To the Shareholders

Items Posted on Internet Concerning
Notice of the 10th Ordinary General Meeting of
Shareholders

May 27, 2014

SEGA SAMMY HOLDINGS INC.

1

Contents
1. “VI Outline of Resolutions Regarding Preparation of Internal Control Systemand so forth to Ensure Appropriate Business Execution”
from the Business Report ···································································································· p.3
2.

Notes to Consolidated Financial Statements ································································ p. 5

3.

Individual Notes ················································································································ p. 14

Pursuant to the provisions of laws and regulations and the Article 16 of the Articles of Incorporation, theabove information shall be deemed to be provided to all shareholders by posting it on the website of theCompany: (http://www.segasammy.co.jp/japanese/ir/event/meeting.html).
Information in English will be posted on our English website(http://www.segasammy.co.jp/english/ir/event/meeting.html).

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1. “VI Outline of Resolutions Regarding Preparation of Internal Control System and so forth toEnsure Appropriate Business Execution” from the Business Report
Based on the Companies Act, the Company made the following resolutions regarding the “Basic Policyon Preparation of Internal Controls System” and has worked to prepare this system.
(1) System to Ensure the Efficient Implementation of Directors’ Duties and Compliance with Laws andthe Articles of Incorporation
Establish a Group CSR Charter and Group Code of Conduct, and Representative Directors will
repeatedly communicate the spirit of such charter and code to employees in administrative post, inorder to thoroughly establish compliance with laws as a condition for all corporate activities. These
efforts will reflect the Company’s fundamental policy of fulfilling its social responsibility as amember of society and provide a basis for establishing a compliance system that comprises suchpolicy. In addition, in the interest of further strengthening corporate governance, the Board of
Directors will make efforts to build an effective internal controls system and to secure a system forcompliance with laws and the Articles of Incorporation for the Company as a whole, so that theCompany’s business execution is appropriate and sound. Also, the Board of Corporate Auditors willaudit the effectiveness and functionality of this internal controls system, and make efforts to identify
and correct issues early through regular inspection.
(2) System Related to the Retention and Management of Information Related to the Implementation of
Directors’ Duties
Representative Directors will appoint the Director in charge of the Administrative Division as the
person in charge of the entire Company with respect to preservation and management of information
related to execution of Directors’ duties. Information related to execution of Directors’ duties will berecorded in writing or electronic media based on the Company regulations etc., and preserved andmanaged so that the Directors and Corporate Auditors are able to appropriately and accurately view
such information and also so that such information is easy to search.
(3) Regulations and Other Systems Regarding Risk Management for Losses
With respect to risks related to the Company’s business, each relevant division and department will
analyze and identify anticipated risks and clarify the risk management system. The Internal Audit
Department and Internal Control Department will audit each division’s and department’s risk
management and report the results regularly to the management decision-making body andexecutive and supervisory management organization. In the event of a situation likely to have asevere impact on the Group, crisis management teams of the Company and the Group companies
shall cooperate to discuss about countermeasures for prompt and effective actions.
(4) System to Ensure that Directors’ Duties are Implemented Efficiently
Adopt a corporate auditor system for efficient implementation of Directors’ duties, as well as for
Company Directors and Corporate Auditors to be well-informed about the Group’s businesses andpromptly and appropriately make decisions for the Group. The system should also enableappropriate and efficient implementation of duties under rules related to authorities anddecision-making based on the Regulations of the Board of Directors, and so forth.
(5) System to Ensure Appropriate Compliance with Law, and the Articles of Incorporation Concerning
the Performance of Employees’ Duties① Grant the Corporate Governance Committee, which governs the Company’s and Group’s
compliance related governing functions. Employees in administrative posts can act incompliance with law, the Articles of Incorporation, Company regulations, and social norms.
Make the foregoing known thoroughly inside the Company and promote compliance.
② Establish a “Hot Line” system that enables an employee to report in the interest of public
good any violation of law, the Articles of Incorporation, Company regulations, or conduct inviolation of social norms. Also establish a system that enables the person in charge promptly toreport any material matters to the Board of Directors and Board of Corporate Auditors. Also,
protect such an informant, and authorize the Company Compliance Department and so forth,and outside counsel as recipients of an informant’s report outside the ordinary reporting line, aspart of a system that maintains transparency and accurately addresses relevant issues.

3(6) System to Ensure that the Businesses of the Group, Comprised of the Company, its Parent, and its
Subsidiaries, are Executed Properly
Hold meetings for the Group’s Directors and Group’s Corporate Auditors, where various problems
in the Group or governance matters with material risks are addressed. The Company’s department incharge of internal audit will conduct audits for the benefit of the Group as a whole, and efforts will
be made to ensure to the extent possible that information is shared among members of the Groupand businesses are properly executed.
(7) Matters Regarding Employees whom Corporate Auditors Request to Assist them in the Performanceof their Duties
Establish a Corporate Auditor’s Office as an organization that reports directly to the Board of
Corporate Auditors and employees in such office will assist the Corporate Auditors’ duties under
their direction and order.
(8) Matters Related to the Independence of Corporate Auditors’ Staff from Directors Described in thePrevious Clause① An employee who assists a Corporate Auditor’s duties is a dedicated employee who is notdirected or supervised by Directors.
② Appointment, termination, personnel transfer, evaluation, disciplinary action, revision of wages,
and so forth, of or involving employees described in the previous section will require prioragreement of the Board of Corporate Auditors.
(9) System to Enable Directors or Employees to Report to Corporate Auditors, and other Systems
Related to Reporting to Corporate Auditors① Directors and employees must report promptly to the Board of Corporate Auditors material
violations of law or the Articles of Incorporation or illegal conduct related to performance of
duties or risks of conspicuous harm to the Company that they learn.
② Directors and employees must report promptly to the Board of Corporate Auditors decisions thatmaterially affect the Company’s business or organization, results of internal audits, or results ofevaluation of the internal control system associated with financial reports.
(10) Systems Established to Ensure the Efficacious Performance of Auditing Responsibilities by
Corporate Auditors① Representative Directors regularly will meet with Corporate Auditors, exchange opinions related
to Company management, in addition to business reports, and otherwise communicate
effectively with them.
② The Board of Directors will ensure Corporate Auditors’ participation in important work-related
meetings to ensure that the Company’s business is executed properly.
③ The Board of Corporate Auditors will use attorneys, certified public accountants, and otheroutside advisors, as necessary for itself, and its opportunities to receive advice related to audit
work will be guaranteed.

42. Notes to Consolidated Financial Statements
I Significant Accounting Policies Used in Preparation of Consolidated Financial Statements(1) Scope of Consolidation
Number of consolidated subsidiaries
67
For a complete list of major consolidated subsidiaries, refer to the section “I Group’s Current
Condition” under “7 Material Parent Company and Subsidiaries” of “(2) Relationships withsubsidiaries”.
Effective as of the fiscal year ended March 31, 2014, the following became the Company’s
consolidated subsidiaries; SEGASAMMY BUSAN INC. and two other companies, because of the
newly establishment; Liverpool Co., Ltd. and one other company, because of the Company’s
acquisition of the shareholdings; SEGA SAMMY CREATION INC., establishment through anincorporation-type split; DARTSLIVE EUROPE Limited, because of the increase of importance.
Effective as of the fiscal year ended March 31, 2014, the following have been excluded from thescope of consolidation; Sega Publishing America, Inc. and eight other companies, because of its
liquidation.
Number of non-consolidated subsidiaries
15
Main non-consolidated subsidiaries: Sega (Shanghai) Software Co., Ltd. etc.
All non-consolidated subsidiaries are excluded from the scope of consolidation because the
combined amounts in assets, net sales, net income, and retained earnings applicable to the equity
interest of the Company are immaterial.
(2) Application of the Equity Method
Number of equity-method non-consolidated subsidiaries 1
SEGA PUBLISHING KOREA LTD. has included in the scope of application of equity-method
because of increase of importance.
Number of equity-method affiliates
7
Main equity-method affiliates: PARADISE SEGASAMMY Co., Ltd., INTERLIFE HOLDINGS
CO., LTD., etc.
IP4. INC. and one other company have excluded from the scope of application of equity-method
because of sale of the share of stocks.
Number of non-consolidated subsidiaries and affiliates not accounted for by the equity method
20
Main non-consolidated subsidiaries and affiliates not accounted for by the equity method:
Chara-Web Co., Ltd etc.
The equity method was not applied to some of the non-consolidated subsidiaries and affiliates
because the combined amounts of these companies in net income and retained earnings applicableto the equity interest of the Company are immaterial.
(3) Fiscal Year for Consolidated Subsidiaries
Consolidated subsidiaries whose fiscal year-ends differ from the consolidated balance sheet date
are listed below. Necessary adjustments are made on consolidation for material transactions that
occurred between the end of the fiscal years of these subsidiaries and the end of the consolidatedbalance sheet date.
Consolidated subsidiary
Sega Amusements Taiwan Ltd.
Shanghai New World Sega Recreation Co., Ltd.
Beijing SEGA Mobile Entertainment Technology Co., Ltd.
Sega Jinwin (Shanghai) Amusements Co., Ltd.
SEGA (QINGDAO) ENTERTAINMENT PARK CO., LTD.

5

Fiscal year-end
December 31
December 31
December 31
December 31
December 31

(4) Accounting Standards① Valuation standards and accounting treatment for important assets
a. Held-to-maturity debt securities are stated at amortized cost (the straight - line method).
b. Available-for-sale securities
Securities with fair market value are stated at fair market value. The difference between
acquisition cost and market value is accounted for as net unrealized holding gains or losses
on securities in net asset, with cost of sales determined by the moving average method.
c. Available-for-sale 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 of the 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.
d. Derivatives
Derivatives are stated at fair market value.
e. Inventories
Inventories are stated at cost, cost being determined mainly by the gross-average method(With regard to the amounts stated in the balance sheet, the method of book value
devaluation based on decline in profitability is used).
Also, work in process is stated at cost, cost being determined mainly by the specificidentification method (With regard to the amounts stated in the balance sheet, the method ofbook value devaluation based on decline in profitability is used).
② Method for depreciating and amortizing important assets
a. Property, plant and equipment (excluding lease assets):
Depreciation is calculated primarily using the straight-line method.
Useful life for primary assets is as follows:
Building/Structure: 2-50 years
Machinery/equipment/vehicles: 2-16 years
Amusement machines and facilities: 2-5 years
b. Intangible assets (excluding lease assets):
Amortization is calculated using the straight-line method. The straight-line method isadopted over the useful life of within five years for Software for internal use.
c. Lease assets
Lease assets involving finance lease transactions under which the ownership of the leaseassets is transferred to lessees:
Depreciation method for such assets is the same as that which applied to property, plant andequipment owned by the Company.
Lease assets involving finance lease transactions of which the ownership is not transferred tolessees:
Depreciation method is the straight line method with their residual values being zero overtheir leased periods used as the number of years for useful life.
③ Accounting for deferred assets
Founding expense : All expenses are expensed when incurred.
Stock issue expense : All expenses are expensed when incurred.
Bond issue expense : All expenses are expensed when incurred.
④ Accounting for allowances and provisions
a. Allowance for doubtful accounts
The reserve for doubtful accounts is provided in amount sufficient to cover possible losses
estimated as a historical write-off ratio of bad debts for general receivables. Allowance for
doubtful accounts and bankrupt receivables are calculated on an individual assessment of thepossibility of collection.
b. Provision for bonuses
Accrued employees’ bonuses are provided based on the estimated amount to be paid.

6

c. Provision for directors’ bonuses
The estimated amount of bonuses was recorded to meet the bonus payments to Directors andCorporate Auditors.
d. Provision for business restructuring
Of the expenses expected to incur in connection with business restructuring, thoserecognized to have incurred in the fiscal year are recorded.
e. Provision for directors’ retirement benefits
The Company and certain domestic consolidated subsidiaries provide provision for directors’
retirement benefits to adequately cover payment of such benefits at the end of the applicable
period in accordance with internal regulations.
f. Provision for point card certificatesIn order to provide for the usage of points granted to customers under the point system, theestimated future usage amount for the end of the fiscal year ended March 31, 2014 has beenrecorded.
⑤ Accounting method for retirement benefitsa. Attribution method for projected retirement benefits
In calculating retirement benefits obligations, straight-line 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, 2014.
b. Treatment of actuarial gains and losses and prior service costs
Past service costs are amortized equally over certain number of years (10 years in principle)
within the average remaining years of service for the employees at the time of accrual, or are
charged to income collectively at the time of accrual. Actuarial gains and losses areamortized by the straight-line method over certain number of years (10 years in principle)
within average remaining years of service for the employees at the time of accrual in eachfiscal 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.
(Changes in accounting policies)
The “Accounting Standard for Retirement Benefits” (Accounting Standard Board of Japan“ASBJ” Statement No. 26, May 17, 2012; the “Standard”) and the “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012; the “Guidance”)
were adopted from the end of the fiscal year ended March 31, 2014 (except for provisions set
in the main clause of Paragraph 35 of the Standard and Paragraph 67 of the Guidance) tochange the method to the new one by which retirement benefit obligations less pension
assets are recognized as net defined benefit liability, and unrecognized actuarial differences
and prior service costs were recognized as net defined benefit liability.
The application of the Standard, etc. follows the transitional rules set in Paragraph 37 of theStandard, and adjustments associated with this change are recorded in accumulated othercomprehensive income as of the end of the fiscal year ended March 31, 2014.
As a result, ¥6,053 million has been recorded in net defined benefit liability at the end of the
fiscal year ended March 31, 2014. In addition, deferred tax assets have decreased ¥322
million, and accumulated other comprehensive income has increased ¥2,504 million.
Meanwhile, the impact on per share information is stipulated in the relevant section.
⑥ Accounting for significant hedge
a. Hedge accounting
The Company 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 foreign exchange forward contracts.
b. Hedging instruments and hedged items
Hedging instrument: Currency swaps, Interest rate swaps, foreign currency forward contracts
Hedged item: Interest on debts, receivables and payables denominated in foreign currencies
c. Hedge policy
Derivative instruments are used to mitigate risks associated with foreign currency exchange
and interest rate fluctuations.
As a rule, hedging is only used for items in which actual demand exists, and not for
speculative purposes.
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d. Evaluation of hedge effectivenessHedge effectiveness is evaluated through comparative analysis of the cumulative fluctuationsin the market between the hedged item and 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 for hedged items are
the same and these transactions are deemed to offset the market fluctuations. Evaluation ofhedge effectiveness at fiscal year-end is omitted also for interest rate swap transactions
applied to special treatment.
⑦ Amortization method and period of goodwill
If the duration of the effect of goodwill can be rationally estimated, amortization is made overthe estimated number of years. In other cases, amortization is made over a five-year-period by
the straight line method.
⑧ Accounting method for consumption taxes
Consumption taxes and local consumption taxes are accounted using the net-of-tax method,and non-deductible consumption taxes and local consumption taxes on assets are posted mainly
as expenses for the fiscal year ended March 31, 2014.
⑨ Application of the Consolidated Taxation System
The Company applied the Consolidated Taxation System.
(5) Changes in Presentation① Consolidated Statement of Income“Loss on retirement of noncurrent assets” that was included in “other” under non-operating
expenses for the previous fiscal year (¥232 million for the previous fiscal year) has now
exceeded 10% of the amount of total non-operating expenses, and is therefore separately
itemized beginning from the fiscal year ended March 31, 2014.
(6) Additional information
The “Partial Amendment of the Income Tax Act” (Act No. 10 of 2014) was officiallyannounced on March 31, 2014 and the special corporate tax for reconstruction will no longer
be imposed on consolidated fiscal years beginning on or after April 1, 2014. As a result, netdeferred tax assets by the end of the fiscal year ended March 31, 2014 have decreased by¥1,429 million, income taxes-deferred have increased by ¥1,459 million.
II

Notes to Consolidated Balance Sheet(1) Accumulated depreciation of property, plant and equipment¥167,870 million(2) Assets pledged
Assets pledged
Buildings / Structures
Land¥212 million¥210 million

Covered for liabilities
Short − term loans payable¥350 million(3) Revaluation of Land
Consolidated subsidiary SEGA CORPORATION has revalued land for commercial use, pursuant
to Japan’s Law Concerning Revaluation of Land (Law No. 34, March 31, 1998) and Amendments
to the Law Concerning Revaluation of Land (Law No. 19, March 31, 2001). SEGA has recorded an
item for the revaluation reserve for land under net assets.
Revaluation method
SEGA CORPORATION computed the value of land based on the methodology regarding rational
adjustments to valuation of fixed assets stipulated in Article 2-3, and appraisals by licensed realestate appraisers prescribed in Article 2-5 of the Enforcement Ordinance No. 119 (March 31, 1998)
pertaining to the Law Concerning Revaluation of Land.
Date of the revaluation

March 31, 20028

(4) Outstanding balance of overdraft account:
Outstanding balance of commitment line:¥40,925 million¥20,000 million

III Notes to Consolidated Statement of Income(1) The book value devaluation of inventories held for normal sales purpose based on decline inprofitability.
Cost of sales¥3,885 million(2) R&D expenses included in general and administrative expenses and this fiscal year’s production
expenses¥40,070 million(3) Breakdown of major extraordinary items① Breakdown of gain on sales of noncurrent assets
Buildings and structures¥521 millionLand¥2,299 million
Other property, plant and equipment¥12 million
Other Intangible assets¥751 million
Total¥3,585 million② Breakdown of loss on sales of noncurrent assets
Buildings and structures¥4 million
Other property, plant and equipment¥4 million
Total¥9 million③ Loss on liquidation of subsidiaries and affiliates was recognized mainly by realization offoreign currency translation adjustment resulted from the completion of the liquidation of someof the subsidiaries in the UK and the U.S.
④ Breakdown of impairment loss.
(Unit: millions of yen)Type
Impairment loss
Buildings and structures
51
Shibuya-ku, Tokyo Other property, plant and equipment
91
Assets forand 6 otherbusiness, etc. locations
Other intangible assets
175
Land
1
Buildings and structures
543
799
Amusement Minato-ku, Tokyo Amusement machines and facilities
and 2 otherfacilities
Other
property,plant
andequipment
118
locations
Other intangible assets
17
Total
1,799
Use

Location

For each business segment, the Group classifies assets or asset groups based on whether
their cash flows can be estimated independently. If the market value of any asset or asset
group has decreased conspicuously or it is expected to continuously generate negative cash
flow from operations, its book value is reduced to its recoverable value, and such reduction
is recorded as an impairment loss under extraordinary loss.

9

IV Notes to Consolidated Statement of changes in Net Assets(1) Issued Stock
Type of stock
Common stock

As of April 1,
2013
266,229,476

Increase

Decrease−−(Unit: shares)
As of March 31,
2014
266,229,476(2) Treasury Stock
As of April 1,
Type of stock
Increase
2013
Common stock
24,169,675
21,851(Outline of Causes of Change)
The causes of the increase are as follows:
Increase due to repurchase of fractional shares
The causes of the decrease are as follows:
Decrease due to exercise of stock option
Decrease due to request to purchase fractional
shares(Unit: shares)
As of March 31,
201422,627,725

Decrease
1,563,801

21,851 shares
1,562,900 shares
901 shares(3) Dividends① Dividend AmountResolution
Board of Directors’Meeting on
May 10, 2013
Board of Directors’Meeting on
November 1, 2013

Type of
Stock

Total
Dividend
dividend per share(¥ million)(¥)

Record date

Effective dateCommon
stock

4,841

20

March 31, 2013

May 28, 2013

Common
stock

4,860

20

September 30,
2013

December 2,
2013② Of the dividends of which the record date is in the fiscal year ended March 31, 2014, but
the effective date is in the following fiscal year.
Type of
Stock

Resourceof dividend

Board of Directors’CommonMeeting on May 9,
Stock
2014

Retained
Earnings

Resolution

Total
Dividend
dividend per share(¥ million)
(¥)
4,872

20

Recorddate

Effective
date

March 31,2014

May 28,2014(4) Number and type of shares to be issued upon exercise of subscription rights to shares (except
for the ones before the first day of the exercisable period) as of the end of the fiscal year ended
March 31, 2014.
Common stock: 1,261,200 shares

10

V Notes on the Financial Instruments(1) Matters regarding the current status of financial instruments
The Group’s signed an agreement concerning commitment lines by the syndicated method,such as securing medium- to long-term fund liquidity with the Company as a holding company,
as a safety net for the entire Group. In addition, capital for each business is financed based on
the financial plan as needed, through bank borrowing or bond issue applying CashManagement System for the purpose of the efficient utilization of the Group funds. Funds areinvested in low-risk financial assets. Derivatives are used, not for speculative purposes, but tomanage exposure to financial risks as described later.
Credit risks of the clients in terms of notes and accounts receivable - trade are mitigated under
the credit management rules, etc. at each Group company.
The Group’s credit risk exposure in held-to-maturity debt securities is minimal, as its
investment in this area is restricted to highly rated debt securities only according to the capitalmanagement rules, etc. at each Group company.
Available-for-sale securities are mainly stocks and the relevant information such as market
prices of those stocks and financial conditions of the issuing companies (business partners) isreviewed and reported to the board of directors of each Group company, etc. on a regular basis.
For securities other than held-to-maturity debt securities, holding status is continually reviewed
in consideration of the relationship with business partners that issue those stocks.
Borrowings as well as bonds is intended to secure funds necessary for the purpose of working
capital and capital expenditures and diversify means for procuring funds. Each Group company
reviews its own actual and projected cash position on a monthly basis, which is eventually
verified collectively by the Company as part of the Group’s liquidity risk management.
The Group’s derivative transactions are restricted to forward exchange contracts as hedge
against currency fluctuation risks on its foreign currency-denominated operating receivables
and debt as well as foreign currency-denominated loans receivable, and interest rate swap
agreements to mitigate interest rate risks on part of the Group’s variable interest rate loans
payable. These transactions are executed and managed mainly by the financial department or
the accounting department upon obtaining internal approvals in compliance with the derivativetransactions management rules, etc. of each Group company. Furthermore, reports on the statusof the derivative transactions are made to the Board of Directors at each company asappropriate.
(2) Matters regarding the market value etc. of financial instruments
Consolidated balance sheet amounts and market values of the Group’s financial instruments
and the difference between the two as of the end of the fiscal year ended March 31, 2014 are as
follows. Market values of financial instruments named in Note 2 below are extremely difficult
to grasp, thus are not included in the following list.
(Unit: millions of yen)
Consolidated balanceMarket value Difference
sheet amount(1) Cash and deposits
101,220
101,220－(2) Notes and accounts receivable - trade
48,10848,092(16)(3) Short-term investment securities andinvestment securities
1) Held-to-maturity debt securities
2,061
2,048
(13)
2) Available-for-sale securities (*1)
144,820
144,820－3) Stocks of affiliates
832
707
(125)
(4) Notes and accounts payable - trade37,29237,292－(5) Short-term loans payable
12,91812,918－(6) Long-term loans payable
35,19835,11582(7) Current portion of bonds
1,700
1,700
－
(8) Bonds payable
37,80037,922(122)(9) Derivative transactions (*2)
1) Transactions outside the scope ofhedge accounting
(0)
(0)
－
2) Transactions subject to hedge
accounting
3
3
－
11

(*1) Since market values of embedded derivatives cannot be reasonably categorized andmeasured, those of the entire composite financial instruments are evaluated, andincluded in investment securities.
(*2) Receivables and payables incurred by derivative transactions are presented in net
amounts.
Notes: 1 Matters regarding the methods to calculate the market values of financial instruments
and securities and derivative transactions(1) Cash and deposits; and (2) Notes and accounts receivable - trade
Of these, items that are settled in the short term (within a year) are recorded usingbook values, as their market values approximate book values. In addition, ofnotes and accounts receivable - trade, those which more than a year to the payment
date from the end of the fiscal year ended March 31, 2014 are stated at the present
values by discounting the amount of claim for each receivable with the interest rate
calculated by the payment period and credit risk.
(3) Short-term investment securities and investment securities
The market values of stocks are determined using the quoted price at the stock
exchange, and those of debt securities are determined using the quoted price at thestock exchange or the quoted price obtained from the financial institutions. In
addition, negotiable certificates of deposit included in available-for-sale securities
are recorded using book values, as they are settled in the short term (within a year)
and their market values approximate book values.
(4) Notes and accounts payable – trade; (5) Short-term loans payable; and (7) Current
portion of bonds
Of these, items that are settled in the short term (within a year) are recorded usingbook values, as their market values approximate book values. Of the short-termloans payable, market values of the loans hedged by interest rate swap contracts
meeting certain conditions are calculated applying the special treatment by
combining them with the relevant interest rate swap.
(6) Long-term loans payable; and (8) Bonds payable
These are stated with the present values calculated by discounting the aggregatedvalues of the principal and interest using an assumed interest rate if loans are
newly made. Of the long-term loans payable, fair values of the loans hedged byinterest rate swap contracts meeting certain conditions are calculated applying thespecial treatment by combining them with the relevant interest rate swap.
(9) Derivative transactions
Market values of these are the prices quoted by the counterparty financial
institutions. Meanwhile, certain derivative transactions such as forward exchange
contracts subject to allocation hedge accounting are treatment on a combined basiswith the receivables and payables that are hedged; therefore, their fair values arepresented as part of the fair values of such receivables and payables.
2 Financial instruments whose market values are not readily determined
Consolidated balance sheet amount(Millions of yen)
1,504

Category

Investment in unlisted stocks, etc.
Investment in investment limited
2,217
partnerships, etc.
Stocks of non-consolidated subsidiaries
2,265
Stocks of affiliates
14,682
Investment in affiliates
155
Items above are not included in “(3) Short-term investment securities and investment
securities,” because there is no market price, future cash flows cannot be estimated and12it is very difficult to identify market values.
VI

Note Regarding Investment and Rental Property
Status and market value of investment and rental property
This disclosure is omitted due to the immateriality of the total amount of the investment and rental
property.

VII Note Regarding Per Share Information
Net assets per share¥1,409.27
Net income per share¥126.42
As stated in changes in accounting policies, the “Accounting Standard for Retirement Benefits” (the“Standard”) and the “Guidance on Accounting Standard for Retirement Benefits” were adopted andthe application of the Standard, etc. follows the transitional rules set in Paragraph 37 of theStandard.
As a result, net asset per share of the fiscal year ended March 31, 2014 increased by ¥10.28.
VIII Note Regarding Material Subsequent Events
There is no pertinent matter.

13

3. Individual Notes
I

Notes Regarding Material Matters Related to Accounting Policies
1. Valuation standards and accounting treatment for assets(1) Valuation standards and methods for securities① Stocks of subsidiaries and affiliates are stated at moving-average cost.
② Available-for-sale securities
Securities with fair market value are stated at fair market value. The difference between
acquisition cost and market value is accounted for as net unrealized holding gains or losses on
securities in net assets, with cost of sales determined by the moving average method.
Securities without fair market value are stated at moving-average cost.
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 of the Financial Investment and Exchange Law of Japan, is calculated based on therelevant financial statements for the partnership available as of the reporting date stipulated in
the partnership agreement.
2. Depreciation and amortization of noncurrent assets(1) Property, plant and equipment
Depreciation is calculated by the straight-line method.
Useful life for primary assets is as follows:
Building: 2 - 50 years
Structure: 2 - 47 years
Aircraft:
8 years
Tools/Furniture: 2 - 13 years(2) Intangible assets
Amortization is calculated using the straight-line method. The straight-line method is adopted overthe useful life of within five years for Software for internal use.
3. Accounting for provisions(1) Allowance for doubtful accounts
The reserve for doubtful accounts is provided in amount sufficient to cover possible losses.
Allowance for doubtful accounts is calculated on an individual assessment of the possibility ofcollection.
(2) Provision for bonuses
Accrued employees’ bonuses are provided based on the estimated amount to be paid.
(3) Provision for directors' bonuses
The estimated amount of bonuses was recorded to meet the bonus payments to Directors andCorporate Auditors.
(4) Provision for retirement benefits
The liability for retirement benefits is based on the estimated amount of benefit obligations at theend of the fiscal year.
4. Accounting for hedge(1) Accounting for hedge
Allocation hedge accounting is used for qualifying currency swap transactions, while special
treatment is applied to qualifying interest rate swap transactions.
(2) Hedging instruments and hedged items
Hedging instrument: Currency swaps, Interest rate swaps
Hedged item: Foreign currency-denominated loans payable and associated interest14(3) Hedge policy
The Company engages in currency swap transactions with the purpose to avoid risks associatedwith foreign exchange fluctuations of loans payable, along with interest rate swap transactions withthe purpose to avoid risks associated with interest rate fluctuations of loans payable. The Company
has a policy not to engage in speculative derivative transactions.
(4) Evaluation of hedge effectivenessEvaluation 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 for hedged items
are the same and these transactions are deemed to offset the market fluctuations. Evaluation ofhedge effectiveness at fiscal year-end is omitted also for interest rate swap transactions as they
adopt special treatment.
5. Other material matters that form the basis of accounting documents(1) Accounting method for consumption taxes
Consumption taxes and local consumption taxes are accounted using the net-of-tax method, andnon-deductible consumption taxes and local consumption taxes on assets are posted mainly as
expenses for the fiscal year ended March 31, 2014.
(2) Application of the Consolidated Taxation System
The Company applied the Consolidated Taxation System.
II

Notes to Balance Sheet(1) Accumulated depreciation of property, plant and equipment ¥1,651 million(2) Guaranteed obligation
Guarantee
SEGA
CORPORATION

Amount¥1,028 million(US $10 million)

Description
Accounts payable- other(3) Receivables from and payables to affiliates
Short-term receivables from affiliates
Short-term payables to affiliates
Long-term receivables from affiliates
III Notes to Statement of Income
Transactions with affiliates
Consulting fee income
Dividends income (Operating revenue)
SG&A expenses
Non-operating transactions¥19,098 million¥23,441 million¥19,381 million¥5,440 million¥10,171 million¥75 million¥313 million

IV Notes to Statement of Changes in Net Assets
Number and type of Treasury stock as of the end of the fiscal year ended March 31, 2014
Common stock
22,627,725 shares

15

V

Notes Regarding Tax Effect Accounting(1) Significant components of deferred tax assets and deferred tax liabilities(Unit: millions of yen)
Deferred tax assets
Loss carried forward
1,752
Exclusion from the deductible expenses of provision45
for bonuses
Exclusion from the deductible expenses of Provision775
of allowance for doubtful accounts
Exclusion from the deductible expenses of loss on
5,283
valuation of investment securities
Disallowed portion of loss on investments in213
partnership
Valuation difference on available-for-sale securities
67
Other
163
Subtotal deferred tax assets
8,301
Valuation allowance(8,213)
Offset against deferred tax liabilities(1)
Total deferred tax assets
86
Deferred tax liabilities
Valuation difference on available-for-sale securities
Subtotal deferred tax liabilities
Offset against deferred tax assets
Total deferred tax liabilities
Deferred tax liabilities, net(8,837)(8,837)1(8,836)(8,749)(2) Breakdown by major causes of the significant difference between the statutory tax rate and theeffective tax rate for financial statement purposes, if any, by item.
Normal effective statutory tax rate
(Adjustment)
Permanently non-deductible expenses including
entertainment expenses
Amount excluded from gross revenue such as dividend
incomeChanges in valuation allowance
Other
Effective tax rate after tax effect accounting

38.0%
1.8%
(22.2 %)
(2.9%)
0.9%
15.7%(3) Amendments to deferred tax assets and deferred tax liabilities due to changes in income tax rate
The “Partial Amendment of the Income Tax Act” (Act No. 10 of 2014) was officially announced on
March 31, 2014 and the special corporate tax for reconstruction will no longer be imposed on
consolidated fiscal years beginning on or after April 1, 2014. Following this change, effective
statutory tax rate used to calculate deferred tax assets and deferred tax liabilities for the fiscal year
ended March 31, 2014 (those which will be reversed in the fiscal years beginning on or after April
1, 2014) has been changed to 35.64% from 38.01% for the previous fiscal year. As a result,deferred tax assets at the end of the fiscal year ended March 31, 2014 (after deduction of deferred
tax liabilities) decreased by ¥8 million, while income taxes-deferred increased by ¥8 million.

16

VI Notes Regarding Transactions with Related Parties(1) Subsidiaries and Affiliates(Unit: millions of yen)Type

Subsidiary

Name of thecompany

Sammy
Corporation

Votingrights Relationship(%)

Management
guidance to the
100.0
company,
interlocking
directorate

Transaction
Description of theamounttransactions(Note 1)

Accounts

Balance at
end offiscal year

Consulting fee
income(Note 2)

3,644

Accounts
receivabletrade318

Consolidated
taxation system－

Accounts
receivableother

12,584

Repayment ofloans payable
Reception ofdeposits(Note 3)
Payment ofinterests(Note 4)
Consulting fee
income(Note 2)

Lending of funds

10,000－

Short-term loans
payableDeposits
received

－
5,648

11

－

－

1,795

Accounts
receivabletrade157

15,000Management
guidance to the
SEGA
100.0
company,
Subsidiary
CORPORATION
interlocking
directorate

Short-term loans
receivable fromsubsidiaries andaffiliates

2,140

Long-term loans
receivable fromsubsidiaries andaffiliates

12,86013,038

Consolidated
taxation system－

Accounts
payableother

Reception ofinterests(Note 4)99

Accrued interest

99

Sega Sammy
Resort Limited
Liability
Subsidiary
Partnership(Note 5)－－Acquisition ofshares in affiliates(Note 6)

4,917

－

－

PARADISESEGASAMMY
Co., Ltd.

45.0－

Undertaking of
the increase ofcapital(Note 7)

6,568

－

－

affiliate

Notes: 1. Consumption taxes are not included in transaction amounts.
2. The amount of the Consulting fee income is decided based on the Company’s necessary
expenses.
3. Cash management system transactions are used for the purpose of uniformly andefficiently procuring and managing funds within the Group.
4. Interest is determined with consideration to market interest rates.
5. Completed liquidation on July 30, 2013.
6. Acquisition of shares in affiliates refers to the shares in PARADISE SEGASAMMY Co.,
Ltd., which was conducted at the price calculated using book value method.
7. The Undertaking of capital increase represents the increase in capital through shareholder
allocation.

17

(2) Directors, Key Individual Shareholders, etc.
(Unit: millions of yen)Type

Name of
Votingrelatedrightsindividual and(%)
company

Company
in which
Directors
FSC Co., Ltdor their(Note 2)
relatives own
majority
voting rights

Transaction
Balance atamountAccounts
end of(Note 1)
fiscal year

Relationship

Description of
the transactions

Insurance
representative

Payment of
insurance
premium(Note 3)8

Prepaid
expenses4

Subcontractor

Payment of
subcontracting
fees(Note 3)

10

－

－

5.36

Notes: 1. Consumption taxes are not included in transaction amounts.
2. Hajime Satomi, Chairman of the Board and Chief Executive Officer, directly holds 53%
shares in FSC Co., Ltd.
3. Transaction prices are determined in the same way as for general transactions and withreference to market prices.
VII Note Regarding Per Share Information
Net assets per share
Net income per share¥1,416.29¥62.44

VIII Notes Regarding Material Subsequent Events
There is no pertinent matter.

18