contract assets and contract liabilities
The breakdown of receivables from contracts with customers, contract assets, and contract liabilities is as follows:
Millions of yen
Beginning balance forthe current year

Ending balance forthe current year

¥34,958¥52,673

Receivables from contracts with customers
Notes and accounts receivable—trade

140

Contract assets

3,993

696

Contract liabilities

10,25725,852

Contract assets consist mainly of rights not yet claimed on revenues
recognized as such, based on measurement of progress for development under contract. Contract assets are transferred to accounts
receivable - trade when rights to payment become unconditional.
Contract liabilities consist mainly of prepayments received from
customers before the delivery of products or provision of services
and balances of points awarded to customers for which performanceobligations have not yet been fulfilled as of the end of the period.
Contract liabilities are derecognized upon recognition of revenues.
Of the revenue recognized in the current fiscal year, the amountincluded in the contract liability balance at the beginning of the period
is ¥9,368 million. The primary reason for the increase in contract
liabilities is an increase in prepayments received before deliveryof products.

(2) Transaction price allocated to remaining performance obligations
The total transaction price allocated to the remaining performance obligations and the time frame in which the Company expects to recognize theamount as revenue are as follows:
Millions of yen

Within one year

¥24,227

Over 1 year but within 2 years

1,047Over 2 years

577

Total

25,85223 Segment Information
The Group’s reporting segments are organizational units for which separate financial information is available. On this basis, the Board of Directors
makes decisions on allocating management resources and examines financial performance on a regular basis.
Planning of business development and strategies as well as execution of business activities in respect of each product and service is carriedout by each Group company that provides such product and service.
As such, the Group is comprised of segments classified by product and service provided through the businesses run by each Group company,in which Entertainment Contents Business, Pachislot and Pachinko Machines Business, and Resort Business are the reporting segments.
The lines of business for each reporting segment are as follows:
Segment

Main product and businessEntertainment Contents Business

Development and sales of consumer game software including Full Game, F2P, etc., andamusement machines, planning, production and sales of animated films, development,
manufacture and sales of toys

Pachislot and Pachinko Machine Business

Development, manufacture and sales of pachislot and pachinko machines

Resort Business

Integrated resorts business and development and operation of hotels and golf courses, etc.,
in other facilities businesses

Integrated Report 2023

1. Outline of reporting segments

2. Method for calculating net sales, income or loss, assets and other items by each reporting segment
The accounting methods applied to reporting segments are generally the same as those described in “Significant matters forming the basis for
preparing consolidated financial statements.”

141

Notes to Consolidated Financial Statements

3. Information on the amounts of net sales, income (loss), assets and other items by each reporting segment
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Reporting segment
Entertainment
Contents

Pachislot
Pachinko
Machines

ResortSubtotal

Adjustment(Note)

Amount inConsolidated
financialstatements¥235,937¥75,868¥ 8,663¥320,469¥    480¥320,949

Net sales:
Net sales to external customers

553

349

143

1,046

(1,046)—

Total

Inter-segment sales and transfers

236,491

76,218

8,806

321,515(565)

320,949

Segment income (loss)

36,861

10,282(6,738)40,405(7,061)33,344

Segment assets

191,320

56,73831,701

279,760

155,732

435,492

Depreciation

6,247

3,566

683

10,497908

11,406

Interest income

34

239

0

274

(162)

112

Interest expenses

83

77

30

191

109

301

Equity in earnings (losses) of affiliates

1,028

291

(4,116)(2,795)17(2,778)Investments in affiliates accounted
for by the equity method

30

659

18,542

19,232813

20,046

7,365

4,114

434

11,9141,130

13,045

Other items:

SEGA SAMMY HOLDINGS

142

Increases in property, plant and equipment
and intangible assets

Notes: 1. Adjustment to segment income (loss) of ¥(7,061) million includes elimination of inter-segment transactions of ¥83 million and general corporate expenses of ¥(7,145)
million which are not allocated to each reporting segment. General corporate expenses consist mainly of Group management expenses incurred by the Company.
2. Adjustment to segment assets of ¥155,732 million includes the elimination of inter-segment transactions of ¥(19,256) million and general corporate assets of ¥174,988
million that are not allocated to each reporting segment. General corporate assets are mainly assets of the Company that are not allocated to each segment.
3. Adjustments to depreciation consist mainly of depreciation associated with the Company.
4. Adjustment to interest income of ¥(162) million includes the elimination of inter-segment transactions of ¥(327) million and interest income of the Company of ¥164 million.
5. Adjustment to interest expenses of ¥109 million includes the elimination of inter-segment transactions of ¥(327) million and interest expenses of the Company of ¥436 million.
6. Adjustments to equity in earnings (losses) of affiliates represent equity in earnings or losses of affiliates not belonging to any reporting segment.
7. Adjustments to investments in affiliates accounted for by the equity method represent investments in affiliates accounted for by the equity method that do not belong to
any reporting segment.
8. Adjustments to increases in property, plant, and equipment and intangible assets consist mainly of the purchase amount of noncurrent assets related to the Company.
9. Adjustments have been made to segment income (loss) and ordinary income in the consolidated statements of income and comprehensive income.

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
Reporting segment
Entertainment
Contents

Pachislot
Pachinko
Machines

ResortSubtotal¥282,881¥94,253¥11,540¥388,675

311

575

79

965

Total

283,192

94,828

11,619Segment income (loss)

41,181

20,713(3,217)

Segment assets

221,633

73,372

Depreciation

5,766Interest income

224

Adjustment(Note)

Amount inConsolidated
financialstatements¥

Net sales:
Net sales to external customers
Inter-segment sales and transfers

960¥389,635(965)—

389,640(5)

389,635

58,676(9,202)49,47331,474326,479

175,086

501,566

3,227

628

9,622

1,047

10,669

257

0

483

(49)

433

Other items:

90

29

225

96

321

1,069

303

(1,893)

(520)

—

(520)

Investments in affiliates accounted
for by the equity method

39

668

17,867

18,575—

18,575

5,986

4,266

1,258

11,511384

11,896

Increases in property, plant and equipment
and intangible assets

Notes: 1. The adjustment to net sales to external customers of ¥960 million corresponds to net sales of businesses not belonging to reporting segments.
2. The adjustment to segment income (loss) of ¥(9,202) million includes losses of ¥(497) million on businesses not belonging to reporting segments, elimination ofinter-segment transactions of ¥198 million, and general corporate expenses of ¥(8,904) million not allocated to reporting segments. General corporate expenses
consist mainly of Group management expenses incurred by the Company.
3. Adjustment to segment assets of ¥175,086 million includes the elimination of inter-segment transactions of ¥(17,551) million and general corporate assets of ¥192,637
million not allocated to each reporting segment. General corporate assets are mainly assets of the Company that are not allocated to each segment.
4. Adjustments to depreciation consist mainly of depreciation associated with the Company.
5. Adjustment to interest income of ¥(49) million includes the elimination of inter-segment transactions of ¥(483) million and interest income of the Company of ¥433 million.
6. Adjustment to interest expenses of ¥96 million includes the elimination of inter-segment transactions of ¥(483) million and interest expenses of the Company of ¥579 million.
7. Adjustments to increases in property, plant, and equipment and intangible assets consist mainly of the purchase amount of noncurrent assets related to the Company.
8. Adjustments have been made to segment income (loss) and ordinary income in the consolidated statements of income and comprehensive income.

Integrated Report 2023

105

Equity in earnings (losses) of affiliates

Interest expenses[Related information]
Prior fiscal year (From April 1, 2021 to March 31, 2022)

1. Information by product and service
This information has been omitted as the same information is disclosed in Segment information.

2. Information by geographical area
(1) Net sales
Millions of yen
Japan

US

Europe

Other

Total

¥215,236¥75,285¥15,343¥15,084¥320,949

Note: Net sales are classified by country or region based on the customer’s location.

(2) Property, plant and equipment
Millions of yen
Japan

North America

UK

Other

Total

¥50,376¥1,635¥6,929¥1,416¥60,358

143

Notes to Consolidated Financial Statements

3. Information by each major customer
No description is provided here since no external customer exists to whom sales are 10% or more of the net sales recorded in the consolidated
statements of income or comprehensive income.
Current fiscal year (From April 1, 2022 to March 31, 2023)

1. Information by product and service
This information has been omitted as the same information is disclosed in Segment information.

2. Information by geographical area
(1) Net sales
Millions of yen
Japan

US

Europe

Other

Total

¥255,935¥96,256¥18,565¥18,878¥389,635

Note: Net sales are classified by country or region based on the customer’s location.

(2) Property, plant and equipment
Millions of yen

SEGA SAMMY HOLDINGSJapan

North America

UK

Other

Total

¥49,264¥2,822¥6,685¥1,711¥60,482

3. Information by each major customer
No description is provided here since no external customer exists to whom sales are 10% or more of the net sales recorded in the consolidated
statements of income or comprehensive income.
[Information on impairment loss on noncurrent assets by each reporting segment]
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Reporting segment

Impairment loss

Entertainment
Contents

Pachislot
Pachinko
Machines

ResortSubtotal

Adjustment(Note)

Amount inconsolidated
financialstatements

¥232

¥197

¥—

¥430

¥—

¥430

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
Reporting segment

Impairment loss

144

Entertainment
Contents

Pachislot
Pachinko
Machines

ResortSubtotal

Adjustment

Amount inconsolidated
financialstatements

¥142

¥304

¥—

¥446

¥—

¥446

[Information on amortization and unamortized balance of goodwill by reporting segment]
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Reporting segment
Entertainment
Contents
Business

Pachislot andPachinko
Machines
Business

ResortBusiness

Subtotal

Adjustment

Amount inconsolidated
financialstatements

Amortization during current period¥2,311¥—¥—¥2,311¥—¥2,311

Balance as of March 31, 2022

3,460

—

—

3,460

—

3,460

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
Reporting segment
Entertainment
Contents
Business

Pachislot andPachinko
Machines
Business

ResortBusiness

Subtotal

Adjustment

Amount inconsolidated
financialstatements

Amortization during current period¥2,142¥ 36¥—¥2,178¥—¥2,178

Balance as of March 31, 2023

2,072

519

—

2,592

—

2,592
Integrated Report 2023

[Information on gain on negative goodwill by each reporting segment]
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Not applicable
Current fiscal year (From April 1, 2022 to March 31, 2023)
Not applicable

24 Related-Party Transactions
1. Transactions with related parties(1) Transactions between the Company and related parties
1) Non-consolidated subsidiaries and affiliated companies of the Company
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Transaction
amountEnd of period
accountbalance

Name of related
individual or company

Position andprincipal business

Description of
the Company’s transactions

PARADISESEGASAMMY
Co., Ltd.

Resort business

Subscription to additional
capital shares (Note1)¥4,315——

Provision of collateral (Note2)

18,542——

Accounts

Notes: 1. This is a subscription to additional capital shares allotted to shareholders.
2. For a portion of the loans from financial institutions to PARADISE SEGASAMMY Co., Ltd., the shares of the company are pledged as collateral

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
Name of related
individual or company

Position andprincipal business

Description of
the Company’s transactions

Transaction
amountPARADISESEGASAMMY
Co., Ltd.

Resort business

Provision of collateral (Note)¥17,867

End of period
accountbalance

Accounts——

Note: For a portion of the loans from financial institutions to PARADISE SEGASAMMY Co., Ltd., the shares of the company are pledged as collateral.

145Notes to Consolidated Financial Statements

2) Directors and major shareholders (limited to individuals) of the Company
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Name of related
individual or company

Position andprincipal business

Description of
the Company’s transactions

Transaction
amount(Note 1)

Haruki Satomi

Chairman of
SEGA SAMMYARTS FOUNDATION

Payment of donation

FSC Co., Ltd. (Note 3)

Non-life insurance agent

Payment of insurance premium (Note 2)

End of period
accountbalance

Accounts

¥107

11

—

—

Prepaid expenses¥10Long-term prepaid
expenses

0

Notes: 1. The amount donated to the Foundation is determined with the approval of the Board of Directors.
2. Transaction prices are determined in the same way as for general transactions, referring to market prices.
3. Hajime Satomi, Chairman, Representative Director, and Haruki Satomi, President and Group CEO, Representative Director, directly hold a majority of the shares of
FSC Co., Ltd.
4. Transaction amounts exclude consumption tax.

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen

SEGA SAMMY HOLDINGS

Name of related
individual or company

Position andprincipal business

Description of
the Company’s transactions

Transaction
amount

FSC Co., Ltd. (Note 2)

Non-life insurance agent

Payment of insurance premium (Note 1)

End of period
accountbalance

Accounts¥6

Prepaid expenses¥1Long-term prepaid
expenses2

Notes: 1. Transaction prices are determined in the same way as general transactions, referring to market prices.
2. Hajime Satomi, Chairman, Representative Director, and Haruki Satomi, President and Group CEO, Representative Director, directly holds a majority of the shares of
FSC Co., Ltd.
3. Transaction amounts exclude consumption tax.

(2) Transactions between consolidated subsidiaries of the Company and related parties
1) Non-consolidated subsidiaries and affiliates of the Company
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Name of related
individual or company

Position andprincipal business

Description of
the Company’s transactions

ZEEG Co., Ltd.

Pachislot and Pachinko
Machines Business

Purchase of pachislot andpachinko machine parts (Note 1)
Loan of funds(Note 2)

Collection of loans (Note 2)
Interest income(Note 2)

Transaction
amount¥6,039Accounts

End of period
accountbalance

Accounts payable–trade¥  480500

Short-term loans receivable

3,069

2,355

Long-term loans receivable

2,582

66

Notes: 1. Transaction prices are determined in the same way as general transactions, referring to market prices.
2. The interest rate on loans is determined by taking market interest rates into consideration. The repayment terms are one to five years, with the principal to be repaid inlump sum on the due date and interest to be repaid in annual installments. No collateral is accepted.

146

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
End of period
accountbalance

Name of related
individual or company

Position andprincipal business

Description of
the Company’s transactions

Transaction
amountAccounts

ZEEG Co., Ltd.

Pachislot and Pachinko
Machines Business

Purchase of pachislot andpachinko machine parts (Note 1)¥12,270

Accounts payable–trade¥  4391,500

Short-term loans receivable

2,500

2,155

Long-term loans receivable

2,497

Loan of funds(Note 2)

Collection of loans (Note 2)
Interest income(Note 2)

79

Notes: 1. Transaction prices are determined in the same way as general transactions, referring to market prices.
2. The interest rate on loans is determined by taking market interest rates into consideration. The repayment terms are one to five years with the principal to be repaid ina lump sum on the due date and interest to be repaid in annual installments. No collateral is accepted.

2) Directors and major shareholders (limited to individuals) of the Company
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Not applicable
Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
Position andprincipal business

Description of
the Company’s transactions

Haruki Satomi

Chairman of
SEGA SAMMY ARTSFOUNDATION

Payment of donation (Note 1)

FSC Co., Ltd. (Note 3)

Non-life insurance agent

Payment of insurance premium (Note 2)

Transaction
amount¥91

8

End of period
accountbalance

Accounts——¥5

Prepaid expenses

Integrated Report 2023

Name of related
individual or company

Notes: 1. The amount donated to the Foundation is determined with the approval of the Board of Directors.
2. Transaction prices are determined in the same way as general transactions, referring to market prices.
3 Hajime Satomi, Chairman, Representative Director, and Haruki Satomi, President and Group CEO, Representative Director, directly holds a majority of the shares of
FSC Co., Ltd.
4. Transaction amounts exclude consumption tax.

2. Notes on the parent company or significant affiliates(1) Information on the parent company
Not applicable(2) Summarized financial information of significant affiliates
PARADISE SEGASAMMY Co., Ltd. is a significant affiliate in the current fiscal year and its summarized financial statements are as follows.
Millions of yen

Prior year

Current year

Total current assets¥  4,808¥ 20,558

Total noncurrent assets

127,675

126,893

Total current liabilities

17,46482,798

Total noncurrent liabilities

83,40324,949Total net assets

31,61639,704

Net sales

15,50527,410

Income (loss) before income taxes(9,147)(4,208)Net Income (loss)(9,147)(4,208)147

Notes to Consolidated Financial Statements

25 Per Share Information
Yen

Item

Prior year

Current year

(from April 1, 2021 toMarch 31, 2022)(from April 1, 2022 toMarch 31, 2023)¥1,311.72¥1,498.75

Profit per share

158.85208.07

Profit per share (diluted)

158.24207.13

Net assets per share

1. The calculation basis for net assets per share is as follows.
Items

Prior year

Current year

(as of March 31, 2022)(as of March 31, 2023)¥292,637¥331,347

Amounts deducted from net assets in the consolidated balance sheets (Millions of yen)

225

492

(Subscription rights to shares) (Millions of yen)

176

468

Total of net assets in the consolidated balance sheets (Millions of yen)

49

24

Net assets pertaining to common stock (Millions of yen)

292,411

330,854

Number of common shares used to calculate net assets per share (Thousands of shares)

222,921220,753(Non-controlling interests) (Millions of yen)

SEGA SAMMY HOLDINGS

2. The calculation basis for profit per share and profit per share (diluted) are as follows.
Item

Prior year

Current year

(from April 1, 2021 toMarch 31, 2022

(from April 1, 2022 toMarch 31, 2023)¥ 37,027¥ 45,938——

Net income (loss) per share:
Profit attributable to owners of parent (Millions of yen)Amount not attributable to ordinary shareholders (Millions of yen)
Profit attributable to owners of parent pertaining to common stock (Millions of yen)

37,02745,938Average number of common shares during the period (Thousands of shares)

233,091

220,790

Profit per share (diluted):——

Increase in common stock (Thousands of shares)

909

999

(Subscription rights to shares) (Thousands of shares)

909

999

—

—

Adjustment to profit attributable to owners of parent (Millions of yen)

Overview of dilutive shares not included in calculation of profit per share (diluted)
because of no dilutive effect

26 Significant Subsequent Events
1. Acquisition of Rovio Entertainment Corporation
At the Board of Directors meeting held on April 17, 2023, the Company and SEGA CORPORATION (“SEGA”), a subsidiary of the Company,
resolved to implement a tender offer (tender offer under the Finnish L aw, the “Tender Offer”) to acquire Rovio Entertainment Corporation(“Rovio”), a mobile game company headquartered in Finland, through SEGA’s wholly owned UK subsidiary SEGA Europe Limited. The Tender
Offer period expired on August 7, 2023, at 4:00 p.m. (EET). Regarding the result of the Tender Offer, the Company’s group company SEGA Europe
Limited acquired approximately 96.3% of the issued and outstanding shares of Rovio, making it the Company’s group company on August 17, 2023.
Furthermore, SEGA Europe Limited commenced a subsequent offer (the “Subsequent Offer”) in accordance with the terms and conditions of
the Tender Offer on August 11, 2023, at 9:30 a.m. (EET), which was completed on August 25, 2023 at 4:00 p.m. (EET). Based on the final result of
the Subsequent Offer, 1,030,171 shares were tendered during the Subsequent Offer period, representing approximately 1.4 percent of all issued
and outstanding shares of Rovio. Together with the shares validly tendered during the Tender Offer period, the shares validly tendered during theSubsequent Offer period represented approximately 97.7% of the issued and outstanding shares and voting rights in Rovio.

148

(i)

(1) Ownership of shares before the acquisition

0 shares (Number of voting rights: 0)(Ratio of voting rights: 0%)(2) Number of shares acquired

74,427,345 shares, 742,300 options(Number of voting rights: 74,427,345)(3) Acquisition price

Shares of Rovio: approximately EUR 689 million (¥ 107,146 million)(4) Ownership of shares after the acquisition

74,427,345 shares, 742,300 options(Number of voting rights: 74,427,345)(Ratio of voting rights: 97.7%)

Integrated Report 2023

Purpose of the acquisition(a) Positioning of the consumer business for the Company
	The Company positions the consumer area of its Entertainment Contents Business as a growth area under its medium-term plan (fromFY2022 to FY2024), and has accelerated its efforts to strengthen the business through initiatives such as converting existing IPs into global
brands as well as strengthening user engagement through multi-platform support and enhanced media mix, etc.
	  As a part of its growth strategy to invest up to ¥250 billion during the five-year period ending FY2026, the Company has been exploring
investment opportunities in the consumer area to strengthen its development capabilities as well as to create new ecosystems.
(b) Background of the acquisition
	The size of the global gaming market is projected to reach US$263.3 billion by 2026, registering a CAGR of 3.5% from 2022 to 2026. The
mobile gaming market, in particular, is set to expand at a CAGR of 5.0% to represent 56% of the global gaming market overall, an increase
from 53% in 2022. (Source: IDG Report (dated October 2022))
	  The Company firmly believes that it is imperative to continue investing in its game development and operating capabilities, in order to further
strengthen its position in this fast-growing mobile and global gaming market, which therefore led to the decision to acquire Rovio.
	  Through the Acquisition, the Company aims to take in Rovio’s live-operated mobile game development capabilities and expertise in mobile
game operation, to accelerate the development of mobile-compatible and multi-platform-supported version of SEGA’s existing game IPs,
thereby strengthening SEGA’s game portfolio and further accelerating global expansion of its business.
(c) Purpose of the acquisition
	Rovio is a global mobile-first, game company that creates, develops, and publishes mobile games, which have been downloaded over 5 billion
times. Rovio is best known for the global Angry Birds brand, which started as a popular mobile game in 2009, and has since evolved fromgames to various entertainment, anime, and consumer products through brand licensing.
	  SEGA aims to accelerate its growth in the global gaming market and increase its corporate value by generating synergies between SEGA’s
existing businesses and Rovio’s strengths, including its global IPs and live-operated mobile game development capabilities.
(ii) Number of shares acquired, acquisition price, and ownership of shares before and after the acquisition (Note)

Note: Acquisition price represents the amount of payment for purchasing shares and stock options.
The Company successfully acquired more than 90% of all shares and voting rights in Rovio. It further intends to implement a squeeze-out procedure set forth in
the Finnish Companies Act to acquire the remaining untendered shares in order to make Rovio its wholly owned subsidiary.

2. Acquisition of treasury stock
At the Board of Directors meetings held on April 28, 2023 and August 31, 2023, the Company resolved the matter related to the acquisition oftreasury stock, pursuant to the provisions of Article 156 of the Companies Act of Japan as applied by replacing the provisions stipulated in Article
165 Paragraph 3 of the same law.
(i) Reasons for the acquisition of treasury stock	The Company aims to maximize corporate value by focusing on capital efficiency in its medium-term financial strategy until the fiscal year
ending March 31, 2026. While promoting aggressive investment for growth, the Company will also provide appropriate shareholder returns.
As a result of considering shareholder returns including acquisition of treasury stock based on the return policy of adopting higher of DOE 3%
or more, or total return ratio of 50% or more, the Company decided to acquire treasury stock.
(ii) Details of the acquisition of treasury stock(a) Type of shares to be acquired
		 Common stock(b) Total number of shares to be acquired
		 8,000,000 shares (upper limit)
		 Ratio of total number of shares outstanding (excluding treasury stock): 3.62%(c) Total cost of acquisition
		 10.0 billion yen (upper limit)(d) Acquisition period
		 From May 1, 2023 to March 29, 2024(e) Acquisition method
		 Market purchase on the Tokyo Stock Exchange

149

Notes to Consolidated Financial Statements

SEGA SAMMY HOLDINGS

150

3. Commitment-type term loan
SEGA’s wholly owned UK subsidiary SEGA Europe Limited has implemented the Tender Offer to acquire Rovio. At the Board of Directors
meeting held on August 9, 2023, the Company resolved to borrow funds required for the Tender Offer from a capital policy perspective as below.
The Company signed a commitment-type term loan agreement with financial institutions on August 10, 2023.
(i) Form of borrowing:	Commitment-type term loan(ii) Lender(a) Arranger and agent:		 Sumitomo Mitsui Banking Corporation(b) Joint arranger:
		 MUFG Bank, Ltd., Mizuho Bank, Ltd.
(c) Participating financial institutions:		 Aozora Bank, Ltd., SBI Shinsei Bank, Limited(iii) Total commitment amount:
105.0 billion yen(iv) Borrowing amount:
100.4 billion yen(v) Contract day:August 10, 2023(vi) Commitment period:	From August 15, 2023 to the earlier of August 15, 2024 or a corresponding day of one month after the date on which the squeeze-out is completed(vii) Borrowing period:
1 year(viii) Borrowing rate:
Base rate and spread(ix) Collateral:None
4. Implementation of Structural Reforms in the consumer area (Entertainment Contents Business)
At the Board of Directors meeting held on September 28, 2023, the Company resolved to implement structural reforms in the consumer area,
mainly at its European bases. In accordance with this decision, the Company expects to record a loss for the fiscal year ending March 31, 2024.
(i) Background of implementation of structural reforms
	The Company has set the consumer area as one of its growth areas and has achieved rapid earnings growth in recent years by promoting the
global branding of its existing IPs and other measures. On the other hand, the business environment surrounding the consumer area has been
rapidly changing, including reactionary decline from the stay-at-home demand in COVID-19 and the economic downturn due to inflation in theEuropean region, and profitability has been lowered mainly in European bases.
	  To promptly adapt to these changes in the environment and improve profitability, the Company decided to implement structural reforms
aimed at increasing efficiency, mainly at the Company’s European bases by reviewing their title portfolio. As a result, the Company has madethe difficult decision to cancel some titles under the development as well as to reduce the fixed expenses.
(ii) Details of implementation
	The Company will implement the following measures regarding structural reform in the Company’s European bases which are determined at
this time.
(a) Cancelation of titles under development
	In response to the lower profitability of the European region, the Company has reviewed the title portfolio of each development base inEurope and the resulting action will be to cancel “HYENAS” and some unannounced titles under development. Accordingly, the Company will
implement a write-down of work-in-progress for titles under development.
(b) Reduction of fixed expenses
	The Company will reduce various fixed expenses at several group companies in the region, mainly for The Creative Assembly Ltd. One-time
expenses related to the reduction of fixed expenses are expected to be incurred. The Company will continue to consider measures toimprove profitability in European bases apart from the above.
(iii) Future outlook
	As a result of implementation of the structural reform described above in the consumer area, the Company expects to record losses ofapproximately 14.3 billion yen for the fiscal year ending March 31, 2024.

27 Supplemental Information[Annexed consolidated detailed schedule of bonds]

Company nameSecurity titles

Issuance date

The Company

5th Series of Unsecured
Straight Bonds(Publicly offered bonds)

October 10, 2019

Balances asof April 1,
2022

Balances asof March 31,2023(Millions of yen)

(Millions of yen)Interest rate(%)

¥10,000¥10,000

0.38

10,00010,000
(—)

Total

Type

Date of maturity

Unsecured

October 10, 2029

Notes: 1. Figure in parentheses under “Balance as of March 31, 2023” is the current portion of the amount of redemption.
2. The scheduled amount of redemption after the consolidated closing date is as follows:
Millions of yen
Within one year

One to two years

Two to three years

Three to four years

Four to five years

Over five years

¥—

¥—

¥—

¥—

¥—

¥10,000[Annexed consolidated detailed schedule of borrowings]
Balances as ofMarch 31, 2023
(Millions of yen)

Short-term borrowings¥¥

Current portion of long-term l borrowings

10,000Category—

Average interest rate(%)

Repayment period

—

—

—

17,0000.4—

Current portion of lease obligations

1,123

1,377

2.0

—

Long-term borrowings (Excluding current portion)

32,00025,0000.5

From 2025 to 2027

Lease obligations (Excluding current portion)

4,013

5,352

2.0

From 2024 to 2031

30

29

1.3

—

116

119

1.5

From 2024 to 2030

47,284

48,879——Integrated Report 2023

Balances as ofApril 1, 2022
(Millions of yen)

Other interest-bearing debts:
Accounts payable—facilities
Accounts payable—facilities(Excluding current portion)
Total

Notes: 1. “Average interest rate” represents the weighted average rate applicable to the balance of borrowings at end of period.
2. Some lease obligations stated in the consolidated balance sheets represent the amounts with interest equivalents not deducted from the total lease payments.
Accordingly, said lease obligations are not included when calculating the “Average interest rate.”
3. The scheduled amounts of long-term borrowings, lease obligations, and other interest-bearing debts (excluding current portion) to be repaid after the consolidated
closing date are as follows:
Millions of yen

Long-term borrowings
Lease obligations

One to two years

Two to three years

Three to four years

Four to five years¥15,000¥ —¥ —¥10,000

Over five years

1,184

993

861

795

1,518

22

20

20

20

34

¥

—

Other interest-bearing debt:
Accounts payable—facilities

Schedule of asset retirement obligations
No description is provided here, since the amount of asset retirement obligations as of the beginning and end of the current fiscal year were lessthan 1/100 of the total amount of liabilities and net assets, respectively, as of the beginning and end of the current fiscal year.

151Notes to Consolidated Financial Statements

28 OtherQuarterly information for the current fiscal year
(Cumulative period)

Net sales (Millions of yen)
Income before income taxes (Millions of yen)First six months

First nine months

Current fiscal year

¥66,118¥150,095¥271,979¥389,635

4,106

12,01939,79647,069Profit attributable to owners of parent (Millions of yen)

3,158

9,619

32,84645,938

Profit per share (Yen)

14.29

43.56

148.76208.07First quarter

Second quarter

Third quarter

Fourth quarter¥14.29¥29.28¥105.22¥59.31(Accounting period)

Profit per share (Yen)

SEGA SAMMY HOLDINGS

152

First three months

Independent Auditor’s Report

Independent auditor’s report

To the Board of Directors of SEGA SAMMY HOLDINGS INC.:
OpinionWe have audited the accompanying consolidated financial statements of SEGA SAMMY HOLDINGS
INC. (“the Company”) and its consolidated subsidiaries (collectively referred to as “the Group”),
which comprise the consolidated balance sheets as at March 31, 2023 and 2022, the consolidated
statements of income and comprehensive income, changes in net assets and cash flows for the years
then ended , and notes, comprising a summary of significant accounting policies and other explanatory
information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2023 and 2022, and its
consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion

Emphasis of Matter

Integrated Report 2023

We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.

We draw attention to Note 26 “Significant Subsequent Events” to the consolidated financial statements.
At the Board of Directors meeting held on April 17, 2023, the Company and SEGA CORPORATION,
a subsidiary of the Company, resolved to implement a tender offer (the “Tender Offer”) to acquire
Rovio Entertainment Corporation (“Rovio”), a mobile game company headquartered in Finland,through SEGA’s wholly owned UK subsidiary SEGA Europe Limited. Regarding the result of theTender Offer, SEGA Europe Limited acquired approximately 96.3% of the issued and outstanding
shares of Rovio, making it the Company's group company on August 17, 2023.
Furthermore, SEGA Europe Limited commenced a subsequent offer (the “Subsequent Offer”) on
August 11, 2023 (EET), which was completed on August 25, 2023 (EET). Together with the shares
validly tendered during the Tender Offer period, the shares validly tendered during the Subsequent
Offer period represented approximately 97.7% of the issued and outstanding shares and voting rights in
Rovio.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our153Independent Auditor’s Report

audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Appropriateness of management’s judgment as to whether an impairment loss should berecognized on non-financial assets including goodwill at the equity-method affiliate.

SEGA SAMMY HOLDINGSThe key audit matter

How the matter was addressed in our audit

As described in Note 3, “Significant Accounting
Estimates” (3), to the consolidated financial
statements, SEGA SAMMY HOLDINGS INC.
(hereinafter, referred to as the “Company”) and its
consolidated subsidiaries reported investment
securities of 39,538 million yen in the consolidatedbalance sheet as of March 31, 2023, which
included an investment in PARADISESEGASAMMY Co., Ltd. (hereinafter “PSS”), an
equity-method affiliate in the Resort Businesssegment, of 17,867 million yen, representing
approximately 4% of total assets in the
consolidated financial statements. PSS recognized
non-financial assets of 125,811 million yen in its
financial statements, of which 7,771 million yen
was related to goodwill.

In order to assess the appropriateness ofmanagement’s judgment with respect to whether an
impairment loss should be recognized on nonfinancial assets including goodwill held by PSS, werequested the component auditors of PSS, an equitymethod affiliate, to perform specified audit procedures
including the involvement of valuation specialists
within the network firms of the component auditors.

PSS prepares its financial statements in accordancewith International Financial Reporting Standards
and performs an impairment test on a cashgenerating unit (CGU) whenever there is an
impairment indicator, or at least annually on a
CGU to which goodwill has been allocated. In the
impairment testing, when the recoverable amountof a CGU is less than the carrying amount, PSS
reduces the carrying amount to the recoverable
amount and recognizes the resulting decrease in the
carrying amount as an impairment loss, which
affects the amount of investment securities
recorded in the Company’s consolidated financial
statements through the equity method of
accounting.
In the current fiscal year, PSS performed
impairment tests on the CGU to which goodwill
had been allocated as well as on other CGU for
which there was an impairment indicator, using thevalue in use or the fair value less cost of disposal
as the recoverable amount. The future cash flows
used to measure the value in use were estimatedbased on the business plan of PSS approved bymanagement. For periods beyond the period
covered by the business plan, the future cash flows

154

We then evaluated the report of the component
auditors to conclude on whether sufficient andappropriate audit evidence was obtained from thefollowing procedures among others:(1) Internal control testing
We tested the design and operating effectiveness ofcertain of the Company’s internal controls relevant toevaluating the appropriateness of PSS’s financial
statements including the assessment on its CGUs.
(2) Assessment of the reasonableness of theestimated recoverable amount
Evaluating the appropriateness of the rationale
supporting key assumptions adopted by managementin preparing the business plan that formed the basis
for estimating future cash flows used to calculate thevalue in use, by performing the procedures set forth
below, as well as evaluating the competence,capabilities and objectivity of the external valuation
expert engaged by management.
⚫

Inspected the materials supporting the number ofcasino visitors and amounts of Drop embedded in
the business plan, and compared them with pastactual results; and⚫

Compared the growth rate with external data inorder to ensure that it was within the long-term
average growth rate of relevant markets.

In addition, we involved valuation specialists within
our network firms who assisted our assessment of theappropriateness of the selection of input data for
estimating the discount rate used to calculate thewere estimated based on the forecasts using a
projected growth rate within the long-term average
growth rate of relevant markets. Key assumptions
used to project future cash inflows and outflows
included in the business plan, such as the numberof casino visitors, amounts of Drop (chips
purchased at a table) and projected market growthrate, involved a high degree of estimation
uncertainty. Accordingly, management’s judgment
thereon had a significant effect on the estimatedfuture cash flows.

value in use, and the selection of appropriate
valuation techniques and key assumptions formeasuring the fair value less cost of disposal.

In addition, selecting the input data for estimating
the discount rate used to calculate the value in use
and selecting the appropriate valuation techniques
and key assumptions for measuring the fair valueless cost of disposal, using mainly the depreciatedreplacement cost approach, required a high degreeof expertise in valuation.
Integrated Report 2023

We, therefore, determined that our assessment of
the appropriateness of management’s judgment as
to whether an impairment loss should berecognized on non-financial assets including
goodwill held by PSS was of most significance in
our audit of the consolidated financial statements
for the current fiscal year, and accordingly, a key
audit matter.

Other Information
The other information comprises the information included in the INTEGRATED Report, but does notinclude the consolidated financial statements, the financial statements, and our auditor’s reports
thereon. Management is responsible for the preparation and presentation of the other information. The
audit and supervisory committee are responsible for overseeing the directors’ performance of theirduties with regard to the design, implementation and maintenance of the reporting process for the otherinformation.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and the Audit and Supervisory Committee for the Consolidated
Financial Statements
155

Independent Auditor’s ReportManagement is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
The audit and supervisory committee are responsible for overseeing the directors’ performance of theirduties with regard to the design, implementation and maintenance of the Group’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

SEGA SAMMY HOLDINGS156

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an
opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group tocease to continue as a going concern.



Evaluate whether the presentation and disclosures in the consolidated financial statements are inaccordance with accounting standards generally accepted in Japan, the overall presentation,
structure and content of the consolidated financial statements, including the disclosures, andwhether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

We communicate with the audit and supervisory committee regarding, among other matters, theplanned scope and timing of the audit, significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide the audit and supervisory committee with a statement that we have complied with
relevant ethical requirements regarding independence, and communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with the audit and supervisory committee, we determine those mattersthat were of most significance in the audit of the consolidated financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of such communication.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of
the Certified Public Accountants Act of Japan.

Designated Engagement Partner
Certified Public Accountant

Integrated Report 2023

Hidetoshi Fukuda

Danya Sekiguchi
Designated Engagement Partner
Certified Public Accountant

Yoichi Ueno
Designated Engagement Partner
Certified Public Accountant
KPMG AZSA LLC
Tokyo Office, JapanOct 27, 2023
Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by theCompany and KPMG AZSA LLC.

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SEGA SAMMY HOLDINGS INC.
Sumitomo Fudosan Osaki Garden Tower, 1-1-1 Nishi-Shinagawa,Shinagawa-ku, Tokyo 141-0033, Japanwww.segasammy.co.jp/en/