Contents
Page

Corporate Profile

2

Corporate Information and Information for Investors

3

Financial and Operational Highlights

4

Chairman’s Statement

6

Management Discussion and Analysis

8

Corporate Governance Report

13

Profile of Directors and Senior Management

23

Report of the Directors

26

Independent Auditor’s Report

37

Consolidated Statement of Comprehensive Income

43

Consolidated Statement of Financial Position

44

Consolidated Statement of Changes in Equity

46

Consolidated Statement of Cash Flows

47

Notes to the Consolidated Financial Statements

48

Corporate Profile
株式会社ニラク▪ジー▪シー▪ホールディングス NIRAKU GC HOLDINGS, INC.* (“NIRAKU” or the “Company”, Hong
Kong stock code: 1245, together with its subsidiaries, the “Group”) is a leading pachinko hall operator in Fukushima
Prefecture in Japan, and has over 60 years of pachinko hall operation experience. The Company was listed on the Main
Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 8 April 2015 (the “Listing Date”).
Since the opening of the first pachinko hall in 1950, NIRAKU has been aiming in bringing enjoyable experience tocustomers, which forms our slogan of “Happy Time, Creation”.
NIRAKU has a strong pachinko hall network with 53 halls at present, stretching from Tokyo Metropolitan Area to
Northeast Honshu, equipped with over 27,900 pachinko and pachislot machines serving customers in ten prefectures inJapan.

2

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Corporate Information and Information for Investors
CORPORATE INFORMATION
Executive Directors

Mr. Hisanori TANIGUCHI (Chairman)
Mr. Akinori OHISHI
Mr. Masataka WATANABE

Non-Executive Director

Mr. Hiroshi BANNAI

Independent Non-Executive Directors

Mr. Michio MINAKATA
Mr. Yoshihiro KOIZUMIMr. Kuraji KUTSUWATA

Audit Committee

Mr. Michio MINAKATA (Committee Chairman)
Mr. Hiroshi BANNAI
Mr. Yoshihiro KOIZUMIRemuneration Committee

Mr. Yoshihiro KOIZUMI (Committee Chairman)
Mr. Michio MINAKATA
Mr. Hisanori TANIGUCHI

Nomination Committee

Mr. Hisanori TANIGUCHI (Committee Chairman)
Mr. Michio MINAKATA
Mr. Yoshihiro KOIZUMIINFORMATION FOR INVESTORS
Principal Bankers

Mizuho Bank, Ltd.
Sumitomo Mitsui Bank Corporation
The Toho Bank, Ltd.

AuditorPricewaterhouseCoopers
Certified Public Accountants
Registered Public Interest Entity Auditor

Legal Adviser

Deacons

Share Registrar

Computershare Hong Kong Investor Services Limited
Shops 1712–1716
17/F Hopewell Centre
183 Queen’s Road East
Wan Chai, Hong Kong

Principal Place of Business in Hong Kong

805B, 8/F, Tsim Sha Tsui Centre
66 Mody Road, Tsim Sha Tsui
Kowloon, Hong Kong

Headquarter in Japan and Registered Office

1-1-39 Hohaccho
Koriyama-shi, Fukushima
Japan 963-8811

Stock Code

1245

Investor and Media Relations Consultant

Strategic Financial Relations Limited

Websitewww.ngch.co.jp

Investor Relation Inquiry

e-mail: niraku@sprg.com.hk

NIRAKU GC HOLDINGS, INC.

Annual Report 20203

Financial and Operational Highlights
The following table summarises the results of the Group for the financial years ended 31 March 2020, 2019, 2018, 2017and 2016.

2020¥ million HK$ million

For the year ended 31 March
2019
2018
¥ million HK$ million¥ million

2017¥ million

2016¥ million

139,053(114,046)

9,911(8,129)141,731(115,850)

10,023(8,193)

138,493(113,230)

143,130(114,734)

158,095(127,900)

25,007

1,782

25,881

1,830

25,26328,39630,195

1,663
1,376

119
98

1,535
909

109
64

417
874

N/A
784

N/A
800

Revenue

28,046

1,999

28,3252,003

26,55429,18030,995

Hall operating expenses
Administrative and otheroperating expenses
Profit before income tax
Profit/(loss) attributable to theshareholders of the Company(21,910)(1,562)(22,875)(1,618)(22,640)(24,110)(25,207)(5,655)
581

(403)
41

(4,502)
1,093

(318)
77

(3,918)213(4,391)902(4,815)
633

179

13

610

43

(15)

492

181

Earnings/(loss) per share(expressed in Japanese Yenor Hong Kong dollar)

0.150

0.011

0.510

0.036

(0.013)

0.41

0.15

Overall revenue margin

18.0%

–

18.3%

–

18.2%

19.8%

19.1%

Net (loss)/profit margin(0.50%)

–

1.9%

–

(0.2%)

1.7%

0.6%

Gross pay-ins
Gross pay-outs
Revenue from pachinko andpachislot business
Revenue from amusement
arcade business
Other revenue

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Annual Report 2020

Financial and Operational Highlights

2020¥ million HK$ million
Current assets
Current liabilities
Net current assets
Total assets
Total assets less current liabilities
Gearing ratio

16,092
11,1794,913
81,15869,979
61.2%

1,147
797
350
5,785
4,988
–

As at 31 March2019¥ million HK$ million

2018¥ million

2017¥ million

2016¥ million

16,401
9,770
6,631
54,04344,27370.9%

17,3638,815
8,548
52,171
43,35669.6%

15,276
7,210
8,066
49,41342,203
59.1%

15,5978,287
7,310
52,25743,970
72.4%

1,160
691
469
3,822
3,131
–

CURRENCY TRANSLATIONS
For the purpose of illustration only and unless otherwise specified in this annual report, certain amounts denominated inJapanese Yen (“¥”) are translated into Hong Kong dollar (“HK$”) at the rates (as the case may be) described below:
1.

¥14.03 to HK$1.00, the exchange rate prevailing on 31 March 2020 (i.e. the last business day in March 2020);2.

¥14.14 to HK$1.00, the exchange rate prevailing on 29 March 2019 (i.e. the last business day in March 2019).

No representation is made that the amounts in Japanese Yen could have been, or could be, converted into Hong Kong
dollar or vice versa, at such rates or at any other rates on such date or on any other dates.

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

5

Chairman’s Statement
OUR BUSINESS ACTIVITIES AND VISION
Based on our corporate philosophy to make life “Happy,
Enjoyable, and Fun”, our Group aims to create a community thatbrings people together and brings people together with thepeople. In our main core pachinko business, we strive for quality
improvement of operation services based on the perspective of
our customers in order to deliver the greatest excitement andenjoyment. As a result, we were able to gain a higher share thanlast year even the pachinko market is shrinking. On the other
hand, gross pay-ins fell by 1.9% compared to prior year due tothe impact of increase in consumption tax from 8% to 10%,changes in specification of machines in accordance with the new
regulations, and the impact of temporary closure of stores due tolocalized damage caused by Typhoon No. 19 in October 2019.
We acquired the company that is operating amusement arcade
business in Vietnam and Cambodia in November 2017. We
made investments to take an advantage of the growth in thesecountries, including opening of two new “Kids Playground” format
stores. The main target of “Kids Playground” is children at orunder 12 years old and their parents. As a result, operating
revenue rose by 8.3% year-on-year.
As the COVID-19 has spread globally from the beginning of 2020, it is expected that our way of living will be coexistent
with the virus under circumstances after this pandemic. And we imagine that people’s needs, values and behavior will
significantly change after COVID-19 pandemic. However, we look at this shift into a different lifestyle as an opportunity
and we believe that the needs that people seek for fulfilling life of leisure, entertainment and amusement will neverchange as long as people want a better life than one has now. We have confidence to address the need for what people
seek, because we have accumulated invaluable experience in this industry since foundation, which will be advantageous
in business development. We will strive to build existence value in community with our strength by coping appropriately
with social changes, and by doing good in a community.
We will continue to concentrate to build a strong base of operations and make effort to gain customer satisfaction, whichallow us to maintain and improve the competitiveness. In the medium-to-long term, we will continue to seek theentertainment and hospitality in amusement and food businesses, and we will realize the basic philosophy of “we provide
happy time for people by making the world cheerful, fun, and entertaining” by developing this business portfolio.

Pachinko businessIn the pachinko industry, the sign of recovery is still unclear. It is expected that many operators will have to withdraw fromthe market, especially those with less resilience to market change caused by the negative effect of COVID-19 amidst andafter the pandemic. Even in these business environments, we strive to take step further to provide customers with thebest possible services and the best assortment of machines through hearing the voice from each customer. Furthermore,
we will continue to improve the business structure in order to provide best service quality. We believe that we will be able
to increase the market share even if these difficult circumstances, decline in gross pay-in caused by the change of themachine regulations, is expected to remain unchanged.
During the year, we acquired a property that has a capacity of more than 1,000 machines in our main market Koriyama
city in Fukushima Prefecture in order to strengthen our base and achieve competitive advantage. We are aiming tocommence the business in the mid-2020.

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Annual Report 2020

Chairman’s Statement
Amusement arcade business (Dream Games)
Dream Games is currently operating gaming arcades in Vietnam and Cambodia, which are extremely fast-growing
countries with high potential and young people, which is an advantage to leisure and entertainment business.
Dream Games’ outlets mainly focused in popular shopping malls, like Aeon Mall, with strong ability to attract customers.
During the year, Dream Games opened four new outlets in Vietnam, among which, two are under the mode of “kidsplaygrounds” targeting children aged 12 and under in order to meet the diversified needs of leisure. As at 31 March 2020,
Dream Games operated eleven outlets in Vietnam, including four Kids’ Playground; and two outlets in Cambodia, with a
total of thirteen outlets.
Dream Games will continue to strive to raise its awareness on the expansion trend in the leisure market in both countries
and build up on the existing business.

Food business
Including the new “LIZARRAN” restaurant that opened in Tokyo in October 2019, we currently have four restaurants
arranged under a franchise agreement with Comess Group, a Spain-based restaurant developer that operates many
restaurants primarily in Europe.
In July 2019, we opened a food mall named “YOKOCHO” which consists of famous Japanese restaurants in Shenzhen
Upper Hills, an urban complex centre in Shenzhen, China. YOKOCHO business is temporarily suspended due to
COVID-19 pandemic, and will resume its business at an appropriate time.

eSports business
In November 2018, we stepped in the eSports business through a 40% equity investment in a company named Yes!
E-Sports Asia Holdings Limited (YEAH), which is jointly established with a Hong Kong partner. During the year, YEAH
actively organized various promotional events with the aim of raising awareness, establishing a business model, andworking to increase the value of the YEAH brand.
We will build a unique “eSports + entertainment” platform and plan to provide new entertainment in the future.

Impact of COVID-19 pandemic and management initiatives
In response to the COVID-19 pandemic, the Japanese government declared a state of emergency on 7 April 2020, andeach local government issued a request to specific industries, including the pachinko hall business, asking them to refrainfrom undertaking sales activities. In response to this request, the Group temporarily suspended all 53 pachinko outlets on
25 April 2020, and gradually started resuming operations from 7 May 2020.
In addition, with the request from Vietnamese government, 11 outlets of the Dream Games business in Vietnam were under
temporarily closure on 26 March 2020. These outlets have been gradually reopened since 8 May 2020, while the two outlets
in Cambodia which were closed since 14 May 2020 were still under suspension as at date of this annual report.
The temporary closures of domestic and overseas operations have a significant impact on the Group’s financial position
and business activities. Despite our businesses resumption since 7 May 2020, the uncertainties surrounding the businessenvironment as a result of the outbreak of the COVID-19 has a significant impact on our future business performanceand financial position.
In preparation for future uncertainties, we will maintain a healthy cash flow and financial position and has sufficient cash
to meet its business needs. In addition, we plan to move ahead with structural reforms.
The year ahead continues to be challenging and severe as the movement of people and supply chains are significantlyinterrupted as a result of the COVID-19 pandemic. In light of the adverse impact to the business performance, we will adopt
prudent measures and exercise our strength of resilience to deliver a stable performance and ensure business continuity.

NIRAKU GC HOLDINGS, INC.

Annual Report 20207

Management Discussion and Analysis
FINANCIAL REVIEWRevenue from Pachinko and Pachislot Business
Revenue from pachinko and pachislot is derived from gross pay-in netted with gross pay-out.
Revenue from pachinko and pachislot business recorded a decrease of ¥874 million, or 3.4%, from ¥25,881 million in2019 to ¥25,007 million in 2020. The decline was mainly attributable to the (i) closure of two loss-making halls during theyear ended 31 March 2019 and (ii) introduction of new gaming regulation requiring all pachinko hall operators to replace
the higher jackpot size pachinko and pachislot machines with new lower jackpot size machines which chased away thehall traffic as these new machines are less popular among the players.
Gross pay-ins
For the year ended 31 March 2020, the Group’s gross pay-ins from pachinko and pachislot business amounted to¥139,053 million, comprising revenue from suburban halls of ¥132,706 million (2019: ¥135,064 million) and urban halls of¥6,347 million (2019: ¥6,667 million), representing a drop of ¥2,358 million, or 1.7%, and drop of ¥320 million, or 4.8%,
respectively, as compared to last year. The overall decrease was mainly generated from closure of two pachinko halls in2019 as mentioned above.
Gross pay-out
Gross pay-out decreased from ¥115,850 million in 2019 to ¥114,046 million in 2020, a drop of ¥1,804 million, or 1.6%,
which mirrored the fall of pay-out ratio to improve revenue.
Revenue margin
The revenue margin in current year decreased by 0.3% from 18.3% in 2019 to 18.0% in 2020. The decline in revenue
margin was due to slight increase in pay-out ratio to improve customer visits.

Revenue from Amusement Arcade Business
Revenue from amusement arcade business increased from ¥1,535 million in 2019 to ¥1,663 million in current year. The
amount comprised revenue derived from Vietnam and Cambodia amounting to ¥1,292 million and ¥371 million,
respectively (2019: ¥1,274 million and ¥261 million, respectively). The increase in revenue was attributable to opening ofa new amusement centre in January 2019 and four more centres during the year ended 31 March 2020 which generated
additional income of ¥15 million and ¥56 million, respectively, together with continuous growth in each game centre.

Other revenue
Other revenue represents incomes from vending machines, hotel and restaurant operations.
Vending machines income amounted to ¥480 million in 2020. The decrease of ¥27 million as compared to ¥507 million in2019 was resulted from decrease in number of vending machines.
Revenue from hotel operations amounted to ¥143 million with an average occupancy rate of 66.5%. Income derived fromhotel operation achieved an increase of 8.3% as a result of rise in occupancy rate.
Revenue from restaurant increased from ¥270 million in 2019 to ¥753 million in 2020. The hike was due to the opening of
one Lizarran restaurant, two Komeda Cafés in pachinko halls close to the 2019 financial year end and commencement of
YOKOCHO business in July 2019 which generated additional revenue of ¥26 million, ¥80 million and ¥304 million,
respectively.

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Management Discussion and Analysis
Hall operating expenses
Hall operating expenses decreased by ¥965 million, or 4.2%, from ¥22,875 million in 2019 to ¥21,910 million in current
year. Major components of hall operating expenses are pachinko and pachislot machine expenses, staff cost for hall staff
and depreciation expenses, amounting to ¥6,692 million, ¥5,542 million and ¥4,384 million, respectively, in 2020 (2019:¥6,971 million, ¥5,510 million and ¥2,902 million, respectively).
The decline in hall operating expenses was mainly resulted from drop in pachinko and pachislot machine expenses
netted with the effect of adoption of IFRS 16 Leases which led to an increase in depreciation expense and corresponding
drop in rental expenses.

Administrative and other operating expenses
Administrative and other operating expenses increased by ¥1,153 million, or 25.6% from ¥4,502 million in 2019 to ¥5,655
million in current year. The increase in expenses was due to (i) increase in staff costs subsequent to opening of
YOKOCHO restaurants in China which requires employees to fill up different posts, (ii) increase in provision for
impairment loss of ¥687 million, and (iii) increase in depreciation expense and corresponding drop in rental expenses asa result of adoption of IFRS 16 Leases.

Finance costs
Finance costs, net recorded a surge of ¥919 million, or 202.0%, from ¥455 million in 2019 to ¥1,374 million in current
year. The drastic increase was resulted from the adoption of IFRS 16 Leases which caused a significant amount ofinterest expenses from lease liabilities being recognised in current year.

Profit attributable to owners of the Company, basic earnings per share and dividend
Profit attributable to shareholders of the Company of ¥179 million was recorded in current year, as compared to ¥610
million in 2019. The decrease was mainly due to increase in provision for impairment loss during the year.
Basic earnings per share was ¥0.150 (2019: ¥0.510). The board (the “Board”) of directors (the “Directors”) of theCompany has resolved not to declare a final dividend for the year ended 31 March 2020 (2019: ¥0.07 per share).

CAPITAL STRUCTURE
The Group principally meets its working capital and other liquidity requirements through a combination of capital
contributions, including cash flow from operations and bank borrowings. The Group’s daily operation is mainly financedby operating cash flows, and relies on short- and long-term borrowings for financing working capital, future expansion
plans and unexpected needs. The Group’s treasury objective is mainly to ensure there is sufficient cash flow to meet thepayment of expenses, loans and to fund any capital expenditure and commitment that the Group may have from time totime. The Group’s cash surpluses are placed in short-term and long-term fixed deposits to maintain liquidity. The Group
has not experienced any difficulty in repaying its borrowings.
The Group’s principal business activities are carried out in Japan, with income, expenditure, assets and liabilities mainly
denominated in Japanese Yen, as such, the Group does not have any material foreign exchange exposure.

NIRAKU GC HOLDINGS, INC.

Annual Report 20209

Management Discussion and Analysis
The table below sets forth the information regarding the cash and cash equivalents, bank deposits, bank borrowings,
obligations under finance leases, working capital, total equity and gearing ratio of the Group as at 31 March 2020 and
2019, and operating cash flows before movements in working capital of the Group for the years ended 31 March 2020
and 2019, respectively:
As at 31 March

Cash and cash equivalents
Bank deposits

Bank loans
Syndicated loans
Lease liabilities (Note 1)

Working capital (Note 2)
Total equity
Gearing ratio2020¥ million

2019¥ million

14,128750

15,17643

14,87815,219

4,792
8,294
2,701

4,294
11,7883,420

15,787

19,502

4,913
25,79961.2%

6,631
27,51170.9%

Note 1: The balances only include leases under hire purchase arrangement.
Note 2: Working capital being current assets less current liabilities.

For the year ended 31 MarchOperating cash flows before movements in working capital2020¥ million

2019¥ million

7,122

4,278

Net current assets of the Group totalled ¥4,913 million as at 31 March 2020 (31 March 2019: ¥6,631 million), and current
ratio was 1.44 as at 31 March 2020 (31 March 2019: 1.68). As at 31 March 2020, there were cash and cash equivalentsof ¥14,128 million (31 March 2019: ¥15,176 million), in which ¥12,854 million was denominated in Japanese Yen, ¥856
million was denominated in United States dollar, ¥250 million was denominated in Hong Kong dollar and ¥168 million
was denominated in other currencies. Excluding the impact on adoption of IFRS 16 Leases, the Group had totalborrowings of ¥15,787 million as at 31 March 2020 (31 March 2019: ¥19,502 million). Current portion of borrowings andcurrent portion of lease liabilities amounted to ¥3,675 million as at 31 March 2020 (31 March 2019: ¥4,993 million).
The Group’s bank borrowings during the current period comprised bank loans and syndicated loans. As at 31 March
2020, the total bank borrowings amounted to ¥13,086 million (31 March 2019: ¥16,082 million), with average effective
interest rates on bank borrowings ranged from 1.08% to 1.80% (31 March 2019: 0.99% to 1.91%) per annum.
Approximately 10.0% of bank borrowings as at 31 March 2020 were fixed rate borrowings.

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Annual Report 2020

Management Discussion and Analysis
HEDGING OF FLOATING RATE BORROWINGS AND FOREIGN EXCHANGE
As at 31 March 2020, the Group had three floating to fixed interest rate swap contracts with a bank in Japan (i.e. theGroup pays fixed interest rates and receives interests at floating rate). These interest rate swap contracts were enteredinto as a measure to manage interest rate risk in relation to loans of the Group. As interest rates of some of the Group’sloans are on a floating rate basis, the floating to fixed interest rate swap contracts enabled the Group to reduce thevolatility in the amount of interest being paid. For the year ended 31 March 2020, the gain on fair value for interest rate
swap contracts amounted to ¥5 million.
The Group did not carry out any foreign currency investment and its debts were all denominated in Japanese Yen as at
31 March 2020. As the functional currencies of certain subsidiaries are different from the Company, the Group will be
exposed to foreign exchange risk arising from such exposure, namely in Singapore Dollar, Vietnamese Dong, Cambodian
Riel and Renminbi against Japanese Yen. The management is assessing the significance of the foreign currency
exposures faced by the Group and will consider adopting appropriate measures to mitigate the risk, including but notlimited to entering into currency hedges.

GEARING RATIOThe gearing ratio, defined as the aggregate of interest-bearing loans and lease liabilities, divided by total equity, was61.2% as at 31 March 2020 (31 March 2019: 70.9%).

CAPITAL EXPENDITURE
Capital expenditure mainly comprises expenditure for (i) the purchase of property, plant and equipment mainly used forconstruction of buildings, and (ii) the purchase of equipment and tools for the expansion and maintenance of ourpachinko and pachislot hall and amusement arcade operations. The table below shows a breakdown of the capital
expenditure for the indicated periods:
As at 31 March

Property, plant and equipment
Right-of-use assets
Investment properties
Intangible assets

NIRAKU GC HOLDINGS, INC.

2020
¥ million

2019¥ million

1,473
963
–
63

5,084
–
14
83

2,499

5,181

Annual Report 202011

Management Discussion and Analysis
CHARGES ON ASSETS
As at 31 March 2020 and 2019, the carrying values of charged assets were as below:

Property, plant and equipment
Investment properties
Deposits and other receivables

2020¥ million

2019¥ million

10,475630
178

11,050650
18011,283

11,880CONTINGENT LIABILITIESThe Group did not have any material contingent liabilities as at 31 March 2020 and 2019.

CAPITAL COMMITMENTS
Details of the Group’s capital commitments as at 31 March 2020 and 2019 are set out in Note 33 to the consolidated
financial statements.

SIGNIFICANT INVESTMENTS, MATERIAL ACQUISITIONS AND DISPOSALS OF
SUBSIDIARIES, AND FUTURE PLANS FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS
Save for those disclosed in this annual report, the Group had no plan authorised by the Board for other material
investments or additions of capital assets as at the date of this annual report.
There is no important event affecting the Company that have occurred since the end of the financial year.

EMPLOYEES AND REMUNERATION POLICY
As at 31 March 2020, the Group had 1,932 employees. The remuneration policy of the Group (including those fordirectors and employees) is determined by the Remuneration Committee under the Board as per the performance,
qualifications and competence of the employees. Details of the key management remuneration of the Company are set
forth in Note 34(b) to the consolidated financial statements.

FINAL DIVIDENDThe Board has resolved not to declare a final dividend in respect of the year ended 31 March 2020 (2019: ¥0.07 perordinary share).

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Annual Report 2020

Corporate Governance Report
CORPORATE GOVERNANCE
During the year ended 31 March 2020, the Company has adopted and complied with all the applicable principles andcode provisions of the Corporate Governance Code and Corporate Governance Report (the “CG Code”) contained inAppendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing
Rules”), with the exception for code provision A.2.1, which requires the roles of chairman and chief executive to be
separate and should be performed by different individuals, and code provision E.1.3, which requires that notice for anannual general meeting should be sent to the shareholders at least 20 clear business days before the meeting.

Code Provision A.2.1
Under code provision A.2.1 of the CG Code, the roles of chairman and chief executive should be separate and should
not be performed by the same individual. Our Chairman currently holds both positions. Since April 2010, our Chairman
has been the key leadership figure of our Group who has been primarily involved in the formulation of business strategies
and determination of the overall direction of our Group. He has also been chiefly responsible for our Group’s operations
as he directly supervises our executive officers (other than himself) and members of our senior management. Taking into
account the continuation of the implementation of our business plans, the Directors (including our independent nonexecutive Directors) consider our Chairman is the best candidate for both positions and the present arrangements are
beneficial to and in the interests of our Company and our shareholders as a whole.

Code Provision E.1.3
Code provision E.1.3 stipulates that notice for an annual general meeting (the “AGM”) should be sent to its shareholders
by the issuer at least 20 clear business days before the meeting. The AGM of the Company for the year ended 31 March
2019 was held on 27 June 2019 (the “2019 AGM”), while the notice for the 2019 AGM was despatched on 5 June 2019.
The above arrangement complied with the articles of incorporation of the Company (the “Articles of Incorporation”)
prepared pursuant to the Companies Act in respect of the minimum notice period of 21 calendar days (the date ofsending and the date of the meeting shall not be included within this period) for AGM but the notice period for the 2019
AGM was less than 20 clear business days before the 2019 AGM.
Under the Companies Act and the Articles of Incorporation, the Company is required to hold an AGM within three months
after the expiration of each financial year (i.e. on or before 30 June 2019 for the financial year ended 31 March 2019).
The Companies Act also requires the notice for the AGM to be despatched together with the audited financial statements
under the Japanese Generally Accepted Accounting Principles, which must be approved by the Board. On the other
hand, the annual report must contain audited financial statements prepared under the IFRS as required under the Listing
Rules. As a result, more time was required to finalise the annual report which accompanied the AGM notice despatchedto the shareholders of the Company.

BOARD OF DIRECTORSThe Board oversees the management, businesses, strategic directions and financial performance of the Group. The
Board currently comprises a total of seven Directors, with three executive Directors, namely Mr. Hisanori TANIGUCHI,
Mr. Akinori OHISHI and Mr. Masataka WATANABE; one non-executive Director, namely Mr. Hiroshi BANNAI, and three
independent non-executive Directors, namely Mr. Michio MINAKATA, Mr. Yoshihiro KOIZUMI and Mr. Kuraji
KUTSUWATA.

NIRAKU GC HOLDINGS, INC.

Annual Report 202013

Corporate Governance Report(a)Delegation by the Board
The Board reserves for its decision all major matters of the Company, including: approval and monitoring of allpolicy matters, overall strategies and budgets, internal control and risk management systems, material transactions(in particular those that may involve conflict of interests), financial information, appointment of Directors and othersignificant financial and operational matters. The Board is accountable to the Shareholders. Directors could haverecourse to seek independent professional advice in performing their duties at the Company’s expense and areencouraged to access and to consult with the Company’s senior management independently.
The daily management, administration and operation of the Group are delegated to the senior management. The
delegated functions and responsibilities are periodically reviewed by the Board. Approval has to be obtained fromthe Board prior to any significant transactions entered into by the management.

(b) Corporate Governance Function
The Board recognises that corporate governance should be the collective responsibility of Directors which includes:

(c)

(a)

to review and monitor the Company’s policies and practices on compliance with legal and regulatory
requirements;(b)

to review and monitor the training and continuous professional development of Directors and senior
management;(c)to develop, review and monitor the code of conduct and compliance manual applicable to employees andDirectors;(d)to develop and review the Company’s policies and practices on corporate governance and to makerecommendations to the Board and report to the Board on matters;(e)to review the Company’s compliance with the CG Code and disclosure in the corporate governance report;
and

(f)

to review and monitor the Company’s compliance with the Company’s whistleblowing policy.

Appointment and Re-election of Directors
The Board is empowered under the Articles of Incorporation to appoint any person, as a Director, either to fill acasual vacancy or to be an additional member of the Board. Only the most suitable candidates who are experienced
and competent and able to fulfill the fiduciary duties and exercise reasonable care would be recommended to theBoard for selection.
Appointments are first considered by the Nomination Committee in accordance with its terms of reference under
Nomination Policy and Board Diversity Policy. Recommendations of the Nomination Committee are then put forth
to the Board for decision. In accordance with the Articles of Incorporation, all Directors shall retire at the next AGM
but are eligible for re-election. Each Director was appointed by a written service contract setting out the key terms
and conditions of his/her appointment. The appointment of independent non-executive Directors follows theguidelines for assessing independence as set out in Rule 3.13 of the Listing Rules.

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Corporate Governance Report
Chairman and Chief Executive Officer
The Board has appointed a Chairman, Mr. Hisanori TANIGUCHI, who provides leadership for the Board and ensures thatthe Board works effectively and that all important issues are discussed in a timely manner. The Chairman also holds the
position of Chief Executive Officer. Since April 2010, our Chairman has been the key leadership figure of our Group who
has been primarily involved in the formulation of business strategies and determination of the overall direction of ourGroup. He has also been chiefly responsible for our Group’s operations as he directly supervises our executive officers(other than himself) and members of our senior management. Taking into account the continuation of the implementationof our business plans, our Directors (including our independent non-executive Directors) consider our Chairman is thebest candidate for both positions and the present arrangements are beneficial and in the interests of our Company and
our Shareholders as a whole.

Independent Non-Executive Directors
The Company has received annual confirmations of independence from all the independent non-executive Directors inaccordance with Rule 3.13 of the Listing Rules. The Board is of the view that all the independent non-executive Directors
are independent and have appropriate professional qualifications or accounting or related financial management
expertise in accordance with Rule 3.10 of the Listing Rules.
The biographical details of the Chairman and the Independent Non-Executive Directors are set out on page 23 andpages 24 to 25, respectively, of this annual report.
Pursuant to the code provision A.5.6 of the CG Code, listed issuers are required to adopt a board diversity policy. The
Board has adopted the board diversity policy as follows.

Board Diversity Policy
The Company recognises and embraces the benefits of having a diverse Board to enhance the quality of its performance.
The Company formulated a Board Diversity Policy which sets out the approach to a diversity of perspectives among
members of its Board.
With a view to achieving a sustainable and balanced development, the Company sees increasing diversity at the Board
level as an essential element in supporting the attainment of its strategic objectives and its sustainable development. In
designing the Board’s composition, Board diversity has been considered from a number of aspects, including but notlimited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge andlength of service. All Board appointments will be based on meritocracy, and candidates will be considered against
objective criteria, having due regard for the benefits of diversity on the Board.
Selection of candidates will be based on a range of diversity perspectives appropriate to the requirements of theCompany’s business operations and environment as well as the industry in which the Company operates. The ultimate
decision will be based on merit and contribution that the selected candidates will bring to the Board.
Regarding the Board’s current composition, the Board comprises 7 male Directors with different age, length of service
and diversity perspectives, which have been disclosed in biographical information shown in “Profile of Directors andSenior Management” on pages 23 to 25 of this annual report. The Nomination Committee will continuously monitor andreview the implementation and operation of this policy and the progress towards achieving the measurable objectives,and also review this policy to ensure its effectiveness from time to time, as appropriate. The Nomination Committee will
discuss any revisions that may be required, and recommend any such revisions to the Board for consideration andapproval. The policy has been published on the Company’s website for public information.

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Annual Report 202015

Corporate Governance Report
Audit Committee
The Company established the Audit Committee on 25 June 2014 with specific written terms of reference. The Audit
Committee is responsible for assisting the Board in providing an independent view of the financial information of theCompany, effectiveness of our risk management system, financial reporting system and internal control procedures,
overseeing the audit process, internal audit function and performing other duties and responsibilities as assigned by the
Board. The Audit Committee also oversees the corporate governance functions.
The Audit Committee held 14 meetings during the year ended 31 March 2020 to review reports on risk management
system, internal control system and internal audit function of the Group, and to discuss with the management and theexternal auditors the accounting policies and practices which may affect the Group and financial reporting matters. The
Audit Committee reviewed the system of internal control and the financial statements for the year ended 31 March 2020
and interim financial statements for the six months ended 30 September 2019 and with recommendation to the Board forapproval. The audit plans from external auditors were also reviewed by the Audit Committee and recommendation wasmade on the reappointment of the external auditors.
The Audit Committee currently consists of two independent non-executive Directors, namely Mr. Michio MINAKATA (南方美千雄), Mr. Yoshihiro KOIZUMI (小泉義広) and a non-executive Director, namely Mr. Hiroshi BANNAI (坂內弘). It iscurrently chaired by Mr. Michio MINAKATA (南方美千雄), an independent non-executive Director.

Remuneration Committee
Remuneration Committee is responsible for making recommendations to the Board on the Company’s policy andstructure for the remuneration of all the Directors and senior management of the Group and on the establishment of aformal and transparent procedure for developing remuneration policy for approval by the Board.
The Remuneration Committee currently consists of three members, including two independent non-executive Directors,
namely Mr. Yoshihiro KOIZUMI (小泉義広) and Mr. Michio MINAKATA (南方美千雄), and an executive Director, namely
Mr. Hisanori TANIGUCHI (谷口久徳). It is currently chaired by Mr. Yoshihiro KOIZUMI (小泉義広), an independent nonexecutive Director. The Remuneration Committee held 5 meetings during the year ended 31 March 2020 to review andapprove the management’s remuneration proposals with reference to the Board’s corporate goals and objectives; and to
determine, with delegated responsibility, the remuneration packages of individual executive Directors and senior
management and make recommendations to the Board about the remuneration of non-executive Directors.
For the year ended 31 March 2020, the number of the senior management (including Directors) whose remuneration fellwithin the following bands is as follows:
Emolument bands

Number of individuals

Below ¥10,000,000¥10,000,001 to ¥20,000,000¥20,000,001 to ¥30,000,000¥30,000,001 to ¥100,000,000¥100,000,001 to ¥160,000,000

16

NIRAKU GC HOLDINGS, INC.

7
–
–
2
1

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Corporate Governance Report
Nomination Committee
The Company established the Nomination Committee on 25 June 2014 with specific written terms of reference. The
Nomination Committee is responsible for reviewing the structure, size and composition of the Board, overseeing theimplementation of board diversity policy, assessing the independence of the independent non-executive Directors andmaking recommendations to the Board on the appointment and re-appointment of Directors.
The Nomination Committee currently consists of three members, including two independent non-executive Directors,
namely Mr. Michio MINAKATA (南方美千雄) and Mr. Yoshihiro KOIZUMI (小泉義広), and an executive Director, namely
Mr. Hisanori TANIGUCHI (谷口久徳). It is currently chaired by Mr. Hisanori TANIGUCHI (谷口久徳), an executive
Director. The Nomination Committee held 5 meetings during the year ended 31 March 2020 to review the structure, sizeand composition (including the skills, knowledge, experience and diversity) of the Board, approve the renewal of the termof appointment for the Directors, assess the independence of the independent non-executive Directors and review themeasurable objective in implementing the diversity policy of the Board.
All Directors (including non-executive Director and independent non-executive Directors) have formal service agreements
or letters of appointment with the Company for a term of one year commencing from their respective dates of
appointment, subject to retirement in accordance with the Articles of Incorporation. At the Company’s 2019 AGM, five of
the Directors retired from office in accordance with the Articles of Incorporation. All of them were re-elected by
Shareholders to continue their offices as Directors. The Nomination Committee has reviewed the Directors’ re-election
plan to ensure that every Director will retire every year at an AGM.
Attendance at meetings of the General Meeting, the Board, the Audit Committee, the Remuneration Committee and theNomination Committee:
Number of meetings attended/Eligible to attend
for year ended 31 March 2020

Name of Directors
Mr. Hisanori TANIGUCHI (谷口久徳)
Mr. Akinori OHISHI (大石明徳) Note
Mr. Masataka WATANABE (渡辺将敬) Note
Mr. Hiroshi BANNAI (坂內弘)Mr. Hiroaki MORITA (森田弘昭) Note
Mr. Michio MINAKATA (南方美千雄)
Mr. Yoshihiro KOIZUMI (小泉義広)
Mr. Kuraji KUTSUWATA (轡田倉治) Note

GeneralMeeting

Board
Meeting

Audit
Committee
Meeting

Remuneration
Committee
MeetingNomination
Committee
Meeting

1/1
–
–
1/1
1/1
1/1
1/1
–

15/15
11/11
11/11
15/15
4/11
15/15
15/15
11/11

–
–
–
14/14
3/10
14/14
4/4
–

5/5
–
–
–
4/4
1/1
5/5
–

5/5
–
–
–
–
5/5
5/5
–

Note:
•

Mr. Akinori OHISHI and Mr. Masataka WATANABE were appointed as executive Directors on 27 June 2019.

•

Mr. Kuraji KUTSUWATA was appointed as independent non-executive Director on 27 June 2019.

•

Mr. Hiroaki MORITA resigned as the independent non-executive Director on 30 November 2019.

There were 15 meetings of the Board held during the year ended 31 March 2020.

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Corporate Governance Report
Directors who are considered having conflict of interests or material interests in proposed transactions or contemplated
issues are required to abstain from voting on the relevant resolution.

Induction and Continuous Professional Development
Each newly appointed Director is provided with necessary induction and information to ensure that he/she has a proper
understanding of the Company’s operations and businesses as well as his/her responsibilities under relevant statues,
laws, rules and regulations. The Company also arranges regular seminars to provide Directors with updates on latest
development and changes in the Listing Rules and other relevant legal and regulatory requirements from time to time.
The Directors are also provided with regular updates on the Company’s performance, position and prospects to enable
the Board as a whole and each Director to discharge their duties.
Directors are encouraged to participate in continuous professional development to develop and refresh their knowledge
and skills. All Directors participated in continuous professional development to develop and refresh their knowledge andskills. The Company’s external lawyers had facilitated directors’ training by the provision of presentations, briefings andmaterials for the Directors primarily relating to the roles, functions and duties of a listed company director. Directors
including Mr. Hisanori TANIGUCHI, Mr. Akinori OHISHI, Mr. Masataka WATANABE, Mr. Hiroshi BANNAI, Mr. Hiroaki
MORITA, Mr. Michio MINAKATA, Mr. Yoshihiro KOIZUMI and Mr. Kuraji KUTSUWATA received this training. Ms. YIU
Wai Man Karen, the joint company secretary of the Company, from time to time updates and provides written training
material relating to the roles, functions and duties of a director to all Directors to study, and they are asked to submit asigned training record to the Company on an annual basis.

AUDITOR’S REMUNERATION
During the year ended 31 March 2020, the total fee in relation to the annual audit of the Group amounted to ¥129 million,
which was paid/payable to PricewaterhouseCoopers and its affiliated firm. The remuneration paid toPricewaterhouseCoopers and its affiliated firm for services rendered is listed as follows:2020¥ million
Types of services
Statutory audit
Non-audit services (Note)

115
14

Total

129

Note: Non-audit services comprise primarily tax advisory services provided to the Group.

JOINT COMPANY SECRETARY
The joint company secretaries are Ms. YIU Wai Man Karen and Ms. NG Sau Mei. Ms. YIU Wai Man Karen is also thefinancial controller and is employed by the Company on a full-time basis.
In order to uphold good corporate governance and ensure compliance with the Listing Rules and applicable Hong Konglaws, the Company also engages Ms. NG Sau Mei, associate director of TMF Hong Kong Limited (a company secretarial
service provider), as the other joint company secretary to assist Ms. YIU Wai Man Karen to discharge her duties ascompany secretary of the Company. The primary contact person of Ms. NG Sau Mei at the Company is Ms. YIU Wai Man
Karen.

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Corporate Governance Report
During the year ended 31 March 2020, Ms. YIU Wai Man Karen and Ms. NG Sau Mei have undertaken not less than 15hours of relevant professional training respectively in compliance with Rule 3.29 of the Listing Rules.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The Board, supported by the finance department, is responsible for the preparation of the financial statements of theCompany and the Group. The Board has prepared the financial statements in accordance with International Financial
Reporting Standards issued by International Accounting Standard Board. Appropriate accounting policies have also beenused and applied consistently. The Directors were not aware of any material uncertainties relating to events or conditions
which may cast significant doubt upon the Group’s ability to continue as a going concern.
The statement by the auditor of the Company and the Group regarding its reporting responsibilities on the financial
statements of the Company and the Group is set out in the Independent Auditor’s Report on pages 37 to 42 of thisannual report.

DIRECTORS’ SECURITIES TRANSACTIONSThe Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out inAppendix 10 to the Listing Rules (the “Model Code”) as its own code of conduct regarding securities transactions by
Directors. Having made specific enquiry with all Directors, the Directors confirmed that they had complied with therequired standard set out in the Model Code and the Company’s code of conduct during the year ended 31 March 2020.

SHAREHOLDERS’ RIGHTS
Rights to demand Directors to call for a Shareholders’ meeting
Any one Shareholder holding no less than 3% of the voting rights in the Company for the last six consecutive months
may request the Directors to convene a general meeting. If the Directors do not send out a convocation notice for suchgeneral meeting to be held and such Shareholders’ meeting is not convened by the Directors within eight weeks from thedate of such request, the relevant Shareholder who made the request may convene a general meeting with court
permission.

Rights to put enquires to the Board
The Board and senior management maintain a continuing dialogue with the Shareholders and investors through various
channels including the Company’s AGM. The Chairman, chairmen of board committees (or respective designatedmember), executive officers and external auditors will attend the AGM. The Directors will answer questions raised by the
Shareholders on the performance of the Group. Our corporate website which contains corporate information,
announcements as well as the recent developments of the Group enables Shareholders to have timely and updated
information of the Group.

Rights to demand Directors to include a proposal in a Shareholders’ meeting
Shareholders continuously holding not less than 1% of the votes of all Shareholders or not less than 300 votes of all
Shareholders for the preceding six months may demand the Directors, no later than eight weeks prior to the date of the
Shareholders’ meeting, to notify Shareholders of the summary of the proposals which the demanding Shareholders
intend to submit with respect to the matters that are the purpose of the Shareholders’ meeting and include a proposal in
the notices of the Shareholders’ meetings. The Company will notify the Shareholders of the date on which an AGM is tobe held no less than ten weeks prior to the date of such meeting by making a voluntary announcement on the websites of
the Company and the Stock Exchange.

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Annual Report 202019

Corporate Governance Report
INVESTOR RELATIONS
To manage its relationship with investment community and its Shareholders, the Company also communicates throughannouncements and annual and interim reports. All such reports and announcements can also be accessed via the
Company’s website. The Directors, joint company secretary or other appropriate members of the senior management
also respond to inquiries from Shareholders and investment community promptly. Shareholders who intend to put forward
their enquiries about the Company to the Board could send their enquiries via Strategic Financial Relations Limited at
niraku@sprg.com.hk.

RISK MANAGEMENT AND INTERNAL CONTROLSThe Company has formulated the risk management policy and processes which apply to all levels of the Company andits subsidiaries to ensure all material risks which the Company is exposed to are properly identified, analysed, evaluated,
responded, monitored and communicated.
The Board acknowledges its responsibility to ensure that the Company establishes and maintains sound risk
management and internal control systems within the Group and to review the effectiveness of the systems. Such systems
are designed to manage and mitigate risks inherent in the Group to an acceptable level, rather than eliminate the risk offailure to achieve business objectives, and can only provide reasonable assurance against material misstatement or loss.
The structure of the Company’s risk management and internal control systems is to ensure (i) appropriate policies andcontrol procedures have been designed and established to safeguard the Group’s assets against improper use ordisposal; (ii) relevant laws and regulations are adhered to and complied with; and (iii) reliable financial and accounting
records are maintained in accordance with relevant accounting standards and regulatory reporting requirements. The
main structure of the systems are as follows:

The Board•

ensures effective systems are maintained in order to safeguard the assets of the Group;•

defines management structure with clear lines of responsibility and limit of authority; and•determines the nature and extent of significant risk that the Company is willing to take in achieving the strategic
objectives and formulates the Group’s risk management strategies.

The Audit Committee•

oversees the systems of the Group;•

reviews and discusses with the management of the Company at least annually to ensure that the management of
the Company has performed its duty to have the effective systems; and•considers major findings on internal control matters and makes recommendations to the Board.

The Internal Audit Department•

analyses and appraises independently the adequacy and effectiveness of the Company’s risk management andinternal control systems;•

reports internal audit findings to Audit Committee; and•provides recommendations for improvement.

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Corporate Governance Report
The Risk Management Office•assists the management of the Company in formulating risk management policies, tools and processes;•

gives advice on the design of the systems and action plans taken by the management of the Company inaddressing the identified risks;•

ensures appropriate actions are taken against major risks which affect the Group’s businesses and operations; and•monitors and reviews the systems and reports to the Audit Committee.

The Management of the Company (includes heads of departments and business units)•

designs, implements and monitors the systems and ensures the systems are executed effectively;•

identifies risks and takes measures to mitigate risks in day-to-day operations;•gives prompt responses and conducts follow-up actions against internal control matters raised by internal auditors (ifany) or the independent auditor; and•provides confirmation to the Board on the effectiveness of the systems.

During the reporting period, the Company has carried out the following works in relation to risk management and internal
control:•

The management of the Company, through daily risk management activities, identified major risks that may impact
the Group’s performance; assessed and evaluated the likelihood of occurrence of the identified risks; formulated
and implemented measures, controls and action plans to manage and mitigate such risks;•

Risk management office monitored and reviewed the risk management and internal control systems on an ongoingbasis and reported to the Audit Committee regarding the status of the systems;•

Risk management office periodically followed-up and reviewed the implementation of the measures against majorrisks identified and ensured appropriate actions were taken to address all major risks identified;•

Risk management office reviewed the risk management and internal control systems periodically to identify process
and control deficiencies, and designed and implemented remedial actions to address such deficiencies;•

Risk management office ensured appropriate procedures and measures are in place to safeguard assets against
unauthorised use or disposition, control capital expenditure, maintain proper accounting records and ensure
reliability of financial information used for business and publications;•Internal audit department carried out analysis and independent appraisal of the adequacy and effectiveness of therisk management and internal control systems; examined risk-related documentation prepared by the managementof the Company and conducted interviews with employees at all levels; and•The head of internal audit department attended meetings of the Audit Committee and reported on the internal audit
findings and responded to queries from members of the Audit Committee.

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Annual Report 202021

Corporate Governance Report
The Company has internal guidelines in place to ensure inside information is disseminated to the public in accordancewith the applicable laws and regulations. Executive officers and financial function of the Group are delegated withresponsibilities to control and monitor the proper procedures regarding inside information disclosures. Access to inside
information is restricted to relevant senior executives. Relevant personnel and other professional parties involved arereminded to preserve confidentiality of the inside information until it is publicly disclosed. Other procedures including preclearance on dealing in Company’s securities by Directors and designated members of the management, notification ofregular blackout period and securities dealing restrictions to Directors and employees, and identification of project bycode name have also been implemented by the Company against possible mishandling of inside information within theGroup.
In the year under review, the Board has reviewed, through the Audit Committee, the Group’s risk management andinternal control system and is not aware of any significant issues that would have an adverse impact on the effectivenessand adequacy of the risk management and internal control system throughout the year.

CHANGE IN CONSTITUTIONAL DOCUMENTS
There was no significant change in the Company’s constitutional documents made during the year.

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Profile of Directors and Senior Management
CHAIRMAN OF THE BOARD, EXECUTIVE DIRECTOR AND CHIEF EXECUTIVE OFFICER
Mr. Hisanori TANIGUCHI (谷口久徳), aged 57, is the primary leadership figure of the Group. He was appointed as theRepresentative Director and President* (代表取締役社長) of the Company on 10 January 2013, the date of incorporationof our Company, and was re-designated as a Director and Chief Executive Officer on 25 June 2014. Mr. Taniguchi is
responsible for the Group’s overall corporate strategies, management and business development.
Mr. Taniguchi joined the Group in April 1983, deployed in a number of departments across our operations, from humanresources to hall development and sales. Throughout his 37 years of experience with the Group, he has acquired
extensive knowledge in a wide array of aspects in pachinko and pachislot hall operations.
Mr. Taniguchi first involved in our overall general management in November 2002, when he was appointed as the
managing director* (常務取締役) of Niraku Corporation. He was subsequently elected as the vice president* (取締役副社長), president* (取締役社長) and representative director and president* (代表取締役社長) of Niraku Corporation in June
2008, June 2009 and April 2010, respectively. He is currently the representative director and president* (代表取締役社長)
of Niraku Corporation and the representative director* (代表取締役) of Niraku Merrist Corporation (“Merrist”).

EXECUTIVE DIRECTORS
Mr. Akinori OHISHI (大石明徳), aged 55, worked at Sumisho Ekika Gas Co., Ltd* (住商液化ガス株式会社) (nowEnessance Holdings Co., Ltd.* (株式会社エネサンスホールディングス)), where he was involved in general work in the
management division, from 1987 to 1995, and worked at Dynam Co., Ltd.* (株式会社ダイナム), from 1995 to 1998,
where he was involved in corporate planning. He then went on to serve as an executive of a venture company, then workat a consulting company and finally serve as president of a management consulting company, and he was involved inmanagement consulting for about 10 years.
In April 2009, Mr. Ohishi joined the Group as an adviser* (顧問) of Niraku Corporation. In April 2010, Mr. Ohishi became
the executive officer* (執行役員) and head of corporate planning before promoted to a director* (取締役) of Niraku
Corporation in June 2012, and he is responsible for implementing corporate strategy and business strategy.
Subsequently, Mr. Ohishi served as a director* (取締役) of the Company from March 2013 to June 2014, and he hasserved as an Executive Officer* (執行役) of the Company from June 2014 to the present.
Mr. Ohishi graduated from the College of Humanities and Sciences, Nihon University* (日本大学), in March 1987. Mr.
Ohishi is well versed in the areas of business strategy and finance, and he was nominated by the Board of Directors formonitoring the business based on his experience and expertise.
Mr. Masataka WATANABE (渡辺将敬), aged 51, worked at Yamaichi Securities Co., Ltd.* (山一證券株式会社) from 1993
to 1994, where he was involved in securities, and from 1995 to 2015 he worked at Hikari Tsushin Inc.* (株式会社光通信),
where he was involved in business strategy and accounting. He was appointed as a Director* (取締役) and member ofthe Audit Committee* (監査等委員) of Hikari Tsushin Inc.* (株式会社光通信) in June 2017, in which capacity he serves tothe present. Hikari Tsushin Inc.* (株式会社光通信) is an information and telecommunications services company listed on
the Tokyo Stock Exchange (stock code: 9435).
In December 2018, Mr. Watanabe joined the Group as an adviser* (特別顧問) of the Company.
Mr. Watanabe graduated from The University of Tokyo* (東京大学), Faculty of Economics, in October 1992. Mr.
Watanabe is well versed in the areas of securities trading, accounting and auditing, and he was nominated by the Boardof Directors to provide advice based on his experience and expertise.

NIRAKU GC HOLDINGS, INC.

Annual Report 202023

Profile of Directors and Senior Management
NON-EXECUTIVE DIRECTOR
Mr. Hiroshi BANNAI (坂內弘), aged 81, had served as a police officer in Fukushima Prefecture from 1962 to hisretirement from the police force in 1999, during which he was mainly responsible for handling matters related to antisocialorganisations. Mr. Bannai then served as an executive director* (専務理事) for the Fukushima Prefecture Amusement
Business Association* (福島県遊技業協同組合). Relying on his experience from the police force, Mr. Bannai had also
been an advisor for Fukushima Bank* (福島銀行) from 2002 to 2009. Mr. Bannai is currently an advisor for Xebio Co.,
Ltd.* (株式会社ゼビオ). Mr. Bannai received his education from the Fukushima Prefectural Wakamatsu Commercial HighSchool (福島県立若松商業高等学校). Mr. Bannai was appointed to the Board to supervise the Group’s compliance withapplicable laws and regulations relating to adult entertainment.

INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. Michio MINAKATA (南方美千雄), aged 53, was appointed as an independent non-executive Director in June 2016.
He started his career at KPMG Century Audit Corporation* (KPMGセンチュリー監査法人). Mr. Minakata then worked forseveral companies and offices including NASDAQ Japan* (ナスダッックジャパン) based on his capability in theaccounting field. Mr. Minakata is currently serving as the representative director* (代表取締役) of IPO Bank* (株式会社IPOバンク) and the partner (社員) of Yamato Tax Corporation* (やまと税理士法). Further, Mr. Minakata is currently also
an advisor* (監査役) for Showcase TV Inc.* (株式会社ショーケース•テ ィービー), the shares of which are listed on theMarket of The First Section of The Tokyo Stock Exchange (3909: JP). Mr. Minakata received a bachelor’s degree in
economics from the Keio University* (慶應義塾大学) in March 1990. Mr. Minakata has also been a member of theJapanese Institute of Certified Public Accountants since May 1996. Mr. Minakata was appointed to the Board to provide
advice to the Company based on his accounting and management background and expertise.
Mr. Yoshihiro KOIZUMI (小泉義広), aged 65, was appointed as an independent non-executive Director in June 2016.
He has worked for several leading Japanese and foreign companies over the years, including Toshiba Co., Ltd.* (株式会社東芝) from 1979 to 1986 and Daiwa Securities Co., Ltd.* (大和証券株式会社) from 1986 to 1992. Mr. Koizumi also has
experience in working for banks and financial institutions, including Deutsche Bank* (ドイツ銀行) from 1994 to 1997 andSociete General Bank* (ソシエテジェネラル銀行) from 1997 to 2002. Thereafter, Mr. Koizumi also served as therepresentative director* (代表取締役) of Mariner Financial Service Co., Ltd.* (株式会社マリナー•フィナンシャル•サービス) from 2002 to 2015 and has been serving as the representative director* (代表取締役) of Clear Markets Japan Co.,
Ltd* (Clear Markets Japan 株式会社) since 2014. Mr. Koizumi graduated from the Department of Commerce Science at
Keio University* (慶応義塾大学商学部). Mr. Koizumi has also obtained his qualification as a certified public accountant in
the United States in 1991. Mr. Koizumi was appointed to the Board to provide advice to the Company based on his
financial and management background and expertise.

24

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Annual Report 2020

Profile of Directors and Senior Management
Mr. Kuraji KUTSUWATA (轡田倉治), aged 78, worked at the Iwase village office* (岩瀬村役場) from 1961 to 1975 before
joining food vendor “Kutsuwata Shoten” (now Kutsuwata Shoten Co., Ltd.* (有限會社くつわた商店)) in 1975. Whileserving as the company’s representative director* (代表取締役) from 1980 onwards, in 1985, he established Yappu
Kogyo Co., Ltd.* (有限会社ヤツプ工業) an optical component assembly and processing company, and has served as its
representative director* (代表取締役) to this day.
In addition, he has served as a member* (議員) of the Iwase Village Council* (岩瀬村議会) and as Chairman* (会長) of
the Iwase Society of Commerce and Industry* (岩瀬村商工会), and in 2004 he became a director: (理事) of the
Fukushima Federation of Societies of Commerce and Industry* (福島県商工会連合会), which oversees management
support projects and regional economy promotion projects run by societies of commerce and industry in Fukushima
Prefecture. From 2012 to the present he has served as Chairman* (会長) of the Federation. A society of commerce andindustry is an economic organization that supports the business activities of small and medium-sized enterprises.
Mr. Kutsuwata graduated from Fukushima Prefectural Sukagawa High School* (福島県立須賀川高等学校). Mr. Kutsuwata
has contributed to the development of the regional economy, and his perspective is in line with the regional management
strategies that our Group is aiming for, so he has been nominated by the Board of Directors to provide advice based on
his experience.

EXECUTIVE OFFICER
Mr. Hidenori MOROTA (諸田英模), aged 54, has been appointed as Executive Officer since November 2014. He is alsoa director of Niraku Corporation since June 2012. He is the head of sales department and oversees the advertising,marketing, sales, machine selection and general prize offerings functions of the Group. Mr. Morota joined the Group in
October 1988 and was elected as a director of Niraku Corporation in June 2001 and was subsequently promoted to an
executive officer* (執行役) in June 2005. He served as a Director of the Company between January 2013 and June 2014,
and was designated as Executive Officer in November 2014. Mr. Morota’s industry positions include the chief director* (理事長) at the Fukushima Prefecture Amusement Business Association* (福島県遊技業協同組合連合会).

SENIOR MANAGEMENT
Mr. Tatsuo TANIGUCHI (谷口龍雄), aged 66, was appointed as the representative director and president* (代表取締役社長) of Nexia Inc. in June 2009. His primary duties within the Group are the oversight of property activities, including theselection, acquisition and maintenance of the lands and premises of our pachinko halls. He also manages the officepremises and residential apartment building owned by the Group which were leased to third party customers as anancillary business. Mr. Taniguchi joined the Group in 1974 and resigned his office as Director of the Group in 2014. Mr.
Taniguchi remains as an advisory role within the Group, focusing on property activities. Mr. Taniguchi is the brother of
the Chairman and is therefore his associate under the Listing Rules. Mr. Taniguchi is also a controlling shareholder of theCompany and also a person acting in concert with the Chairman within the meanings of the Codes on Takeovers andMergers and Share Buy-backs.
* For identification purpose only

NIRAKU GC HOLDINGS, INC.

Annual Report 202025

Report of the Directors
The Directors are here to present the annual report of the Company together with the audited consolidated financial
statements of the Group for the year ended 31 March 2020.

PRINCIPAL ACTIVITIESThe principal activity of the Company is investment holding. The Company and its subsidiaries comprising the Group are
principally engaged in pachinko and pachislot hall operations, amusement arcade operations, hotel operations andrestaurant business in Japan. The principal activities of the subsidiaries are set out in Note 12 to the consolidated
financial statements. The operating segment of the Group for the year ended 31 March 2020 is set out in Note 5 to theconsolidated financial statements.

BUSINESS OVERVIEW
Year 2020 is a challenging year for the Group. Domestically, pachinko business continues to be tough due to market
shrinkage; globally, the outbreak of COVID-19 posed further harm to the hospitality and entertainment industries in China
and Southeast Asian countries where the business of the Group is operating.
For the year ended 31 March 2020, the Group’s revenue from pachinko business amounted to ¥25,007 million (2019:¥25,881 million) with revenue margin at 18.0% (2019: 18.3%). The decline in revenue is a sign of the market
phenomenon in which pachinko hall operators are facing higher degree of difficulties in attracting new young players andretaining existing customers. The revision of gaming machine regulations, increase in consumption tax, and passage of“IR Promotion Act” further undermine the profitability of pachinko business.
In confronting with the downturn of the pachinko business, the Group had formulated strategic sales measures such as
acquisition of pachinko halls from rivalries, alliance with business partners, gaming environment improvement, productconfiguration and customer services broadening. Approaching the financial year end of 2019, the Group acquired apachinko hall from a third-party pachinko operator. This acquisition would increase the Group’s market share in Koriyama
province and its competitiveness against other pachinko operators. Moreover, close to the end of financial year 2019, theGroup’s second “Komeda Café” opened inside the vicinity of Iruma pachinko hall commenced its operation. The café
provided a cosy place for both pachinko and non-pachinko players to enjoy drinks and light meals and was welcomed bymany customers.
The amusement arcade business is the second largest revenue stream of the Group, generating ¥1,663 million (or 5.9%)of revenue income. During the third and fourth quarters of the financial year, the Group opened 4 new game centres inVietnam, attributable to an additional revenue of ¥35 million. Seeing the year-on-year revenue growth of each individual
arcade, the Group is confident that the demand for recreational and entertainment facilities in Southeast Asian countries
will increase persistently; and enduring to focus on these markets through opening of new arcades remains the businessstrategy of the Group.
In respect of food and beverage business, the new “LIZARRAN” Spanish restaurant which opened in October 2019 inSangen Jaya district; and the Japanese food court “YOKOCHO” commenced its operation in July 2019 in Shenzhen
Upper Hills commercial building had brought a total revenue of ¥304 million to the Group. Since the outbreak of
COVID-19 in January 2020, YOKOCHO business was subjected to temporary closure. The management is assessing aseries of possible plans to promote the restaurant business once the operation is resumed. The management is confidentof the success in this business.
More detailed business, prospects and development, and analysis of the Group’s performance for the year ended 31
March 2020 are available in the sections “Chairman’s Statement” on pages 6 to 7 and “Management Discussion andAnalysis” on pages 8 to 12 of this annual report.

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Report of the Directors
Financial Key Performance Indicators
Certain financial key performance indicators which complement and supplement the financial disclosures are set out in“Financial Review” on pages 8 to 9 and the “Consolidated Financial Statements” on pages 43 to 118 of this annual report.

Relationship with Suppliers
The Group’s major suppliers consist of pachinko and pachislot machine suppliers, game machines suppliers, G-prize
wholesalers, and general prize suppliers. These suppliers are relatively large and reputable corporations with longstanding relationships with the Group. On average, the Group has over ten years of business dealings with its major
suppliers.

Relationship with Customers
The Group’s revenue comes from pachinko and pachislot business, amusement arcade business, and vending machines.
As a pachinko hall and amusement arcade operator, the Group has a large and diverse customer base across Japan,
Cambodia and Vietnam. Regarding vending machine business, revenue derived from the Group’s top five largest
customers accounted for less than 1% of total revenue for the year ended 31 March 2020.

Relationship with Employees
The Group’s success, to a considerable extent, depends upon its ability to attract, motivate and retain a sufficient numberof qualified employees, including area managers, hall managers, sales managers and staff. The Group offers competitive
wages, bonuses and other benefits to full time employees. Opportunity for advancement is also crucial in building
employee loyalty and work dedication. The Group provides clear career paths, job rotation and training to its full time
employees. As at 31 March 2020, the Group employed 1,507 staff for pachinko and pachislot business; and 425 staff foramusement arcade business.

Environmental Policy
Pursuant to Amusement Business Law and local ordinances, a pachinko license holder must conduct business in such a
way as not to cause noise or vibrations (limited to voices of people and other noises and vibrations that are part ofoperating a business) in the area surrounding the place of business that exceed the limits specified by prefecturalordinances. To ensure compliance with such laws and regulations, the Group had appointed a manager to supervise andmonitor the compliance, formulate internal standards regarding such matters, and keep records of any relevant incidents.

Licenses, Regulatory Approvals and Compliance Record
The Group had complied with the Listing Rules and all relevant Japan, Cambodia and Vietnam laws and regulations in allmaterial respects and had obtained all material licenses, approvals and permits from relevant regulatory authorities for allof its pachinko halls and amusement centres in 2020.

NIRAKU GC HOLDINGS, INC.

Annual Report 202027

Report of the Directors
Principal Risks and Uncertainties
Principal risks and uncertainties the Group faces include:•risks related to continuous shrinkage of pachinko players in the industry;•risks related to natural disasters, such as earthquake and tsunami;•risks related to human resources and systems application;•

uncertainty as to the profitability of new halls and arcades;•

uncertainty as to the performance of the Group’s existing halls and arcades;•

uncertainty as to the expansion of hall and arcade network;•

uncertainty as to the change of Amusement Business Law and related laws and regulations;•

uncertainty as to the impact on pachinko industry after the passage of the IR Promotion Act; and•uncertainty as to the development of novel coronavirus.

RESULTS AND APPROPRIATIONThe results of the Group for the year ended 31 March 2020 are set out in the consolidated statement of comprehensive
income on page 43.
The Directors have resolved not to declare a final dividend in respect of the year ended 31 March 2020.

DIVIDEND POLICYThe Company has adopted a dividend policy (the “Dividend Policy”), which aims at setting out the principles andguidelines that the Company intends to apply in relation to the declaration, payment or distribution of its net profits as
dividends to the Shareholders. Under the policy, in recommending or declaring dividends, the Company shall maintainadequate cash reserve for meeting its working capital requirements and future growth as well as its shareholder value.
The Company does not have any pre-determined dividend payout ratio. The Board has the discretion to declare anddistribute dividends to the Shareholders, subject to the Articles of Incorporation and all applicable laws and regulations
and the various factors stipulated. When determining declaration or payment of dividends, the Company shall consider
the following matters:•

the Company’s actual and expected financial performance;•

retained earnings and distributable reserves of the Company and each of the members of the Group;•

the Group’s working capital requirements, capital expenditure requirements and future expansion plans;•

the Group’s liquidity position;

28

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Report of the Directors•

general economic conditions, business cycle of the Group’s business and other internal or external factors that may
have an impact on the business or financial performance and position of the Company; and•other factors that the Board deems relevant.

Any unclaimed dividend shall not be forfeited until the lapse of six years after the date of declaration of such dividend inaccordance with the Articles of Incorporation.
The Board will review the Dividend Policy as appropriate from time to time. The Dividend Policy has been published on
the Company’s website for public information.

FINANCIAL SUMMARY
A summary of the results and the assets and liabilities of the Group for the last five financial years is set out on pages 4
and 5 of this annual report.

SHARE CAPITAL
Details of the share capital for the year ended 31 March 2020 are set out in Note 24 to the consolidated financial
statements.

EQUITY-LINKED AGREEMENTS
During the year ended 31 March 2020, the Group did not enter into any equity-linked agreements.

RESERVES AND DISTRIBUTABLE RESERVES
Movements in reserves during the year are set out in the consolidated statement of changes in equity on page 46.
Distributable reserves of the Company as at 31 March 2020 amounted to approximately ¥4,104 million.

BANK LOANS AND OTHER BORROWINGSParticulars of bank loans and other borrowings of the Company and the Group as at 31 March 2020 are set out in Note
28 to the consolidated financial statements.

PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights under the Articles of Incorporation or the laws of Japan.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIESThe Company did not redeem any of its listed securities during the year ended 31 March 2020 and up to the date of thisannual report. Neither the Company nor any of its subsidiaries purchased or sold any of the Company’s listed securities
during the year ended 31 March 2020 and up to the date of this annual report.

NIRAKU GC HOLDINGS, INC.

Annual Report 202029

Report of the Directors
DIRECTORSThe Directors during the year and up to the date of this annual report are:Executive Directors
Mr. Hisanori TANIGUCHI (谷口久徳)
Mr. Akinori OHISHI (大石明徳) Note
Mr. Masataka WATANABE (渡辺将敬) Note

Non-Executive Director
Mr. Hiroshi BANNAI (坂內弘)Independent Non-Executive Directors
Mr. Hiroaki MORITA (森田弘昭) Note
Mr. Michio MINAKATA (南方美千雄)
Mr. Yoshihiro KOIZUMI (小泉義広)
Mr. Kuraji KUTSUWATA (轡田倉治) Note
Note:•

Mr. Akinori OHISHI and Mr. Masataka WATANABE were appointed as executive Directors on 27 June 2019.

•

Mr. Kuraji KUTSUWATA was appointed as independent non-executive Director on 27 June 2019.

•

Mr. Hiroaki MORITA resigned as the independent non-executive Director on 30 November 2019.

In accordance with articles 29 of the Articles of Incorporation, all Directors will retire at the forthcoming AGM and, being
eligible, offered themselves for re-election. The Company has received from each of the independent non-executive
Directors an annual confirmation of independence pursuant to Rule 3.13 of the Listing Rules and the Company considers
that all of the independent non-executive Directors are independent.

DIRECTORS’ SERVICE CONTRACTS
None of the Directors has a service contract with the Company or any of its subsidiaries which is not determinable within
one year without payment of compensation, other than statutory compensation.

DIRECTORS’ MATERIAL INTERESTS IN TRANSACTIONS, ARRANGEMENTS AND
CONTRACTS THAT ARE SIGNIFICANT IN RELATION TO THE GROUP’S BUSINESS
Save as disclosed in this annual report, no transactions, arrangements and contracts of significance in relation to theGroup’s business to which the Company, any of its subsidiaries was a party and in which a Director and the Director’sconnected party had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time
during the year.

DIRECTORS’ INTEREST IN COMPETING BUSINESS
Save as disclosed in this annual report, as at the date of this annual report, none of the Directors or their respective
associates had engaged in or had any interest in any business which competes or may compete with the businesses of
the Group.

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Report of the Directors
PERMITTED INDEMNITY PROVISION
The Articles of Incorporation provide that the Company may execute an agreement with its directors to limit their liability
under Article 423 of the Companies Act in Japan. The Company has taken and maintained directors’ liability insurance
throughout the year and up to date of this annual report, which provides appropriate cover for the Directors.

REMUNERATION OF DIRECTORS AND FIVE INDIVIDUALS WITH HIGHEST EMOLUMENTS
No remuneration was paid to the Directors or the five highest paid individuals as an inducement to join or upon joining
the Group. Further, no compensation was paid to, or receivable by, the Directors or past Directors or the five highest paid
individuals during the years ended 31 March 2020 and 2019 for the loss of office as director of any member of the Groupor of any other office in connection with the management of the affairs of any member of the Group.
Details of the emoluments of the Directors and five highest paid individuals during the reporting period are set out in
Notes 8 and 36 to the consolidated financial statements.

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND/OR SHORT POSITIONS IN THE
SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY OR ANY
SPECIFIED UNDERTAKING OF THE COMPANY OR ANY OTHER ASSOCIATEDCORPORATIONAs at 31 March 2020, the interests and short positions of the Directors and the chief executive of the Company and theirassociates in the shares of the Company (the “Shares”), underlying Shares and debentures of the Company and its
associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)) which havebeen notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or whichwere recorded in the register as required to be kept pursuant to Section 352 of the SFO or as otherwise notified to theCompany and the Stock Exchange pursuant to the Model Code set out in Appendix 10 to the Listing Rules were as
follows:
Approximate %of shareholding

Capacity/Nature of interest

Total

Hisanori TANIGUCHI (谷口久徳)

Beneficial owner; interest ofcontrolled corporation(1)225,560,460
common Shares

18.86%

Hiroshi BANNAI (坂內弘)Beneficial owner

216,000
common Shares

0.02%

Notes:(1)

The interests held by Hisanori TANIGUCHI (谷口久徳) shown above include the 214,060,460 Shares held in his own name for his own benefit andthe 11,500,000 Shares held by Densho Limited* (有限会社伝承), a company collectively wholly-owned by his children, the voting rights of which are
exercisable by him.

(2)

All interests stated are long positions.

(3)

There were 1,195,850,460 Shares in issue as at 31 March 2020.

NIRAKU GC HOLDINGS, INC.

Annual Report 202031

Report of the Directors
Save as disclosed above, as at 31 March 2020, none of the Directors and chief executive of the Company had or wasdeemed to have any interest or short position in the Shares, underlying Shares or debentures of the Company or its
associated corporations (within the meaning of Part XV of the SFO) that was required to be notified to the Company andthe Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which
they were taken or deemed to have under such provisions of the SFO), or required to be recorded in the register to be
kept by the Company under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange
pursuant to the Model Code.

SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND/OR SHORT POSITIONS IN THE SHARESAND UNDERLYING SHARES OF THE COMPANY
As at 31 March 2020, to the best knowledge of the Directors, the following persons (not being a Director or chief
executive of the Company) had interests or short positions in the Shares or underlying Shares which fall to be disclosed
to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to
be kept by the Company pursuant to section 336 of the SFO:
Approximate %of shareholding

Capacity/Nature of interest

Total

Tatsuo TANIGUCHI (谷口龍雄)

Beneficial owner; interest ofcontrolled corporation;custodian(1)223,790,000
common shares

18.71%

Masataka TANIGUCHI (谷口晶貴)

Beneficial owner; interest ofcontrolled corporation;custodian(2)151,570,000
common shares

12.67%

Yoshihiro TEI (鄭義弘)*(also known as JEONG Jungwung)

Beneficial owner; interest ofcontrolled corporation;custodian(3)98,440,000
common shares

8.23%

Sumitomo Mitsui Financial Group, Inc.*(株式会社三井住友フィナンシ
ャルグループ)Interest of controlled
corporation(4)229,137,500
common shares

19.16%

Sumitomo Mitsui Banking Corporation*(株式会社三井住友銀行)

Interest of controlled
corporation(4)229,137,500
common shares

19.16%SMBC Trust Bank Ltd.*(株式会社SMBC信託銀行)

Trustee(1), (2), (3), (4)229,137,500
common shares

19.16%

Seiai TANIGUCHI (谷口正愛)

Interest of a spouse(5)225,560,460
common shares

18.86%

Hideko TANIGUCHI (谷口秀子)

Interest of a spouse(6)223,790,000
common shares

18.71%

Eiko TANIGUCHI (谷口栄子)

Interest of a spouse(7)151,570,000
common shares

12.67%

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Annual Report 2020

NIRAKU GC HOLDINGS, INC.

Report of the Directors

Capacity/Nature of interest

Total

Approximate %of shareholding

JEONG Kyeonghae (鄭慶惠)Interest of a spouse(8)98,440,000
common shares

8.23%

Okada Holdings Limited

Beneficial owner(9)80,500,000
common shares

6.73%

Universal Entertainment Corporation

Beneficial owner(9)80,500,000
common shares

6.73%

Tiger Resort Asia Limited

Beneficial owner(9)80,500,000
common shares

6.73%

Notes:(1)

The interests held by Mr. Tatsuo TANIGUCHI (谷口龍雄) shown above include: (i) 161,690,000 Shares held in his own name for his own benefit,(ii)19,320,000 Shares held by Jukki Limited* (有限会社十起), a company collectively wholly-owned by his children, the voting rights of which are
exercisable by Mr. Tatsuo TANIGUCHI (谷口龍雄); (iii) 1,380,000 Shares held by KAWASHIMA Co., Ltd.* (株式会社KAWASHIMA), a company
collectively wholly-owned by our Chairman, Mr. Tatsuo TANIGUCHI (谷口龍雄) and Mr. Masataka TANIGUCHI (谷口晶貴), the voting rights of which
are exercisable by Mr. Tatsuo TANIGUCHI (谷口龍雄); and (iv) 41,400,000 Shares held by the TT Family Trust for the benefit of his children, namely
Ms. Yoshika TEI (鄭淑佳)* (also known as Ms. JEONG Sukka), Mr. Kousei TEI (鄭光誠)* (also known as Mr. CHONG Gangsong) and Mr. Kiyokazu
TANIGUCHI (谷口清和). SMBC Trust Bank Ltd.* (株式会社SMBC信託銀行) is the trustee and assignee* (受託者) of the TT Family Trust and Mr.
Tatsuo TANIGUCHI (谷口龍雄) is entitled to exercise the voting rights attached to the Shares under the TT Family Trust. The interests under the TT
Family Trust are equally distributed among the three beneficiaries under the TT Family Trust.

(2)

The interests held by Mr. Masataka TANIGUCHI (谷口晶貴) shown above include: (i) 11,442,500 Shares held in his own name for his own benefit; (ii)
5,750,000 Shares held by Hokuyo Kanko Limited* (有限会社北陽觀光), a company collectively wholly-owned by his children, the voting rights ofwhich are exercisable by Mr. Masataka TANIGUCHI (谷口晶貴); and (iii) 134,377,500 Shares held by the MT Family Trust for the benefit of hischildren, namely Mr. Tatsunari TANIGUCHI (谷口辰成)* (also known as Mr. CHONG Jinsong), Mr. Takanari TANIGUCHI (谷口喆成)* (also known as
Mr. JEONG Cheolseong) and Mr. Toshinari TANIGUCHI (谷口才成)* (also known as Mr. CHUNG Jaeseong). SMBC Trust Bank Ltd.* (株式会社
SMBC信託銀行) is the trustee and assignee* (受託者) of the MT Family Trust and Mr. Masataka TANIGUCHI (谷口晶貴) is entitled to exercise thevoting rights attached to the Shares under the MT Family Trust. The interests under the MT Family Trust are equally distributed among the threebeneficiaries under the MT Family Trust.

(3)

The interests held by Mr. Yoshihiro TEI (鄭義弘)* (also known as JEONG Jungwung) shown above include: (i) 33,580,000 Shares held in his own
name for his own benefit; (ii) 11,500,000 Shares held by Daiki Limited* (有限会社大喜), a company collectively wholly-owned by his children, thevoting rights of which are exercisable by Mr. Yoshihiro TEI (鄭義弘)* (also known as JEONG Jungwung); and (iii) 53,360,000 Shares held by the YT
Family Trust for the benefit of his children, namely Mr. Akinori TEI (鄭敬憲)* (also known as JEONG Kyeongheon) and Mr. Masahide TEI (鄭將英)*(also known as JEONG Jangyeong). SMBC Trust Bank Ltd.* (株式会社SMBC信託銀行) is the trustee and assignee* (受託者) of the YT Family Trustand Mr. Yoshihiro TEI (鄭義弘)* (also known as JEONG Jungwung) is entitled to exercise the voting rights attached to the Shares under the YT
Family Trust. The interests under the YT Family Trust are equally distributed among the two beneficiaries under the YT Family Trust.

(4)

Sumitomo Mitsui Financial Group, Inc.* (株式会社三井住友フィナンシャルグループ) holds Sumitomo Mitsui Banking Corporation* (株式会社三井住友銀行), which holds SMBC Trust Bank Ltd.* (株式会社SMBC信託銀行). Accordingly, each of Sumitomo Mitsui Banking Corporation* (株式会社三井住友銀行) and Sumitomo Mitsui Financial Group, Inc.* (株式会社三井住友フィナンシャルグループ) is deemed to be interested in such 229,137,500
Shares held by SMBC Trust Bank Ltd.* (株式会社SMBC信託銀行).

(5)

Ms. Seiai TANIGUCHI (谷口正愛) is the spouse of our Chairman and is therefore deemed to be interested in the Shares that our Chairman isinterested in under the SFO.

(6)

Mrs. Hideko TANIGUCHI (谷口秀子) is the spouse of Mr. Tatsuo TANIGUCHI (谷口龍雄) and is therefore deemed to be interested in the Shares that
Mr. Tatsuo TANIGUCHI (谷口龍雄) is interested in under the SFO.

(7)

Mrs. Eiko TANIGUCHI (谷口栄子) is the spouse of Mr. Masataka TANIGUCHI (谷口晶貴) and is therefore deemed to be interested in the Shares that
Mr. Masataka TANIGUCHI (谷口晶貴) is interested in under the SFO.

(8)

Ms. JEONG Kyeonghae (鄭慶惠) is the spouse of Mr. Yoshihiro TEI (鄭義弘)* (also known as JEONG Jungwung) and is therefore deemed to beinterested in the Shares that Mr. Yoshihiro TEI (鄭義弘)* (also known as JEONG Jungwung) is interested in under the SFO.

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Annual Report 202033

Report of the Directors(9)

Okada Holdings Limited indirectly holds 74.21% interest in Universal Entertainment Corporation, which directly holds Tiger Resort Asia Limited.
Accordingly, each of the Universal Entertainment Corporation and Okada Holdings Limited is deemed to be interested in such 80,500,000 Shares
held by Tiger Resort Asia Limited.

(10)

All interests stated are long positions.

(11)

There were 1,195,850,460 Shares in issue as at 31 March 2020.

Save as disclosed above, and as at 31 March 2020, the Directors were not aware of any persons (who were not Directors
or chief executive of the Company) who had an interest or short position in the Shares or underlying Shares which would
fall to be disclosed under Divisions 2 and 3 of Part XV of the SFO, or which would be required, pursuant to Section 336
of the SFO, to be entered in the register referred to therein.

ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES
Save as disclosed under the section headed “Directors’ and Chief Executive’s Interests and/or Short Positions in the
Shares, Underlying Shares and Debentures of the Company or any Specified Undertaking of the Company or any other
Associated Corporation”, at no time during the year was the Company, any subsidiary or its holding company or any
fellow subsidiary, a party to any arrangement to enable the Directors to acquire benefits by means of the acquisition ofshares in, or debentures of, the Company or any other body corporate.

MANAGEMENT CONTRACTS
No contracts concerning the management and administration of the whole or any substantial part of the business of theCompany were entered into or existed during the year.

NON-COMPETITION UNDERTAKING
The Controlling Shareholders, including the members of the Taniguchi Consortium, have confirmed to the Company of
their compliance with the non-competition undertakings provided to the Company under a deed of non-competition dated
16 March 2015. The independent non-executive Directors have reviewed the status of compliance and confirmed that all
the undertakings under the deed of non-competition have been complied with by the Controlling Shareholders and duly
enforced since the Listing Date and up to the date of this annual report.

DONATIONS
Charitable and other donations made by the Group during the year amounted to approximately ¥2 million.

CONNECTED TRANSACTIONSThe Directors confirm that during the year ended 31 March 2020, the Group did not have any connected transactions andcontinuing connected transactions as defined under the Listing Rules. The significant related party transactions madeduring the year that did not constitute connected transactions under the Listing Rules were disclosed in Note 34 to theconsolidated financial statements. The Directors therefore confirm that the Company has complied with the disclosure
requirements in accordance with Chapter 14A of the Listing Rules.

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Report of the Directors
MAJOR CUSTOMERS AND SUPPLIERS
During the year ended 31 March 2020, less than 1.0% of the Group’s revenue were attributed by the Group’s five largest
customers; while 68.3% and 90.7% of the Group’s total purchases were attributed by the Group’s largest and the fivelargest suppliers, respectively. The largest supplier of the Group supplies G-prize to the Group’s pachinko halls and has
a business relationship of more than 10 years with the Group. To the knowledge of the Directors, none of the Directors or
any Shareholders who owned 5.0% or more of the issued share capital of the Company as at 31 March 2020 or any of
their respective associates held any interest in any of the five largest suppliers of the Group.

REMUNERATION POLICY AND PENSION SCHEME
Remuneration policy of the Group is reviewed regularly, making reference to legal framework, market condition andperformance of the Group and individual staff (including the Directors). The remuneration policy and remuneration
packages of the executive Directors and members of the senior management of the Group are reviewed by the
Remuneration Committee.
Particulars of the Group’s retirement benefit schemes are set out in Note 36 to the consolidated financial statements.

AUDIT COMMITTEE
The audit committee had reviewed, together with the management and external auditor, the accounting principles andpolicies adopted by the Group and the audited consolidated financial statements for the year ended 31 March 2020.

SUFFICIENCY OF PUBLIC FLOAT
Based on information publicly available to the Company and to the knowledge of the Directors, at least 25% of theCompany’s total issued share capital, the prescribed minimum percentage of public float approved by the Stock
Exchange and permitted under the Listing Rules, is held by the public at all times as of the date of this annual report.

AUDITOR
PricewaterhouseCoopers has acted as auditor of the Company for the year ended 31 March 2020.
The consolidated financial statements have been audited by PricewaterhouseCoopers who shall retire in the forthcoming
AGM and, being eligible, will offer itself for re-appointment. A resolution for the re-appointment of PricewaterhouseCoopers
as auditor of the Company will be proposed at the forthcoming AGM.

NIRAKU GC HOLDINGS, INC.

Annual Report 202035

Report of the Directors
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTING
The environmental, social and governance report of the Group will be published separately no longer than three months
after the publication of this annual report.

On behalf of the BoardNIRAKU GC HOLDINGS, INC.*
株式会社ニラク▪ジー▪シー▪ホールディングス
Chairman, Executive Director and Chief Executive Officer
Hisanori TANIGUCHI
Fukushima, Japan, 19 June 2020
* For identification purpose only

36

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Independent Auditor’s Report

TO THE SHAREHOLDERS OF 株式会社二ラク▪ジー▪シー▪ホールディングスNIRAKU GC HOLDINGS, INC.*(incorporated in Japan with limited liability)

OPINION
What we have audited
The consolidated financial statements of 株式会社二ラク▪ジー▪シー▪ホールディングス Niraku GC Holdings, Inc.* (the“Company”) and its subsidiaries (the “Group”) set out on pages 43 to 118, which comprise:•the consolidated statement of financial position as at 31 March 2020;•

the consolidated statement of comprehensive income for the year then ended;•

the consolidated statement of changes in equity for the year then ended;•

the consolidated statement of cash flows for the year then ended; and•the notes to the consolidated financial statements, which include a summary of significant accounting policies.

Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of theGroup as at 31 March 2020, and of its consolidated financial performance and its consolidated cash flows for the year
then ended in accordance with International Financial Reporting Standards (“IFRSs”) and have been properly prepared incompliance with the disclosure requirements of the Hong Kong Companies Ordinance.

NIRAKU GC HOLDINGS, INC.

Annual Report 202037

Independent Auditor’s Report
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide basis for our opinion.

Independence
We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of
Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordancewith the IESBA Code.

KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of theconsolidated financial statements of the current year. These matters were addressed in the context of our audit of theconsolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key audit matters identified in our audit are summarised as follows:•

38

Impairment assessment of property, plant and equipment and right-of-use-assets.

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Independent Auditor’s Report
Impairment assessment of property,
plant and equipment and right-of-use assets
Refer to Notes 4 (Critical accounting estimates andjudgements), 13 (Property, plant and equipment) and 14(Leases) to the consolidated financial statements for the
related disclosures.
As at 31 March 2020, the Group had property, plant andequipment and right-of-use assets of ¥22,257 million and¥32,072 million, respectively. The balances of property,
plant and equipment and right-of-use assets were related
to the cash-generating units (“CGUs”) of each individual
pachinko and pachislot hall, a pachinko and pachislot hallwith hotel business, restaurants and amusement arcades.
The performance of the Group’s pachinko and pachislot
hall operations and other operations were impacted bykeen competition and the outbreak of Coronavirus Disease2019 (COVID-19). Management reviews for impairment
whenever events or changes in circumstances indicatethat carrying amount of a CGU may not be recoverable.
In view that some of the CGUs had performed below
management’s expectation or were loss-making,management considered there were impairment indicators
for these CGUs.
Management performed impairment assessments toassess the recoverable amounts of these CGUs, whichwere determined as the fair value less cost to sell or valuein-use, whichever was higher. The value-in-use
calculations were based on future cash flow forecasts of
the CGUs adopted under the multiple probability-weighted
scenarios approach. Based on management’s assessment,
provisions for impairment loss of ¥213 million and ¥463
million were recorded for property, plant and equipment
and right-of-use assets, respectively, during the year
ended 31 March 2020.
We focused on this area due to the significance of thecarrying values of the property, plant and equipment andright-of-use assets to the Group, as well as the significant
judgments and estimates involved in the determination ofvalue-in-use calculations, including the revenue growth
rates, discount rate and probabilities assigned to eachscenario under the multiple probability-weighted scenarios
approach.

In relation to the impairment assessments of property,
plant and equipment and right-of-use assets performed bymanagement, we assessed the reasonableness ofmanagement’s assessments which were to identify
impairment indicators for the CGUs that had performed
below management’s expectation or were loss-making. We
challenged management’s criteria for identification of
impairment indication by comparing to the historicalperformance and operational development of the CGUs.
Our procedures in relation to management’s value-in-use
calculations included:•

Challenged management’s assumption of revenue
growth rates adopted under the multiple probabilityweighted scenarios approach by comparing the rate
to industry trends, the Group’s historical performanceand operational development;•

Assessed management’s assumptions of discountrate by comparing to the cost of capital and cost ofdebt of comparable organisations in the industry;•

Assessed management’s assumptions of theprobability assigned to each scenario under the
probabi l i ty-w ei ghted scenari os approach byconsidering relevant factors such as the Group’sbusiness development and length and severity of the
impact of COVID-19 with reference to the businessand industry circumstances, etc.;•

Compared the current year actual results with theprior year forecasts to consider the reasonablenessof management’s forecasts; including the relevant
factors such as the Group’s business developmentwith reference to the business and industry
circumstances etc., had been taken into account in
the current year forecasts;•

Reconciled the data input to supporting evidence,such as approved budgets and considered thereasonableness of these budgets based on our
knowledge to the business; and•Evaluated the sensitivity analysis performed bymanagement around the revenue growth rate toascertain the extent and likelihood of such changes
had been appropriately considered.

Based on the procedures performed, we found thejudgements and estimates made by management inrelation to the value-in-use calculations were supportableby available evidence.
NIRAKU GC HOLDINGS, INC.

Annual Report 202039

Independent Auditor’s Report
OTHER INFORMATION
The directors of the Company are responsible for the other information. The other information comprises all of theinformation included in the annual report other than the consolidated financial statements and our auditor’s report
thereon.
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 the other 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 this other information, weare required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the consolidated financial statements that give a trueand fair view in accordance with IFRSs and the disclosure requirements of the Hong Kong Companies Ordinance, andfor such internal control as the directors determine 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, the directors are responsible for assessing the Group’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole arefree from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
We report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards oraccept liability to any other person for the contents of this report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.

40

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Independent Auditor’s Report
As part of an audit in accordance with ISAs, 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 tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theGroup’s internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by the directors.

•

Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on theaudit evidence obtained, whether a material uncertainty exists related to events or conditions that may castsignificant 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’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on theaudit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause theGroup to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the consolidated financial statements, including thedisclosures, and whether the consolidated financial statements represent the underlying transactions and events ina manner that achieves fair presentation.

•

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business 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 remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide those charged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.

NIRAKU GC HOLDINGS, INC.

Annual Report 202041

Independent Auditor’s Report
From the matters communicated with those charged with governance, we determine those matters that were of mostsignificance 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 thematter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits ofsuch communication.
The engagement partner on the audit resulting in this independent auditor’s report is Ng Ka Ho.

PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 19 June 2020
* For identification purpose only

42

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Consolidated Statement of Comprehensive Income
For the year ended 31 March 2020

Note

2020
¥ million

2019¥ million

Revenue

5

28,04628,325

Other income
Other gains, net
Hall operating expenses
Administrative and other operating expenses

6
6
7
7

1,074
400
(21,910)(5,655)551
54(22,875)(4,502)

1,955

1,553

Operating profit
Finance income
Finance costs

9962(1,436)52(507)

Finance costs, net

9(1,374)(455)

Share of results of an associate

12

–

(5)

10

581
(717)

1,093
(549)

(Loss)/profit for the year

(136)

544

(Loss)/profit attributable to:
Owners of the Company
Non-controlling interest

179
(315)

610
(66)

(136)

544

0.15

0.51

Other comprehensive (loss)/income
Items that have been or may be subsequently reclassified to profit or loss
Change in value of financial assets through other comprehensive income
Currency translation differences

(241)
(45)

(29)
99

Total comprehensive (loss)/income for the year

(422)

614

Total comprehensive (loss)/income attributable to:
Owners of the Company
Non-controlling interest

(107)
(315)

680
(66)

(422)

614

Profit before income tax
Income tax expense

Earnings per share for profit attributable to ownersof the Company— Basic and diluted (expressed in Japanese Yen per share)

11

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying
notes.
NIRAKU GC HOLDINGS, INC.

Annual Report 202043

Consolidated Statement of Financial Position
As at 31 March 2020

ASSETS
Non-current assets
Property, plant and equipment
Right-of-use assets
Investment properties
Intangible assets
Prepayments, deposits and other receivables
Interest in an associate
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Deferred income tax assets

Current assets
Inventories
Trade receivables
Prepayments, deposits and other receivables
Financial assets at fair value through profit or loss
Bank deposits with maturity over 3 months
Cash and cash equivalents

Total assets

44

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Note

2020
¥ million

2019¥ million

13
14
15
16
22
12
18
18
29

22,25732,072
630
1,601
5,119
–
–
565
2,822

28,523
–
650
1,662
4,208
–
100
911
1,588

65,066

37,642

40
48
1,026
100
750
14,128

109
53
1,020
–
43
15,176

16,092

16,401

81,15854,043

20
21
22
18
23
23

Consolidated Statement of Financial Position
As at 31 March 2020

Note

2020
¥ million

2019¥ million

24
25

3,000
23,2203,000
24,617

Non-controlling interest

26,220(421)

27,617(106)

Total equity

25,79927,511

9,853
32,0352,270
22

11,792
2,717
2,226
27

44,18016,762

114
3,233
2,542
4,404
4
882

294
4,290
703
4,353
4
126

11,1799,770

Total liabilities

55,35926,532

Total equity and liabilities

81,15854,043

EQUITY
Equity attributable to owners of the Company
Share capital
Reserves

LIABILITIES
Non-current liabilities
Borrowings
Lease liabilities
Provisions and other payables
Derivative financial instruments

28
14
27
19

Current liabilities
Trade payables
Borrowings
Lease liabilities
Accruals, provisions and other payables
Derivative financial instruments
Current income tax liabilities

26
28
14
27
19

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
The financial statements on pages 43 to 118 were approved by the Board of Directors on 19 June 2020 and were signed
on its behalf.

Hisanori Taniguchi
Director

NIRAKU GC HOLDINGS, INC.

Annual Report 202045

Consolidated Statement of Changes in Equity
For the year ended 31 March 2020

Attributable to owners of the Company
Investment
Share

Balances at 1 April 2018

CapitalCapitalsurplusreserve

Legal revaluation
reserveNon-reserve

Retained

capital (Note 24(a)) (Note 24(b)) (Note 24(c)) (Note 24(d))

Exchange

controlling

earnings

reserve

Sub-totalinterest

Total¥ million¥ million¥ million¥ million¥ million¥ million¥ million¥ million¥ million¥ million

3,000

13,954(16,028)107

93

26,143(93)

27,176(40)

27,136

–

–

–

–

–

610

–

610

(66)

544

–

–

–

–

(29)

–

–

(29)

–

(29)

–

–

–

–

–

–

99

99

–

99

–

–

–

–

(29)

610

99

680

(66)

614

Comprehensive income
Profit/(loss) for the year
Other comprehensive (loss)/income
Financial assets at fair value through othercomprehensive income, net of tax
Currency translation difference
Total comprehensive (loss)/income
for the year

Final dividend relating to 2018 (Note 30)

–

–

–

–

–

(143)

–

(143)

–

(143)

Interim dividend relating to 2019 (Note 30)

–

–

–

–

–

(96)

–

(96)

–

(96)

Total transactions with owners

–

–

–

–

–

(239)

–

(239)

–

(239)

Balance at 31 March 2019

3,000

13,954(16,028)107

64

26,514

6

27,617(106)

27,511

Balances at 1 April 2019

3,000

13,954(16,028)107

64

26,514

6

27,617(106)

27,511

–

–

–

–

–

(1,086)–(1,086)–(1,086)3,000

13,954(16,028)107

64

25,428

6

26,531(106)

26,425

–

–

–

–

–

179

–

179

(315)

(136)

Adjustment on adoption of IFRS 16
At 1 April 2019 (restated)
Comprehensive income/(loss)
Profit/(loss) for the year
Other comprehensive loss
Financial assets at fair value through other

–

–

–

–

(241)

–

–

(241)

–

(241)

–

–

–

–

–

–

(45)

(45)

–

(45)

–

–

–

–

(241)

179

(45)

(107)

(315)

(422)

Final dividend relating to 2019 (Note 30)

–

–

–

–

–

(84)

–

(84)

–

(84)

Interim dividend relating to 2020 (Note 30)

–

–

–

–

–

(120)

–

(120)

–

(120)

Total transactions with owners

–

–

–

–

–

(204)

–

(204)

–

(204)

3,000

13,954(16,028)

107

(177)

25,403(39)

26,220(421)

25,799comprehensive income, net of tax
Currency translation difference
Total comprehensive (loss)/income
for the year

Balance at 31 March 2020

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

46

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Consolidated Statement of Cash Flows
For the year ended 31 March 20202020
¥ million

2019¥ million

6,286
(197)
(619)

5,082
(391)
(126)

5,470

4,565

–
(1,446)
–
(63)
1,991
–
–
–
43
(750)
–
5
55

(5)
(4,587)
(14)
(83)
4
(100)
50
(354)
–
–
47
1
55

(165)

(4,986)–
7,294(10,290)(204)(2,011)(1,131)

(981)
6,127
(4,901)(239)––

Net cash (used in)/generated from financing activities(6,342)

6

Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange loss on cash and cash equivalents(1,037)
15,176(11)(415)
15,594(3)

Cash and cash equivalents at end of the year

14,12815,176

Note
Cash flows from operating activities
Cash generated from operations
Interest paid
Income tax paid

31

Net cash generated from operating activities
Cash flows from investing activities
Payment for interest in an associate
Purchase of property, plant and equipment
Purchase of investment properties
Purchase of intangible assets
Proceeds from disposal of property, plant and equipment
Purchase of financial assets at fair value
Proceeds from disposal of financial assets at fair value
Payment of long-term loan to an associate
Proceeds from bank deposits with maturity over 3 months
Placement of bank deposits with maturity over 3 months
Proceeds from long-term bank deposits
Interest received
Dividend received

12
15
16

12

Net cash used in investing activities
Cash flows from financing activities
Repayment of obligations under finance leases
Proceeds from bank borrowings
Repayment of bank borrowings
Dividends paid
Capital element of lease payment
Interest element of lease payment

9

The above consolidated statement of statement of cash flows should be read in conjunction with the accompanying
notes.
NIRAKU GC HOLDINGS, INC.

Annual Report 202047

Notes to the Consolidated Financial Statements
1

GENERAL INFORMATION, REORGANISATION AND BASIS OF PRESENTATION
1.1 General information
株式会社二ラク▪ジー▪シー▪ホールディングスNIRAKU GC HOLDINGS, INC.* was incorporated in Japan
under the Japan Companies Act with limited liability on 10 January 2013. The address of its registered office
is 1-39 Hohaccho 1-chome, Koriyama-shi, Fukushima, Japan.
The Company is an investment holding company. The Company and its subsidiaries (together, the “Group”)
are principally engaged in pachinko and pachislot hall operations, hotel and restaurant operations in Japan;
amusement arcade operations in Southeast Asian countries; and restaurant operations in China. The
Company is listed on the Main Board of The Stock Exchange of Hong Kong Limited.
These consolidated financial statements are presented in millions of Japanese Yen (“¥”), unless otherwise
stated.
These consolidated financial statements have been approved by the Board of Directors of the Company on
19 June 2020.

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThis note provides a list of the significant accounting policies adopted in the preparation of these consolidated
financial statements. These policies have been consistently applied to all the years presented, unless otherwise
stated. The financial statements are for the Group consisting of the Company and its subsidiaries.

2.1 Basis of preparation

48

(i)

Compliance with International Financial Reporting Standards and Hong Kong Companies OrdinanceThe consolidated financial statements have been prepared in accordance with all applicable
International Financial Reporting Standards (“IFRS”) issued by the IASB and requirements of the Hong
Kong Companies Ordinance Cap. 622.

(ii)

Historical cost convention
The consolidated financial statements have been prepared under the historical cost convention, as
modified by the revaluation of financial assets and financial liabilities (including derivative financial
instruments) which are carried at fair values.

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.1 Basis of preparation (Continued)(iii)

New and amended standards, improvements and interpretations adopted by the GroupThe Group has applied the following standards, amendments and interpretations for the first time for
their annual reporting period commencing 1 April 2019:
IFRS 16IFRIC-Int 23
Amendments to IFRS 9
Amendments to IAS 19
Amendments to IAS 28
Amendments to IFRSs

Leases
Uncertainty over income tax treatments
Prepayment features with negative compensation
Plan amendment, curtailment or settlement
Long-term interests in associates and joint ventures
Annual improvements to IFRSs 2015–2017 cycle

The Group had to change its accounting policies as a result of adopting IFRS 16. For details, pleaserefer to Note 2.2. Most of the other amendments and interpretations listed above did not have any
material impact on the amounts recognised in prior periods and are not expected to significantly affectthe current period.
(iv)

New and amended standards, improvements and interpretations, to existing standards not yet
adopted by the Group
Effective foraccounting
periods
beginningon or after
Amendments to IFRS 3
Amendments to IAS 1 and IAS 8
Conceptual Framework
for Financial Reporting 2018
IFRS 17
Amendments to IFRS 10 and
IAS 28

Definition of a Business
Definition of Material
Revised Conceptual Framework
for Financial Reporting
Insurance contracts
Sale or Contribution of Assets between
an Investor and its Associateor Joint Venture

1 January 2020
1 January 2020
1 January 2020
1 January 2021
To be determined

Certain new accounting standards and interpretations have been published that are not mandatory for
31 March 2020 reporting periods and have not been early adopted by the Group. These standards are
not expected to have a material impact on the Group in the current or future reporting periods and on
foreseeable future transactions.

NIRAKU GC HOLDINGS, INC.

Annual Report 202049

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.2 Adoption of IFRS 16 Leases
This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements.
As indicated in Note 2.1 above, the Group has adopted IFRS 16 Leases retrospectively from 1 April 2019, but
has not restated comparatives for the 2019 reporting period, as permitted under the specific transition
provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are
therefore recognised in the opening balance sheet on 1 April 2019. The new accounting policies are disclosed
in Note 2.28.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously beenclassified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at thepresent value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate asof 1 April 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1
April 2019 was 3.06%.
For leases previously classified as finance leases the entity recognised the carrying amount of the leaseassets and lease liabilities immediately before transition as the carrying amount of the right-of-use assets andthe lease liabilities at the date of initial application. The measurement principles of IFRS 16 are only applied
after that date.
(i)

Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by
the standard:•

applying a single discount rate to a portfolio of leases with reasonably similar characteristics•

relying on previous assessments on whether leases are onerous as an alternative to performing
an impairment review — there were no onerous contracts as at 1 April 2019•accounting for operating leases with a remaining lease term of less than 12 months as at 1 April
2019 as short-term leases•

excluding initial direct costs for the measurement of the right-of-use asset at the date of initial
application, and•using hindsight in determining the lease term where the contract contains options to extend or
terminate the lease.

The Group has also elected not to reassess whether a contract is, or contains a lease at the date ofinitial application. Instead, for contracts entered into before the transition date the Group relied on its
assessment made applying IAS 17 and Interpretation 4 Determining whether an Arrangement contains
a Lease.

50

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.2 Adoption of IFRS 16 Leases (Continued)(ii)

Measurement of lease liabilities
2019¥ million
Operating lease commitments disclosed as at 31 March 2019
Discounted using the lessee’s incremental borrowing rate
at the date of initial application
Add: adjustments as a result of a different treatment ofextension and termination options
Less: short-term leases recognised on a straight-line basis as expense
Add: finance lease liabilities under IAS 17 as at 31 March 201910,176

Lease liabilities recognised as at 1 April 201935,625

Of which are:
Current lease liabilities
Non-current lease liabilities

3,993
31,632(3,352)
26,041(660)
3,420

35,625(iii)

Measurement of right-of-use assets
The associated right-of-use assets were measured at the amount equal to the lease liabilities, adjusted
by the amount of any prepaid or accrued lease payments relating to that lease recognised in the
consolidated statement of financial position as at 31 March 2019.

(iv)

Adjustments recognised on adoption of IFRS 16
The carrying amount of right-of-use assets by class of underlying asset are as below:
1 April 2019¥ million
Non-current assets
Buildings
Leasehold improvements
Equipment and tools

32,566
1,646
97
34,309NIRAKU GC HOLDINGS, INC.

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Notes to the Consolidated Financial Statements
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.2 Adoption of IFRS 16 Leases (Continued)(iv)

Adjustments recognised on adoption of IFRS 16 (Continued)
The following table shows the adjustment for change in accounting policy recognised for each individualline item. Line items that were not affected by the changes have not been included. As a result, the subtotals and totals disclosed cannot be recalculated from the numbers provided.
As at 1 April 2019
Consolidated statement offinancial position (extracted)

As originallypresented¥ million

Adjustment
under IFRS 16¥ million

Restated¥ million

Non-current assets
Property, plant and equipment
Right-of-use assets
Deferred tax assets

28,523–
1,588(3,661)34,309471

24,86234,3092,059

Non-current liabilities
Lease liabilities
Obligations under finance leases

–
2,717

31,632(2,717)

31,632–Current liabilities
Lease liabilities
Obligations under finance leases

–
703

3,993
(703)

3,993
–

24,617(1,086)23,531EquityReserves(v)

52

Lessor accounting
The Group did not need to make any adjustments to the accounting for assets held as lessor underoperating leases as a result of the adoption of IFRS 16.

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Annual Report 2020

Notes to the Consolidated Financial Statements
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.2 Adoption of IFRS 16 Leases (Continued)(vi)

Accounting for sales and leaseback transaction
A sale and leaseback transaction involves the sale of an asset and the leasing back of the same asset.
The lease payment and the sale price are usually interdependent because they are negotiated as a
package.
Until 31 March 2019, the accounting treatment of a sale and leaseback transaction depends upon thetype of lease involved. If a sale and leaseback transaction results in a finance lease, any excess ofsales proceeds over the carrying amount is deferred and amortised over the lease term. If a sale andleaseback transaction results in an operating lease, and it is clear that the transaction is established atfair value, any profit or loss is recognised immediately. If the sale price is below fair value, any profit orloss is recognised immediately except that, if the loss is compensated for by future lease payments at
below market price, it is deferred and amortised in proportion to the lease payments over the period forwhich the asset is expected to be used. If the sale price is above fair value, the excess over fair value isdeferred and amortised over the period for which the asset is expected to be used.
On the initial application day, the Group do not re-assess sale and leaseback transactions entered into
before the date of initial application to determine whether or not the sale fulfilled the condition of IFRS
15. The seller-lessee accounts for any deferred gain or loss due to off-market term as an adjustment to
the leaseback right-of-use asset for an operating leaseback.
Upon adoption of IFRS 16, the associated right-of-use for sales and leaseback entered into before thedate of initial application were measured at the amount equal to the lease liability, adjusted by theamount of other liabilities, retained earnings and non-controlling interest, relating to that leaserecognised in the consolidated statement of financial position as at 31 March 2019.

(vii) Impact on segment disclosures
Segment EBITDA for the year ended 31 March 2020, segment assets and segment liabilities as at 31
March 2020 changed as a result of the change in accounting policy as follows:

Pachinko and pachislot hall operations
Amusement arcade operations
OthersSegment
EBITDA¥ million
Increase/(decrease)

Segment
assets¥ million
Increase/(decrease)

Segment
liabilities¥ million
Increase/(decrease)

2,215
227
(269)

27,225910
276

30,504
930
441

2,173

28,411

31,875

Annual Report 2020

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Notes to the Consolidated Financial Statements
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3 Principles of consolidation and equity accounting(i)

Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group
controls an entity where the Group is exposed to, or has rights to, variable returns from its involvementwith the entity and has the ability to affect those returns through its power to direct the activities of theentity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group (refer
to note 2.4).
Inter-company transactions, balances and unrealised gains on transactions between Group companies
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the transferred asset. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the
consolidated statement of profit or loss, statement of comprehensive income, statement of changes inequity and balance sheet respectively.

(ii)

Associates
Associates are all entities over which the Group has significant influence but not control or joint control.
This is generally the case where the Group holds between 20% and 50% of the voting rights.
Investments in associates are accounted for using the equity method of accounting (see (iv) below),
after initially being recognised at cost.

(iii)

Equity method
Under the equity method of accounting, the investments are initially recognised at cost and adjusted
thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit
or loss, and the Group’s share of movements in other comprehensive income of the investee in othercomprehensive income. Dividends received or receivable from associates and joint ventures arerecognised as a reduction in the carrying amount of the investment.
Where the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in
the entity, including any other unsecured long-term receivables, the Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are
eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminatedunless the transaction provides evidence of an impairment of the asset transferred. Accounting policies
of equity-accounted investees have been changed where necessary to ensure consistency with thepolicies adopted by the Group.
The carrying amount of equity-accounted investments is tested for impairment in accordance with thepolicy described in note 2.11.

54

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2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3 Principles of consolidation and equity accounting (Continued)(iv)

Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control astransactions with equity owners of the Group. A change in ownership interest results in an adjustment
between the carrying amounts of the controlling and non-controlling interests to reflect their relativeinterests in the subsidiary. Any difference between the amount of the adjustment to non-controllinginterests and any consideration paid or received is recognised in a separate reserve within equity
attributable to owners of the Company.
When the Group ceases to consolidate or equity account for an investment because of a loss of control,
joint control or significant influence, any retained interest in the entity is remeasured to its fair value withthe change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying
amount for the purposes of subsequently accounting for the retained interest as an associate, joint
venture or financial asset. In addition, any amounts previously recognised in other comprehensive
income in respect of that entity are accounted for as if the Group had directly disposed of the related
assets or liabilities. This may mean that amounts previously recognised in other comprehensive income
are reclassified to profit or loss or transferred to another category of equity as specified/permitted byapplicable IFRSs.

2.4 Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether
equity instruments or other assets are acquired. The consideration transferred for the acquisition of a
subsidiary comprises the:•fair values of the assets transferred;•

liabilities incurred to the former owners of the acquired business;•

equity interests issued by the Group;•

fair value of any asset or liability resulting from a contingent consideration arrangement; and•fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are,with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises
any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value orat the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.4 Business combinations (Continued)
The excess of the:•consideration transferred;•amount of any non-controlling interest in the acquired entity; and•acquisition-date fair value of any previous equity interest in the acquired entity

over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are lessthan the fair value of the net identifiable assets of the business acquired, the difference is recognised directlyin profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the Group’s
incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions. Contingent consideration is classified either as
equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fairvalue with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s
previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains orlosses arising from such remeasurement are recognised in profit or loss.

2.5 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable costs
of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend received
and receivable.
Impairment testing of the investments in subsidiaries is required upon receiving a dividend from theseinvestments if the dividend exceeds the total comprehensive income of the subsidiary in the period thedividend is declared or if the carrying amount of the investment in the separate financial statements exceeds
the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

2.6 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker.
The board of the Company has appointed a strategic steering committee which assesses the financial
performance and position of the Group, and makes strategic decisions. The steering committee, which has
been identified as being the chief operating decision maker, consists of the chief executive officer, the chief
financial officer and the manager for corporate planning.

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2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.7 Foreign currency translation(i)Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using thecurrency of the primary economic environment in which the entity operates (the “functional currency”).
The consolidated financial statements is presented in Japanese Yen (“¥”), which is the Company’sfunctional currency and the Group’s presentation currency.

(ii)

Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at thedates of the transactions. Foreign exchange gains and losses resulting from the settlement of suchtransactions and from the translation of monetary assets and liabilities denominated in foreign
currencies at year end exchange rates are generally recognised in profit or loss. They are deferred inequity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are
attributable to part of the net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit orloss, within finance costs. All other foreign exchange gains and losses are presented in the statement of
profit or loss on a net basis within other gains/(losses).
Non-monetary items that are measured at fair value in a foreign currency are translated using theexchange rates at the date when the fair value was determined. Translation differences on assets andliabilities carried at fair value are reported as part of the fair value gain or loss. For example, translationdifferences on non-monetary assets and liabilities such as equities held at fair value through profit orloss are recognised in profit or loss as part of the fair value gain or loss and translation differences on
non-monetary assets such as equities classified as fair value through other comprehensive income arerecognised in other comprehensive income.

(iii)

Group companies
The results and financial position of foreign operations (none of which has the currency of a
hyperinflationary economy) that have a functional currency different from the presentation currency aretranslated into the presentation currency as follows:•

assets and liabilities for each financial position presented are translated at the closing rate at thedate of that financial position•

income and expenses for each statement of profit or loss and statement of comprehensive income
are translated at average exchange rates (unless this is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case income andexpenses are translated at the dates of the transactions), and•all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign
entities, and of borrowings and other financial instruments designated as hedges of such investments,
are recognised in other comprehensive income. When a foreign operation is sold or any borrowings
forming part of the net investment are repaid, the associated exchange differences are reclassified to
profit or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated asassets and liabilities of the foreign operation and translated at the closing rate.

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Annual Report 202057

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.8 Property, plant and equipment
Land and buildings comprise mainly pachinko and pachislot halls and offices. All property, plant andequipment are stated at historical cost less depreciation, except freehold land which is not subject todepreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Construction in progress is stated at cost less impairment loss. It is not depreciated until completion of theconstruction and the relevant assets are available for use.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to theGroup and the cost of the item can be measured reliably. The carrying amount of any component accounted
for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to
profit or loss during the reporting period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate their cost or revalued amounts, net of
their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain
leased plant and equipment, the shorter lease term as follows:— Buildings— Leasehold improvements— Equipment and tools— Motor vehicles

20 to 40 years
Shorter of lease term or useful lives
2 to 20 years
2 to 5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of eachreporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount (note 2.11).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These areincluded in profit or loss. When revalued assets are sold, it is Group policy to transfer any amounts included
in other reserves in respect of those assets to retained earnings.

2.9 Investment properties
Investment properties, principally freehold office buildings, are held for long-term rental yields and are notoccupied by the Group. Investment property is initially measured at cost, including related transaction costs
and where applicable borrowing costs. Subsequently, they are carried at fair value. Changes in fair values arepresented in profit or loss as part of other income.

58

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2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.10 Intangible assets(i)

Goodwill
Goodwill is measured as described in note 2.11. Goodwill on acquisitions of subsidiaries is included inintangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if
events or changes in circumstances indicate that it might be impaired, and is carried at cost lessaccumulated impairment losses. Gains and losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation ismade to those cash-generating units or Groups of cash-generating units that are expected to benefit
from the business combination in which the goodwill arose. The units or Groups of units are identified at
the lowest level at which goodwill is monitored for internal management purposes, being the operating
segments (note 5).

(ii)

Trademarks, licences and customer contracts
Separately acquired trademarks and licences are shown at historical cost. Trademarks, licences andcustomer contracts acquired in a business combination are recognised at fair value at the acquisition
date. They have a finite useful life and are subsequently carried at cost less accumulated amortisationand impairment losses. Amortisation is calculated using the straight-line method to allocate the costover their estimated useful lives of 7 to 10 years.

(iii)

Computer software
Computer software is stated at cost less accumulated amortisation and impairment losses. Amortisation
is calculated using the straight-line method to allocate the cost over their estimated useful lives of 5
years.

2.11 Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be
impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. An impairment loss is recognised for the amount by which theasset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s
fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets areGrouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or Groups of assets (cash-generating units). Non-financial
assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at
the end of each reporting period.

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Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.12 Financial assets(i)Classification
The Group classifies its financial assets in the following categories according to IFRS 9 “Financial
Instruments”: financial assets at amortised costs and financial assets at fair value. Management
determines the classification of its financial assets at initial recognition. This classification depends onwhether the financial asset is a debt or equity instrument.
Debt instruments
Financial assets at amortised costs are debt instruments that meet the Group’s business model forholding the investments to collect contractual cash flows and the contractual terms of the instrument
give rise to cash flows that are solely payments of principal and interest on the principal amountoutstanding. The nature of any derivatives embedded in the debt instrument are considered indetermining whether the cash flows of the instrument are solely payment of principal and interest on theprincipal outstanding and are not accounted for separately. Other debt instruments are held-for-trading
and classified as financial assets at fair value through profit or loss.
Equity instruments
All the Group’s equity instruments are measured at fair value. Equity instruments that are held for
trading are measured at fair value through profit or loss. For all other equity instruments, the Group has
made an irrevocable election at initial recognition to recognise changes in their fair value through othercomprehensive income.
Financial assets are included in current assets, except for the amounts that are settled or expected to
be settled more than 12 months after the end of the reporting periods. These are classified as noncurrent assets.

(ii)

Recognition, derecognition and measurement
Regular way purchases and sales of financial assets are recognised on the trade-date — the date on
which the Group commits to purchase or sell the asset. Financial assets are derecognised when therights to receive cash flows from the investments have expired or have been transferred and the group
has transferred substantially all risks and rewards of ownership. Investments are initially recognised atfair value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Financial assets carried at fair value through profit or loss are initially recognised at fair value, andtransaction costs are expensed in the consolidated statement of comprehensive income.
Debt instruments that fulfil both the business model and the cash flow characteristic conditions aremeasured at amortised cost using the effective interest method. Other debt instruments are held-fortrading and measured at fair value through profit or loss.
Equity instruments are measured at fair value through profit or loss, except where the equity instruments
are not held for trading and are irrevocably elected to measure at fair value through othercomprehensive income at initial recognition, in which case, those financial assets are measured at fairvalue through other comprehensive income and there is no subsequent recycling of fair value gains andlosses to profit or loss. Dividends from such investments continue to be recognised in profit or loss aslong as they represent a return on investment.
The Group reclassifies its financial assets when and only when its business model for managing thosefinancial assets changes.

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Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.12 Financial assets (Continued)(ii)

Recognition, derecognition and measurement (Continued)
Gains or losses arising from changes in the fair value of the financial assets at fair value through profit
or loss are presented in the consolidated statement of comprehensive income within “Other losses, net”
in the period in which they arise. Changes in the fair value of financial assets through othercomprehensive income are recognised in other comprehensive income except for the impairment loss (ifany) on debt instruments which are accounted for in profit or loss.
Gain or loss (if any) on derecognition or impairment (if any) of debt instruments at amortised cost isrecognised in profit or loss.
Interest income from debt instruments at fair value through profit or loss are recognised in the profit orloss. Dividend income from equity instruments included in financial assets at fair value and fair value
through other comprehensive income are recognised in the profit or loss when the Group’s right toreceive payments is established.

2.13 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where theCompany currently has a legally enforceable right to offset the recognised amounts, and there is an intention
to settle on a net basis or realise the asset and settle the liability simultaneously. The company has also
entered into arrangements that do not meet the criteria for offsetting but still allow for the related amounts tobe set off in certain circumstances, such as bankruptcy or the termination of a contract.

2.14 Impairment of financial assets
Impairment charges on the Group’s investment in debt instruments at amortised cost are calculated based on
an expected credit loss model. The Group considers these debt instruments as trade receivables in natureand do not have a significant financing component. Therefore, the Group elected to recognise lifetime
expected credit losses of these debt instruments as provision for impairment allowance at the end of eachreporting period. The Group applies a provision matrix, which is prepared by using historical loss experienceon its trade and other receivables and adjusted for information about current conditions and reasonable andsupportable forecasts of future economic conditions, to estimate the lifetime expected credit losses.
Impairment charge/reversal is recognised in the profit or loss.

2.15 Inventories
Inventories represent supplies, including uninstalled pachinko and pachislot machines with useful life typicallyless than one year, and other consumables which are stated at the lower of cost and net realisable value.
Cost is determined using the first-in, first-out (FIFO) method.

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Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.16 Trade and other receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary
course of business. They are generally due for settlement within 30 days and therefore all classified as
current.
Trade receivables are recognised initially at the amount of consideration that is unconditional unless they
contain significant financing components, when they are recognised at fair value. The Group holds the tradereceivables with the objective of collecting the contractual cash flows and therefore measures them
subsequently at amortised cost using the effective interest method. See note 22 for further information about
the Group’s accounting for trade receivables and note 3.1 for a description of the Group’s impairment policies.

2.17 Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents
includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original
maturities of three months or less that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.

2.18 Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net oftax, from the proceeds.

2.19 Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial
year which are unpaid. Trade payables are classified as current liabilities if payment is due within one year orless (or in the normal operating cycle of the business if longer). If not, they are presented as non-current
liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using theeffective interest method.

2.20 Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings aresubsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs)
and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective
interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of theloan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee isdeferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of
the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised overthe period of the facility to which it relates.

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Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.20 Borrowings (Continued)
Borrowings are removed from the consolidated statement of financial position when the obligation specified in
the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another party and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is recognised in profit or loss as finance costs.
Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor
to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised in profit or loss, whichis measured as the difference between the carrying amount of the financial liability and the fair value of theequity instruments issued.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlementof the liability for at least 12 months after the reporting period.
General and specific borrowing costs that are directly attributable to the acquisition, construction or productionof a qualifying asset are capitalised during the period of time that is required to complete and prepare theasset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period oftime to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.

2.21 Current and deferred income tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets andliabilities attributable to temporary differences and to unused tax losses.
(i)Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in the countries where the Company and its subsidiaries andassociates operate and generate taxable income. Management periodically evaluates positions taken intax returns with respect to situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.

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2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.21 Current and deferred income tax (Continued)(ii)

Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, deferred tax liabilities are not recognised if they arise from the initial recognitionof goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset
or liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (andlaws) that have been enacted or substantially enacted by the end of the reporting period and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled.
The deferred tax liability in relation to investment property that is measured at fair value is determinedassuming the property will be recovered entirely through sale.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available toutilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying
amount and tax bases of investments in foreign operations where the company is able to control thetiming of the reversal of the temporary differences and it is probable that the differences will not reversein the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current
tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset andintends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also recognisedin other comprehensive income or directly in equity, respectively.

2.22 Employee benefits(i)64

Pension obligations
The Group operates a defined contribution plan under which the Group pays fixed contributions into aseparate entity. The Group has no legal or constructive obligations to pay further contributions if thefund does not hold sufficient assets to pay all employees the benefits relating to employee service in thecurrent and prior periods.

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Annual Report 2020

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.22 Employee benefits (Continued)(i)

Pension obligations (Continued)
The Group has established a defined contribution plan for its eligible employees. The assets of the plan
are held in separate trustee-administered funds. Contributions to the plan by the Group are calculated
as a percentage of employees’ monthly basic salaries. The Group has no further payment obligations
once the contributions have been paid. The contributions are recognised as employee benefit expense
when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund ora reduction in the future payments is available.

(ii)

Profit-sharing and bonus plans
The group recognises a liability and an expense for bonuses and profit-sharing based on a formula thattakes into consideration the profit attributable to the company’s shareholders after certain adjustments.
The group recognises a provision where contractually obliged or where there is a past practice that hascreated a constructive obligation.

(iii)

Employee leave entitlements
Employee entitlements to annual leave are recognised when they accrue to employees. A provision ismade for the estimated liability for annual leave as a result of services rendered by employees up to thestatement of financial position date.
Employee entitlements to sick leave and maternity or paternity leave are not recognised until the time ofleave.

(iv)

Long service payments
Employees who have completed the required number of years of service to the Group are eligible forlong service payments.
A provision is recognised in respect of the probable future long service payments expected to be made.
The provision is based on the best estimate of the probable future payments which have been earned
by the employees from their services to the Group to the reporting date.

2.23 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has
been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement isdetermined by considering the class of obligations as a whole. A provision is recognised even if the likelihoodof an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditure expected to be required to settle theobligation using a pre-tax rate that reflects current market assessments of the time value of money and therisks specific to the obligation. The increase in the provision due to passage of time is recognised as interest
expense.

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Annual Report 202065

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.24 Revenue recognition
Revenue from contracts with customers is recognised by reference to each distinct performance obligation
promised in the contract with customer when or as the Group transfers controls of the goods or services
promised in a contract and the customer obtains control of the goods or services.
The Group satisfies a performance obligation and recognises revenue over time, if one of the following criteria
is met:•

The customer simultaneously receives and consumes the benefits provided by the Group’s performanceas the Group performs;•

The Group’s performance creates or enhances an asset that the customer controls as the asset iscreated or enhanced;•

The Group’s performance does not create an asset with an alternative use to the Group and the Group
has an enforceable right to payment for performance completed to date.

If any of the above conditions are not met, the Group recognises revenue at the point in time at which theperformance obligation is satisfied.
Specific criteria for each of the Group’s activities are described as below.
(i)

Revenue from pachinko and pachislot business represents the gross pay-ins, net of the gross payouts
to customers. Gross pay-ins represents the amount received from customers for rental of pachinko balls
and pachislot tokens. Gross payouts represents the aggregate cost of G-prizes and general prizes
exchanged by customers. G-prizes are decorative cards with a small embedded piece of gold or silver
or coin-shaped pendants of gold or silver which can be sold by customers to a G-prize buyer for cash,
and general prizes are generally the types of goods sold in convenience stores, such as snacks, drinks
and cigarettes.
Customers rent pachinko balls and pachislot tokens to play the games, and the balls or tokens won canbe either exchanged for prizes or saved for subsequent visits. The Group offers both general prizes andG-prizes. Customers who opt to claim G-prizes in exchange for the pachinko balls and pachislot tokens
may sell their G-prizes to an independent G-prize buyer for cash outside of the pachinko hall. Revenue
is recognised at the end of each player’s visit to a machine.
A contract liability is recognised when the Group has received upfront fees from the customers. The
Group records these as unutilised balls and tokens in the liabilities section of the consolidated statementof financial position. Such contract liability is recognised as revenue when they are utilised bycustomers. Income from expired prepaid integrated circuit (“IC”) and membership cards are recognised
as other income upon expiry of the usage period.

(ii)

66

Hotel revenue from room rental is recognised over time during the period of stay for the hotel guests.

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.24 Revenue recognition (Continued)(iii)

Vending machine income is recognised on a straight-line basis over the accounting periods covered by
the terms and conditions as stipulated in the agreement. Contingent vending machine income isrecognised when the Group sells a product to the customer.
A contract liability is recognised when the Group has received upfront fees from the customers. The
Group records these as rental receipt in advance in the liabilities section of the consolidated statementof financial position. Such contract liability is recognised as revenue when such services are rendered tocustomers.

(iv)

Restaurant revenue from provision of catering services is recognised when the related catering services
have been provided to customers.

(v)

Amusement arcade business is recognised when the provision of amusement arcade services are
rendered, being when the customers utilised the tokens to play the games. A contract liability isrecognised when the Group has received upfront fees from the customers. The Group records these as
unutilised tokens in the liabilities section of the consolidated statement of financial position. Suchcontract liability is recognised as revenue when such services are rendered to customers.

(vi)

Rental income from investment properties is recognised on a straight-line basis over the term of theleases.

2.25 Interest income
Interest income from financial assets at FVPL is included in the net fair value gains/(losses) on these assets,
see note 8 below.
Interest income on financial assets at amortised cost and financial assets at FVOCI calculated using theeffective interest method is recognised in profit or loss as part of other income.
Interest income is presented as finance income where it is earned from financial assets that are held for cash
management purposes, see note 11 below. Any other interest income is included in other income.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial
asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial
assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of
the loss allowance).

2.26 Dividend income
Dividends are received from financial assets measured at fair value through profit or loss and at fair value
through other comprehensive income. Dividends are recognised as other income in the consolidated
statement of comprehensive income when the right to receive payment is established.

NIRAKU GC HOLDINGS, INC.

Annual Report 202067

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.27 Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the
grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in profit or loss over the period necessary tomatch them with the costs that they are intended to compensate.
Government grants relating to property, plant and equipment are included in non-current liabilities as deferred
government grants and are credited to profit or loss on a straight-line basis over the expected lives of therelated assets.

2.28 Leases
As explained in Note 2.2 above, the Group has changed its accounting policy for leases where the Group is
the lessee. The new policy is described below and the impact of the change is in Note 2.2.
Until 31 March 2019, leases in which a significant portion of the risks and rewards of ownership were nottransferred to the Group as lessee were classified as operating leases. Payments made under operatingleases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis
over the period of the lease.
From 1 April 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at
which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities
include the net present value of fixed payments (including in-substance fixed payments), less any lease
incentives receivable.
Lease payments to be made under reasonably certain extension options are also included in themeasurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate isused, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an
asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security
and conditions.
To determine the incremental borrowing rate, the Group uses recent third-party financing received by theindividual lessee as a starting point, adjusted to reflect changes in financing conditions since third party
financing was received. Lease payments are allocated between principal and finance cost. The finance cost is
charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on theremaining balance of the liability for each period. Right-of-use assets are measured at cost comprising theamount of the initial measurement of lease liability, any lease payments made at or before thecommencement date less and lease incentive received and initial direct cost.

68

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Annual Report 2020

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.28 Leases (Continued)
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term ona straight-line basis.
Payments associated with short-term leases are recognised on a straight-line basis as an expense in profit orloss. Short-term leases are leases with a lease term of 12 months or less.
Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line
basis over the lease term. The respective leased assets are included in the investment properties. The Group
did not need to make any adjustments to the accounting for assets held as lessor as a result of adopting the
new leasing standard.

2.29 Dividend distribution
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer atthe discretion of the entity, on or before the end of the reporting period but not distributed at the end of thereporting period.

3

FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk,
cash flow and fair value interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk
management program focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the Group’s financial performance. The Group does not use any derivative financial
instruments to hedge its financial risks.
Risk management is carried out by management of the Group. Formal and informal management meetings
are held to identify significant risks and to develop procedures to deal with any risks in relation to the Group’sbusinesses.
(a)Market risk(i) Foreign exchange risk
The Group operates principally in Japan and is exposed to foreign exchange risk arising fromvarious foreign currency transactions and foreign, primarily with respect to cash and cash
equivalents denominated in Hong Kong dollar (“HK$”), US dollar (“US$”), Vietnamese Dong(“VND”) and Renminbi (“RMB”).
The Group also has certain investments in foreign operations, whose net assets are exposed toforeign currency translation risk. Currency exposure arising from the net assets of the Group’s
foreign operations is managed primarily through borrowings denominated in the relevant foreign
currencies.

NIRAKU GC HOLDINGS, INC.

Annual Report 202069

Notes to the Consolidated Financial Statements
3

FINANCIAL RISK MANAGEMENT (CONTINUED)
3.1 Financial risk factors (Continued)(a)Market risk (Continued)(i) Foreign exchange risk (Continued)
Majority of the cost and revenue of the local operations in Vietnam, China and Hong Kong areprimarily transacted in their local functional currency which are VND, RMB and HK$, respectively,
and therefore foreign exchange transactional risks are minimal.
At 31 March 2020, if US$ had strengthened/weakened by 5% against the ¥, with all other variables
held constant, post-tax profit for the year would have been approximately ¥30 million, higher orlower (2019: ¥16 million), mainly as a result of foreign exchange differences on translation of US$
denominated cash at bank balance.
(ii)

Cash flow and fair value interest rate risk
The Group’s interest rate risk arises from bank balances and borrowings which are carried atvariable rates, which expose the Group to cash flow interest rate risk.
As at 31 March 2020, if interest rates were increased or decreased by 25 basis points and all othervariables were held constant, the Group’s post-tax profit would have increased or decreased byapproximately ¥4 million (2019: decreased or increased by ¥2 million) as a result of increase or
decrease in net interest expense.
The Group manages its interest rate exposure with a focus on reducing the Group’s overall cost ofdebt and exposure to changes in interest rates. When considered appropriate, the Group uses
derivatives such as interest rate swaps to manage its interest rate exposure. The Group’s maininterest rate exposure relates to Japanese Yen-denominated borrowings. In the opinion of thedirectors, fair value interest rate risk is low as the amounts of interest rate swaps are insignificant
during the year ended 31 March 2020 (2019: Same), and accordingly, sensitivity analysis has notbeen disclosed.

(iii) Price risk
The Group is exposed to equity securities price risk because of investments in listed securities
held by the Group which are classified on the consolidated statement of financial position as
financial assets at fair value through other comprehensive income.
The table below summarises the impact of increases/decreases of the share prices of underlying
financial instruments on the Group’s equity. The analysis is based on the assumption that theshare prices of the underlying financial instruments had increased or decreased by 5% with allother variables held constant.

Impact on other components of equity
Share prices:— increase by 5%— decrease by 5%

70

NIRAKU GC HOLDINGS, INC.

Annual Report 20202020
¥ million

2019¥ million

28
(28)

39
(39)

Notes to the Consolidated Financial Statements
3

FINANCIAL RISK MANAGEMENT (CONTINUED)
3.1 Financial risk factors (Continued)(b)Credit risk
Credit risk arises mainly from cash deposited at banks, trade receivables, deposits and otherreceivables, loan to an associate, financial assets at fair value through profit or loss and through othercomprehensive income.
In respect of cash deposited at banks and financial assets at fair value through profit or loss and throughother comprehensive income, the credit risk is considered to be low as the counterparties are bankswith high credit ratings assigned by international credit rating agencies.
Approximately 99% (2019: 99%) of the Group’s revenue is settled in cash, mitigating credit risk. There
are no significant concentration of credit risk, whether through exposure to individual customers, specificindustry sectors and/or regions.
As at 31 March 2020, top 5 customers of the Group accounted for approximately 68.8% (2019: 70.9%)
to the trade receivables of the Group. The Group has set up long-term cooperative relationship withthese customers. In view of the history of business dealings with the customers and the sound collection
history of the receivables due from them, management believes that there is no material credit risk
inherent in the Group’s outstanding receivable balance due from these customers. Management makes
periodic assessment on the recoverability of trade and other receivables based on historical payment
records, the length of the overdue period, the financial strength of the debtors and whether there areany disputes with the debtors. The Group’s historical experience in collection of trade and otherreceivables falls within the recorded allowances and the directors are of the opinion that adequate
provision for uncollectible receivables has been made in the consolidated financial statements.
Trade receivables are written off when there is no reasonable expectation of recovery, such as a debtor
failing to engage in a repayment plan with the Group. The Group considers a financial asset as indefault if the counterparty fails to make contractual payments within 90 days when they fall due. The
Group writes off trade receivables, in whole or in part, when it was exhausted all practical recovery
efforts and has concluded there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include bankrupt or termination of contracts. Where receivables are
written off, the Group continues to engage in enforcement activity to attempt to recover the receivablesdue. Where recoveries are made, these are recognised in profit or loss.
In measuring the expected credit losses, trade receivables are Grouped based on shared credit risk
characteristics and days past due. The expected loss rates are based on the payment profiles of sales
over a period of 12 months and the corresponding historical credit losses experienced. The historicalloss rates are adjusted to reflect current and forward-looking macroeconomic factors affecting the abilityof the customers to settle the receivables. On that basis, the loss allowance during the years ended 31
March 2020 and 2019 is determined based on an expected loss rate of 0%.
The Company adopts general approach for expected credit losses of other receivables and loan to an
associate and consider these financial assets have not significantly increased in credit risk from initialrecognition. Thus, these financial assets are classified in stage one and only consider 12-month
expected credit losses.

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Annual Report 202071

Notes to the Consolidated Financial Statements
3

FINANCIAL RISK MANAGEMENT (CONTINUED)
3.1 Financial risk factors (Continued)(c)Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and bank balances, the availabilityof funding from an adequate amount of committed credit facilities from leading banks and the ability toclose out market position.
The Group maintains liquidity by a number of sources including orderly realisation of short-term financial
assets and receivables; and long term financing including long-term borrowings. The Group aims tomaintain flexibility in funding by keeping sufficient bank balances, committed credit lines available andinterest bearing borrowings which enable the Group to continue its business for the foreseeable future.
The table below analyses the Group’s non-derivative financial liabilities into relevant maturity Groupings
based on the remaining period at the statement of financial position date to the contractual maturity
date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due
within 12 months equal to their carrying balances as the impact of discounting is not significant.

As at 31 March 2020
Trade payables
Other payables (excluding accruals)
Borrowings
Lease liabilities

As at 31 March 2019
Trade payables
Other payables (excluding accruals)
Borrowings
Lease liabilities

72

NIRAKU GC HOLDINGS, INC.

Within1 year¥ million

Between
1 and
2 years¥ million

Between
2 and
5 years¥ millionOver
5 years¥ million

Total¥ million

114
1,861
3,531
3,622

–
–
2,609
3,381

–
28
5,912
8,077

–
3,150
2,190
29,763

114
5,039
14,242
44,843

9,128

5,990

14,01735,10364,238

294
2,056
4,636
833

–
–
2,711
564

–
32
6,264
157

–
3,150
4,026
2,642

294
5,238
17,637
4,196

7,819

3,275

6,453

9,818

27,365

Annual Report 2020

Notes to the Consolidated Financial Statements
3

FINANCIAL RISK MANAGEMENT (CONTINUED)
3.2 Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital. The Group uses bank borrowings to finance its
operations.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid toshareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio
is calculated as total debt divided by equity. Total debt is calculated as total borrowings (include bankborrowings and obligations under finance leases). Equity is calculated as ‘equity’ as shown in the consolidated
statement of financial position.
2020¥ million

2019¥ million

Borrowings
Lease liabilities (Note)

13,086
2,701

16,082
3,420

Total debt

15,787

19,502Equity25,79927,511

Gearing ratio

61.2%

70.9%

Note: The balances only include leases under hire purchase arrangement.

3.3 Fair value estimation
The table below analyses the Group’s financial instruments carried at fair value by level of the inputs tovaluation techniques used to measure fair value. Such inputs are categorised into three levels within a fairvalue hierarchy as follows:•

Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

•

Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

•

Inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs) (level 3).

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Annual Report 202073

Notes to the Consolidated Financial Statements
3

FINANCIAL RISK MANAGEMENT (CONTINUED)
3.3 Fair value estimation (Continued)

As at 31 March 2020
AssetsFinancial assets at fair value through profit or loss
— Unlisted securities
Financial assets at fair value through othercomprehensive income— Listed securities

Level 1¥ million

Level 2¥ million

Level 3¥ million

Total¥ million

–

100

–

100

565

–

–

565

565
565

–
–

665
665

Liabilities
Derivative financial liabilities— Interest rate swaps

–

25

–

25

As at 31 March 2019
AssetsFinancial assets at fair value through profit or loss
— Unlisted securities

–

100

–

100

781
–

–
–

–
130

781
130

781

100

130

1,011

–

31

–

31

Financial assets at fair value through othercomprehensive income— Listed securities— Unlisted securities

Liabilities
Derivative financial instruments— Interest rate swaps

74

100
100

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
3

FINANCIAL RISK MANAGEMENT (CONTINUED)
3.3 Fair value estimation (Continued)(i)Financial instruments in level 1
The fair value of financial instruments traded in active markets is based on quoted market prices at thestatement of financial position date. A market is regarded as active if quoted prices are readily andregularly available from an exchange, dealer, broker, industry Group, pricing service, or regulatory
agency, and those prices represent actual and regularly occurring market transactions on an arm’s
length basis. The quoted market price used for financial assets held by the Group is the current bid
price. These instruments are included in level 1. Instruments included in level 1 represent Tokyo Stock
Exchange and the Stock Exchange of Hong Kong equity investments classified as fair value throughother comprehensive income which were not held for trading purpose.

(ii)

Financial instruments in level 2
The fair value of financial instruments that are not traded in an active market is determined by using
valuation techniques. These valuation techniques maximise the use of observable market data where it
is available and rely as little as possible on entity specific estimates. If all significant inputs required tofair value an instrument are observable, the instrument is included in level 2. As at 31 March 2020,
instruments included in level 2 comprise trust funds and interest rate swaps issued by a financial
institution in Japan which were classified as financial assets at fair value through profit or loss.

(iii)

Financial instruments in level 3
As at 31 March 2020, the Group valued its investment in the unlisted private company’s equity sharesbased on its net asset value as the Group has determined that the reported net asset value represents
fair value at the end of the reporting period.
There were no transfers between levels 1, 2 and 3 during the year ended 31 March 2020.

3.4 Offsetting financial assets and financial liabilities
As at 31 March 2020 and 2019, there were no financial assets or financial liabilities which were subject tooffsetting, enforceable master netting or similar agreements.

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Annual Report 202075

Notes to the Consolidated Financial Statements
4

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. The Groupmakes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing amaterial adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed
below.

(a)

Income taxes
The Group is subject to income taxes in Japan, Vietnam and Cambodia. Significant judgement is required indetermining the provision for income taxes. There are many transactions and calculations for which theultimate tax determination is uncertain. Where the final tax outcome of these matters is different from theamounts that were initially recorded, such differences will impact the current and deferred income tax assets
and liabilities in the period in which such determination is made.

(b) Impairment of property, plant and equipment and right-of-use assets
The Group has substantial investments in property, plant and equipment and right-of-use assets. Judgement
is required in the area of asset impairment, particularly in assessing: (i) whether an event has occurred that
may indicate that the related asset values may not be recoverable: (ii) whether the carrying value of an asset
can be supported by the recoverable amount, being the higher of fair value less costs to sell or value-in-use,
which is the net present value of future cash flows which are estimated based upon the continued use of theasset in the business; and (iii) the appropriate key assumptions to be applied in preparing cash flow
projections including whether these cash flow projections are discounted using an appropriate rate. Changing
the assumptions used to determine the level, if any, of impairment, including the discount rates or the growthrate assumptions in the cash flow projections, could materially affect the net present value used in the
impairment test and as a result affect the Group’s financial condition and results of operations. If there is asignificant adverse change in the projected performance and resulting future cash flow projections, it may benecessary to take an impairment change to the profit or loss.

(c)

Impairment of goodwill
The Group conducts reviews annually whether goodwill has suffered any impairment whenever events orchanges in circumstances indicate that the carrying amounts may not be recoverable. The recoverable
amounts of CGUs are determined based on value-in-use calculations or fair value less costs of disposal.
Value-in-use calculations require the use of management judgements and estimates in the area of asset
impairment particularly in assessing: (i) whether an event has occurred that may indicate that the related
asset values may not be recoverable; (ii) whether the carrying value of an asset can be supported by therecoverable amount, being the net present value of future cash flows which are estimated based upon thecontinued use of the asset in the business; and (iii) the appropriate key assumptions to be applied in
preparing cash flow projections including whether these cash flow projections are discounted using anappropriate rate. Fair value less costs of disposal calculations require available data from binding sales
transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs
for disposing of the asset. Changing the assumptions selected by management in assessing impairment,
including the discount rates or the growth rate assumptions in the cash flow projections, could materiallyaffect the net present value used in the impairment assessment and as a result affect the Group’s financial
condition and results of operations.
Details of the key assumptions applied by management in assessing impairment of goodwill are stated in
Note 16.

76

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Annual Report 2020

Notes to the Consolidated Financial Statements
5

REVENUE AND SEGMENT INFORMATION(a)

Revenue

Revenue
Gross pay-ins
Less: gross pay-outs
Revenue from pachinko and pachislot hall business
Revenue from amusement arcades
Vending machine income
Revenue from hotel operations
Revenue from restaurant operations

2020¥ million

2019¥ million

139,053(114,046)

141,731(115,850)

25,007
1,663
480
143
753

25,881
1,535
507
132
270

28,04628,325(b) Segment information
Management has determined the operating segments based on the reports reviewed by the chief operating
decision maker (“CODM”) that are used for making strategic decisions. The chief operating decision-maker is
identified as the executive directors of the Company. The executive directors consider the business from aservice perspective and assess the performance of the operating segments based on a measure of adjusted
profit before tax before unallocated corporate expenses for the purposes of allocating resources andassessing performance. These reports are prepared on the same basis as this consolidated financial
statements.
During the year, management has changed its internal performance review to align more closely with theGroup’s strategic decision and development of which the previous operating segment of “others” wasseparated into two operating segments, namely “others”, representing hotel and restaurant operations inJapan and “restaurant operations” in China. The comparative amounts of the segment information in 2019has been reclassified to reflect such change.
Management has identified four reportable segments based on the types of services, namely (i) pachinko andpachislot hall operations, (ii) amusement arcade operations, (iii) restaurant operations in China and (iv)others, representing hotel and restaurant operations in Japan.

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Annual Report 202077

Notes to the Consolidated Financial Statements
5

REVENUE AND SEGMENT INFORMATION (CONTINUED)(b) Segment information (Continued)
Segment assets consist primarily of property, plant and equipment, right-of-use assets, intangible assets,
investment properties, inventories, trade receivables, prepayments, deposits and other receivables, bankdeposits and cash and bank balances. They exclude deferred income tax assets, and assets used forcorporate functions including financial assets at fair value through profit or loss, financial assets at fair value
through other comprehensive income and interest in an associate.
Capital expenditure comprises additions to property, plant and equipment, right-of-use assets, investment
properties and intangible assets. Unallocated corporate expenses and income tax expenses are not included
in segment results.
The segment information provided to the executive directors for the years ended 31 March 2020 and 2019 are
as follows:

Pachinko andpachislot halloperations

Segment revenue from external customers
Over time
Segment results
Corporate expenses
Share of results of an associate

Other

Total

Japan
¥ million

SoutheastAsia¥ million

China¥ millionJapan¥ million¥ million

25,487

1,663

304

592

28,046

2,438

56

(597)

(493)

1,404
(823)
–

Profit before income tax
Income tax expense

581
(717)

Loss for the year

(136)

Other segment items
Depreciation and amortisation expenses
Impairment loss on right-of-use assets
Impairment loss on intangible assets
Impairment loss on property, plant and equipment
Finance income
Finance costs

78

Year ended 31 March 2020
Amusement
arcadeRestaurant
operations
operations

NIRAKU GC HOLDINGS, INC.

(4,401)
(181)
(1)
(107)
60
(1,346)

Annual Report 2020

(466)
–
–
–
2
(90)

(85)
(90)
(10)
(1)
–
–

(56)
(192)
–
(105)
–
–

(5,008)
(463)
(11)
(213)
62
(1,436)

Notes to the Consolidated Financial Statements
5

REVENUE AND SEGMENT INFORMATION (CONTINUED)(b) Segment information (Continued)

Pachinko andpachislot halloperations

Segment revenue from external customers
Over time
Segment results
Corporate expenses
Share of results of an associateYear ended 31 March 2019
Amusement
arcadeRestaurant
operations
operations

Other

Total

China
¥ million(Restated)Japan¥ million(Restated)¥ millionJapan¥ million

SoutheastAsia¥ million

26,388

1,535

–

402

28,325

2,314

153

(92)

(145)

2,230
(1,132)(5)

Profit before income tax
Income tax expense

1,093
(549)

Profit for the year
Other segment items
Depreciation and amortisation expenses
Impairment loss on property, plant andequipment
Finance income
Finance costs

544(2,278)

(283)

(16)

(55)

(2,632)

(195)
50
(501)

–
2
(6)

–
–
–

–
–
–

(195)
52
(507)

NIRAKU GC HOLDINGS, INC.

Annual Report 202079

Notes to the Consolidated Financial Statements
5

REVENUE AND SEGMENT INFORMATION (CONTINUED)(b) Segment information (Continued)
The segment assets as at 31 March 2020 and 2019 are as follows:

As at 31 March 2020
Segment assets
Unallocated assets
Deferred income tax assets
Total assets
Addition to non-current assets other thanfinancial instruments and deferred tax assets

As at 31 March 2019
Segment assets
Unallocated assets
Deferred income tax assets
Total assets
Addition to non-current assets other thanfinancial instruments and deferred tax assets

80

NIRAKU GC HOLDINGS, INC.

Pachinko andpachislot halloperations

Amusement
arcadeoperations

Restaurant
operations

Other

Total

Japan
¥ million

SoutheastAsia¥ million

China¥ millionJapan¥ million¥ million

68,234

2,130

970

696

72,0326,304
2,822
81,158

1,221

580

469

229

2,499

Pachinko andpachislot halloperations

Amusement
arcadeoperations

Restaurant
operations

Other

Total

Japan
¥ million

SoutheastAsia¥ million

China¥ million(Restated)Japan¥ million(Restated)¥ million

42,933

1,003

863

958

45,757
6,698
1,588
54,043

4,606

Annual Report 2020

156

122

297

5,181

Notes to the Consolidated Financial Statements
5

REVENUE AND SEGMENT INFORMATION (CONTINUED)(b) Segment information (Continued)
The total of non-current assets other than financial instruments and deferred tax assets, analysed by locationof the assets, is as follows:

Japan, country of domicile
Southeast Asia and China

2020¥ million

2019¥ million

59,3142,365

34,016
1,027

61,67935,043No single external customer contributed more than 10% revenue to the Group’s revenue for the year ended
31 March 2020 and 2019.

6

OTHER INCOME AND OTHER GAINS, NET

Other income
Rental income
Income from expired IC and membership cards
Dividend income
Compensation and subsidies (Note)
Income from scrap sales of used pachinko and pachislot machines
OthersOther gains, net
Loss on fair value for financial assets at fair value through profit or loss
Gain/(loss) on fair value for derivative financial instruments
Gain/(loss) on disposal of property, plant and equipment
Loss on disposal of investment properties
Others2020¥ million

2019¥ million

410
29
55
332
169
79

167
29
55
3
265
32

1,074

551

–
5
317
–
78

(2)
(23)
(54)
(7)
140

400

54

Note: During the year ended 31 March 2020, compensation and subsidies were mainly received from an insurance company for the typhoon that
occurred in October 2019. The disaster caused significant damages to certain property, plant and equipment and inventories in certain
pachinko and pachislot halls located principally in Fukushima Japan.

NIRAKU GC HOLDINGS, INC.

Annual Report 202081

Notes to the Consolidated Financial Statements
7

HALL OPERATING EXPENSES AND ADMINISTRATIVE AND OTHER OPERATING
EXPENSES

Auditors’ remuneration— Audit fees
— Other services
Employee benefits expenses— Hall operations— Administrative and others
Operating lease rental expense in respect of land and buildings
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Depreciation of investment properties
Amortisation of intangible assets
Reinstatement expenses
Recruitment expenses
Travelling and transportation
Other taxes and duties
Repairs and maintenanceUtilities expenses
Consumables and cleaning
Outsourcing service expenses
G-Prize procurement expenses to wholesalers
Pachinko and pachislot machines expenses (Note (i))
Advertising expenses
Service fee (Note 34)
Impairment loss on property, plant and equipment (Note 13)
Impairment loss on right-of-use assets (Note 14)
Impairment loss on intangible assets (Note 16)
Legal and professional fees
Loss on termination of existing outlets (Note (ii))
Others2020¥ million

2019¥ million

115
14

100
7

5,542
1,830
291
2,178
2,734
20
76
27
72
111
352
314
987
1,663
960
878
6,692
1,219
33
213
463
11
49
–
721

5,510
1,683
3,006
2,532
–
19
81
26
65
125
395
291
1,055
1,495
1,048
753
6,971
1,121
32
195
–
–
46
240
581

27,56527,377

Notes:(i)

Pachinko and pachislot machines are expensed off in the consolidated statement of comprehensive income upon installation. The expected
useful lives of these machines are less than one year.

(ii)

During the year ended 31 March 2019, two pachinko and pachislot halls were closed. The amount of ¥240 million represents penalty charge
for early termination of rental contract of ¥143 million, forfeiture of rental deposits of ¥74 million and miscellaneous expenses in relation to theclosure of halls of ¥23 million. No such costs incurred during the year ended 31 March 2020.

82

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
8

EMPLOYEE BENEFITS EXPENSES (INCLUDING DIRECTORS’ EMOLUMENTS)

Salaries, bonuses and allowances
Pension costs — defined contribution plan
Other employee benefits

(a)

2020
¥ million

2019¥ million

6,034
79
1,259

5,877
78
1,238

7,372

7,193

Pension costs — defined contribution plans
The Company and its subsidiaries operate a defined contribution plan which covers all full-time employees
and directors. No forfeited contribution was incurred during the year (2019: Nil).

(b) Five highest paid individuals
The five individuals whose emoluments were the highest in the Group for the year ended 31 March 2020
include 1 director (2019: 1 director) whose emoluments are reflected in the analysis shown in Note 38. The
emoluments payable to the remaining 4 (2019: 4) individuals during the year ended 31 March 2020 are as
follows:

Salaries, allowances and other benefits
BonusesPension cost — defined contribution plan2020
¥ million

2019¥ million

94
–
3

90
–
3

97

93

The number of highest paid individuals whose remuneration fell within the following band is as follows:
Number of individuals
2020

2019

¥Nil to ¥13,540,000 (equivalent toapproximately HK$Nil to HK$1,000,000)–

2¥13,540,001 to ¥20,310,000 (equivalent toapproximately HK$1,000,001 to HK$1,500,000)

2–¥20,310,001 to ¥27,080,000 (equivalent toapproximately HK$1,500,001 to HK$2,000,000)––¥27,080,001 to ¥33,850,000 (equivalent toapproximately HK$2,000,001 to HK$2,500,000)22Annual Report 202083

Emolument bands

NIRAKU GC HOLDINGS, INC.

Notes to the Consolidated Financial Statements
9

FINANCE COSTS, NET2020¥ million

2019¥ million

5
57

1
51

62

52

(197)
(1,131)
(108)

(196)
(195)
(116)

(1,436)(507)(1,374)

(455)

2020
¥ million

2019¥ million

Current income tax— Japan— Other Asian countries

1,337
38

518
34

Deferred income tax (Note 30)

1,375
(658)

552
(3)

717

549

Finance income
Bank interest income
Other interest income

Finance costs
Bank borrowings
Lease liabilities
Provision for unwinding discountFinance costs, net

10 INCOME TAX EXPENSE

Taxation has been provided at the appropriate rates prevailing in the countries in which the Group operates.
No provision for Hong Kong profits tax or China income tax have been made for the years ended 31 March 2020
and 2019 as the Group did not generate any assessable profits arising in Hong Kong and China during the years
ended 31 March 2020 and 2019.

84

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
10 INCOME TAX EXPENSE (CONTINUED)
The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the profits
tax rate of Japan as follows:2020¥ million

2019¥ million

Profit before income tax

581

1,093

Tax calculated at the Japan tax rate of 29.9% (2019: 29.9%)
Income not subject to tax
Expenses not deductible for tax purpose
Unrecognised tax losses
Utilisation of previously unrecognised tax losses
Effect of different tax rates of subsidiaries operating in other jurisdiction

174
(22)
314
169
–
82

327
(3)
179
72
(13)
(13)

717

549

The Group is subject to national corporate income tax, inhabitants tax, and enterprise tax in Japan, which, inaggregate, resulted in effective statutory income tax rates of approximately 29.9% (2019: 29.9%) for the year ended
31 March 2020.
As a result of the 2016 Tax Reform that was approved on 29 March 2016, the national corporate income tax rate ofJapan was reduced from 23.9% to 23.4% from fiscal years beginning on or after 1 April 2016, followed by a further
rate reduction from 1 April 2018 to 23.3%.
Taxation on other Asian countries profits has been calculated on the estimated profit for the year at the rate oftaxation prevailing in the countries in which the Group operates. These rates range from 17% to 20% (2019: same).

11 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted
average number of ordinary shares in issue during the years ended 31 March 2020 and 2019.

Profit attributable to owners of the Company (¥ million)
Weighted average number of ordinary shares for the purpose of
calculating basic earnings per share (thousands)
Basic and diluted earnings per share (¥)

2020

2019

179

610

1,195,850

1,195,850

0.15

0.51

No diluted earnings per share is presented as there was no potential dilutive shares during the years ended 31
March 2020 and 2019. Diluted earnings per share is equal to the basic earnings per share.

NIRAKU GC HOLDINGS, INC.

Annual Report 202085

Notes to the Consolidated Financial Statements
12 INTEREST IN AN ASSOCIATE
2020¥ million

2019¥ million

At 1 April
Capital injection
Share of loss

–
–
–

5
(5)
–

Carrying amount

–

–

(57)

(14)

Unrecognised share of loss

On 8 November 2018, a wholly-owned subsidiary of the Group entered into an agreement to subscribe for 20,000
shares, representing 40% equity interests, of a newly incorporated Hong Kong entity, Yes! E-Sports Asia Holdings
Limited (“YEAH”) at a cash consideration of USD40,000. YEAH is established to be a hub for developing andexpanding the e-Sports business in Asia.
In addition to the capital contribution, the Group has also entered a loan agreement with YEAH to provide it with a
US$3,200,000 loan (equivalent to approximately ¥354 million) with interest rate at 4% per annum. The loan wasprovided on 15 November 2018 and is repayable every six months by instalments over four years. The firstpayment amounted to US$640,000 (equivalent to approximately ¥70 million) will be due in December 2020. The
Group has the right to demand for full repayment by the time YEAH has surplus funds (defined as any amount offunds, including cash and cash equivalents, in excess of debt or debt-like liabilities such as lease obligations) thatexceeds US$3,200,000 principal amount of the loan.
YEAH is a private company and there is no quoted market price. There is no contingent liability relating to theGroup’s interest in the associate.
The table below summarised the financial information of the associate that is considered immaterial to the Group.

86

2020
¥ million

2019¥ million

Non-current assets
Current assets
Non-current liabilities
Current liabilities

6
220
(280)
(92)

10
313
(355)
(7)

Net liabilities

(146)

(39)

Revenue
Loss for the year

45
(108)

3
(48)

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
13 PROPERTY, PLANT AND EQUIPMENT
Freeholdland¥ million

Leasehold
Buildings improvements¥ million¥ million

Equipment
and tools¥ million

Motorvehicles¥ million

Constructionin progress¥ million

Total¥ million

Cost
At 1 April 2018
Additions
Disposals
Transfer between categories
Translation differences

7,250
1,508
–
–
–

17,651
1,128
(793)
98
–

12,885
1,527
(661)
157
9

12,885
613
(334)
26
15

130
25
(15)
–
–

26
283
–
(281)
–

50,8275,084(1,803)–24

At 31 March 2019
Adjustment on adoption of IFRS 16

8,758
–

18,084(6,902)

13,917–

13,205
(120)

140
–

28
–

54,132(6,922)

At 1 April 2019 (restated)
Additions
Disposals
Transfer between categories
Translation differences

8,758
113
(1,115)––

11,182
43
(286)
–
–

13,917
318
(574)
138
(16)

13,185
515
(775)
164
(29)

140
–
–
–
–

28
484
(20)
(302)
(3)

47,2101,473(2,770)–(48)

At 31 March 2020

7,756

10,93913,78313,060140

18745,865

Accumulated depreciationand impairment
At 1 April 2018
Depreciation (Note 7)
Disposals
Impairment (Note 7)
Translation differences

–
–
–
–
–

(7,994)
(752)
788
(82)
–

(7,557)
(776)
636
(43)
(1)

(9,008)
(980)
306
(70)
(6)

(61)
(24)
15
–
–

–
–
–
–
–

(24,620)(2,532)
1,745
(195)
(7)

At 31 March 2019
Adjustment on adoption of IFRS 16––(8,040)3,243(7,741)–(9,758)
18

(70)
–

–
–

(25,609)
3,261

At 1 April 2019 (restated)
Depreciation (Note 7)
Disposals
Impairment (Note 7)
Translation differences

–
–
–
–
–

(4,797)
(450)
133
(68)
–

(7,741)
(753)
369
(112)
9

(9,740)
(975)
594
(33)
26

(70)
–
–
–
–

–
–
–
–
–

(22,348)(2,178)
1,096
(213)
35

At 31 March 2020–

(5,182)(8,228)(10,128)(70)–(23,608)

Net book value
At 31 March 2020

7,756

5,757

5,555

2,932

70

189

22,257

At 31 March 2019

8,758

10,044

6,176

3,447

70

28

28,523NIRAKU GC HOLDINGS, INC.

Annual Report 202087

Notes to the Consolidated Financial Statements
13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Approaching the year ended 31 March 2019, the Group purchased a pachinko hall property from an independent
third party seller at a consideration of ¥3,600 million, comprising freehold land, building and leasehold improvement
and equipment associated with building of ¥1,504 million, ¥1,951 million and ¥145 million, respectively.
During the year ended 31 March 2020, the Group sold a pachinko hall property to an independent third party buyer
at a consideration of ¥1,980 million, comprising freehold land and building with the net book values of ¥1,115 millionand ¥223 million, respectively, at the date of disposal.
Depreciation expenses of ¥2,096 million (2019: ¥2,490 million) has been charged in “hall operating expenses” and¥82 million (2019: ¥42 million) has been charged in “administrative and other operating expenses” for the year
ended 31 March 2020.
Construction in progress as at 31 March 2020 and 2019 represents pachinko and pachislot halls being constructedin Japan.
The net carrying amount of the Group’s property, plant and machinery that were pledged for the banking facilities
granted to the Group for the year ended 31 March 2020 and 2019 has been disclosed in Note 28.
The Group carried out reviews of the recoverable amounts of each cash-generating unit (“CGU”), which isdetermined as each individual pachinko and pachislot hall, a pachinko and pachislot hall with hotel business,
restaurants and amusement arcades.
For the year ended 31 March 2020, in view that some of the CGUs have performed below management’s
expectation or were loss-making, the directors have reviewed the recoverability of the relevant carrying amounts ofthese CGUs.

88

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
The recoverable amount of a CGU is determined based on the fair value less cost to sell or value-in-use of
calculation, whichever is higher. These calculations use pre-tax cash flow projections based on financial budgets
approved by management covering a three-year period. Cash flows beyond the three-year period are extrapolatedusing the estimated growth rates stated below. The key assumptions used in the value-in-use calculation for theyears ended 31 March 2020 and 2019.
2020

Pachinko and pachislot hall operation
Restaurant operations in China
Restaurant operations in Japan

2019

Revenue
growth rate

Discount rate

Revenue
growth rate

Discount rate

-10% to 0%
6%-10% to 0%

9%
13%
9%

0%
N/A
N/A

8.5%
N/A
N/A

The discount rates applied by the Group are rates that reflect current market assessment of the time value ofmoney and the risk specific to the CGUs. Revenue growth rate is based on past practices and expectations onmarket and operational development.
For the year ended 31 March 2020, as a result of the impairment review, impairment loss of approximately ¥213
million (2019: ¥195 million) has been recognised.
If the forecast revenue was lower by 2%, with all other variable held constant, the change of result would be
insignificant.

NIRAKU GC HOLDINGS, INC.

Annual Report 202089

Notes to the Consolidated Financial Statements
14 LEASES(a)

Amounts recognised in the consolidated statement of financial position
The consolidated statement of financial position shows the following amounts relating to leases:

90

31 March2020¥ million

1 April2019¥ million

Right-of-use assets
Buildings
Leasehold improvement
Equipment and tools

30,565
1,438
69

32,566
1,646
97

Total right-of-use assets

32,07234,309Lease liabilities
Current
Non-current

2,542
32,035

3,993
31,632

34,57735,625NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
14 LEASES (CONTINUED)(a)

Amounts recognised in the consolidated statement of financial position (Continued)
Additions to the right-of-use assets during the year ended 31 March 2020 were ¥963 million.
For the year ended 31 March 2020, as a result of the impairment review, impairment loss of approximately¥463 million has been recognised.

Obligations under finance leases as at 31 March 20192019
¥ million
Gross lease liabilities — minimum lease payments
No later than 1 year
Later than 1 year and no later than 2 years
Later than 2 years and no later than 5 years
Later than 5 years

833
564
157
2,642

Future finance charges on finance leases

4,196
(776)

Present values of finance lease liabilities

3,420

The present values of finance lease liabilities are as follows:2019¥ million
No later than 1 year
Later than 1 year and no later than 2 years
Later than 2 years and no later than 5 years
Later than 5 years

703
451
100
2,166

Total obligations under finance leases
Less: Amount included in current liabilities

3,420
(703)

Non-current obligations under finance leases

2,717

Assets arranged under finance leases represent buildings for pachinko and pachislot halls, pachinko andpachislot machines, and gaming machines for amusement arcades. The average lease term range from 1 to
20 years with effective interest rate range from 2.45% to 4.42% per annum as at 31 March 2020 (2019: same)for pachinko and pachislot business; and from 2 to 3 years with effective interest rate range from 8.06% to20.0% (2019: same) for amusement arcade business. No arrangements have been entered into for contingent
rental payments during the reporting periods.

NIRAKU GC HOLDINGS, INC.

Annual Report 202091

Notes to the Consolidated Financial Statements
14 LEASES (CONTINUED)(b) Amounts recognised in the consolidated statement of comprehensive income
The consolidated statement of comprehensive income shows the following amounts relating to leases:
31 March2020¥ million
Depreciation charge of right-of-use assets
Buildings
Leasehold improvement
Equipment and tools

2,412
292
30
2,734

Interest expense (included in finance cost)
Expense relating to short-term leases (included in hall expenses)
Expense relating to leases of low-value assets that are not shown above as
short-term leases (included in administrative expenses)

1,131
259
32

The total cash outflow for leases during the year ended 31 March 2020 was ¥3,142 million.

(c)

The Group’s leasing activities and how these are accounted for
The Group leases various offices, pachinko and pachislot halls and amusement arcades centres, equipment
and motor vehicles. Rental contracts are typically made for fixed periods of 5 to 20 years but may haveextension options as described below.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants other than the security interests in the leased assets thatare held by the lessor. Leased assets may not be used as security for borrowing purposes.

(d) Extension and termination options
Extension and termination options are included in a number of property leases across the Group. These
terms are used to maximise operational flexibility in terms of managing contracts. The majority of extension
and termination options held are exercisable under mutual agreement by the Group and the respective lessor.
In determining the lease term, management considers all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods
after termination options) are only included in the lease term if the lease is reasonably certain to be extended(or not terminated).

92

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
15 INVESTMENT PROPERTIES
2020¥ million

2019¥ million

858
(208)

857
(195)

650

662

At costAt beginning of year
Additions
Disposals
Depreciation

650
–
–
(20)

662
14
(7)
(19)

At end of year

630

650

At 31 March
Cost
Accumulated depreciation

858
(228)

858
(208)

630

650

At 1 April
Cost
Accumulated depreciation

The investment properties have been pledged to secure general facilities granted to the Company (Note 28).
The Group had no unprovided contractual obligations for future repairs and maintenance as at 31 March 2020 and2019.

NIRAKU GC HOLDINGS, INC.

Annual Report 202093

Notes to the Consolidated Financial Statements
15 INVESTMENT PROPERTIES (CONTINUED)
Investment properties are situated in Japan and rented out under operating lease. Amounts recognised inconsolidated statement of comprehensive income for investment properties are as follows:

Rental income
Direct operating expenses from property that generated rental income

2020¥ million

2019¥ million

93
(16)

96
(18)

77

78

The Group’s investment properties were valued as at 31 March 2020 and 2019 by independent professionallyqualified valuer, JLL Morii Valuation & Advisory K.K., who hold recognised relevant professional qualifications andhas recent experience in the locations and segments of the investment properties valued. The valuations were
determined using the income capitalisation approach (term and reversionary method) which largely used
observable and unobservable inputs, including market rent, yield and estimation in vacancy rate after expiry of
current lease. Such fair values estimation of investment properties are categorised under level 3 of the fair value
hierarchy.
The Group’s finance department includes a team that review the valuations performed by the independent valuers
for financial reporting purposes. This team reports directly to the chief financial officer (CFO) and the audit
committee (AC). Discussions of valuation processes and results are held between the CFO, AC, the valuation teamand valuers at least annually.
At each financial year end the finance department:•

Verifies all major inputs to the independent valuation report;•

Assesses property valuations movements when compared to the prior year valuation report;•

Holds discussions with the independent valuer.

Where the valuation results indicate that the carrying amount of the investment properties exceed its recoverable
amount, impairment loss will be recognised by the Group.
The fair value of the investment properties at 31 March 2020 is ¥846 million (2019: ¥840 million). No impairment
loss was recognised.

94

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
16 INTANGIBLE ASSETS

Goodwill¥ million

Computersoftware Trademarks¥ million¥ million

Contract
License relationship¥ million¥ million

Total¥ million

At 1 April 2018
Cost
Accumulated amortisation

1,154
–

493
(446)

119
(5)

–
–

268
(12)

2,034
(463)

Net book amount

1,154

47

114

–

256

1,571

Year ended 31 March 2019
Opening net book amount
Additions
Amortisation (Note 7)
Translation difference

1,154
–
–
51

47
2
(25)
–

114
–
(13)
11

–
81
(13)
–

256
–
(30)
27

1,571
83
(81)
89

Closing net book amount

1,205

24

112

68

253

1,662

At 31 March 2019 and 1 April 2019
Cost
Accumulated amortisation

1,205
–

491
(467)

131
(19)

81
(13)

294
(41)

2,202
(540)

Net book amount

1,205

24

112

68

253

1,662

Year ended 31 March 2020
Opening net book amount
Additions
Amortisation (Note 7)
Impairment (Note 7)
Translation difference

1,205
–
–
–
(21)

24
60
(26)
(1)
–

112
–
(12)
–
(3)

68
3
(12)
(10)
(5)

253
–
(26)
–
(8)

1,662
63
(76)
(11)
(37)

Closing net book amount

1,184

57

97

44

219

1,601

At 31 March 2020
Cost
Accumulated amortisation

1,184
–

439
(382)

127
(30)

67
(23)

286
(67)

2,103
(502)

Net book amount

1,184

57

97

44

219

1,601

NIRAKU GC HOLDINGS, INC.

Annual Report 202095

Notes to the Consolidated Financial Statements
16 INTANGIBLE ASSETS (CONTINUED)
Amortisation expenses of ¥76 million was charged in “hall operating expenses” for the year ended 31 March 2020(2019: ¥81 million).

Impairment test for goodwill
Goodwill is monitored by management at the level of individual pachinko and pachislot hall and the operating
segment of amusement arcade operations. A segment-level summary of the goodwill allocation is represented
below.

Pachinko and pachislot business
Amusement arcade business2020¥ million

2019¥ million

104
1,080

104
1,101

1,184

1,205

Goodwill is allocated to each CGU of individual pachinko and pachislot hall and a Group of CGUs comprising theamusement arcade operations. Management reviews annually whether the carrying amount of the CGU or theGroup of CGUs is higher than the recoverable amount which results in impairment of goodwill. The recoverable
amount of a CGU is determined based on value-in-use calculation. The calculations use pre-tax cash flow
projections based on financial budgets approved by management covering a three-year period.
For the pachinko and pachislot halls, cash flows beyond the three-year period are extrapolated using the estimatedgrowth rates stated in Note 13. As a result of the impairment review, the recoverable amounts of the CGUs in which
goodwill has been allocated are higher than their carrying amounts as at 31 March 2020 and 2019. As a result, no
impairment loss was charged during the years ended 31 March 2020 and 2019.
For the amusement arcade business, the annual revenue growth rate during the projection period is -5% to 4%(2019: 3% – 4%), whereas cash flows beyond the three-year period are extrapolated using an estimated growthrate of 3.8% (2019: same). The discount rate of 19.7% (2019: same) is pre-tax and reflects the specific risks related
to the relevant business. As a result of the impairment review, the recoverable amounts of the CGUs in which
goodwill has been allocated are higher than their carrying amounts as at 31 March 2020 and 2019. As a result, no
impairment loss was charged during the years ended 31 March 2020 and 2019. Any reasonably possible change inthe key assumptions will not result in significant impairment.

96

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
17 FINANCIAL INSTRUMENTS BY CATEGORY

Financial assets
Financial assets at fair value
Fair value through profit or loss
Fair value through other comprehensive income

Financial assets at amortised cost
Trade receivables
Loan to an associate (Note 22)
Deposits and other receivables
Cash and bank balances

Financial liabilities
Financial liabilities at fair value
Derivative financial instruments
Other financial liabilities at amortised cost
Trade payables
Other payables
Borrowings
Lease liabilities

NIRAKU GC HOLDINGS, INC.

2020
¥ million

2019¥ million

100
565

100
911

665

1,011

48
351
3,173
14,878

53
354
3,332
15,21918,45018,958

19,115

19,969

26

31

114
3,921
13,086
34,577294
4,295
16,082
3,420

51,69824,091

51,724

24,122

Annual Report 202097

Notes to the Consolidated Financial Statements
18 FINANCIAL ASSETS AT FAIR VALUE(a)

Financial assets at fair value through profit or loss
2020
¥ million

2019¥ million

Unlisted securities
Less: non-current portion

100
–

100
(100)

Current portion

100–

Change in fair value of financial assets at fair value through profit or loss are recorded in “other gains, net” inthe consolidated statement of comprehensive income (Note 6).
The fair values of these debt and equity securities are determined by discounted cash flow approach.

(b) Financial assets at fair value through other comprehensive income
2020¥ million

2019¥ million

Listed securities— Equity securities

565

781

Unlisted securities— Equity securities

–

130

565

911

Changes in fair values of financial assets at fair value through other comprehensive income are recorded in“investment revaluation reserve” in the consolidated statement of changes in equity. The fair value of allequity securities is based on the current bid prices.

98

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
19 DERIVATIVE FINANCIAL INSTRUMENTS

Interest rate swaps
Less: non-current portion
Current portion2020¥ million

2019¥ million

26
(22)

31
(27)

4

4

Derivative financial instruments are utilised by the Group in the management of its interest rate exposures. The
Group’s policy is not to utilise derivative financial instruments for trading or speculative purposes. The Group hasentered into interest rate swaps agreement with banks mainly to swap floating interest rate borrowings to fixedinterest rate borrowings to manage the fixed and floating interest rate mix of the Group’s total debt portfolio. As at
31 March 2020, the notional amount of the outstanding interest rate swaps agreement with the banks amounted to¥2,000 million (2019: same).

20 INVENTORIES

Supplies2020¥ million

2019¥ million

40

109

The cost of inventories recognised as expenses and included in “hall operating expenses” amounted to ¥6,692
million (2019: ¥6,971 million) and “administration and other operating expenses” amounted to ¥1 million (2019: ¥1
million) for the year ended 31 March 2020.

21 TRADE RECEIVABLES

Trade receivables

2020¥ million

2019¥ million

48

53

Trade receivables represent income receivable from vending machines. The credit terms granted by the Groupgenerally ranged from 0 to 30 days.

NIRAKU GC HOLDINGS, INC.

Annual Report 202099

Notes to the Consolidated Financial Statements
21 TRADE RECEIVABLES (CONTINUED)
As at 31 March 2020 and 2019, the ageing analysis of the trade receivables, based on invoice date, is as follows:

Less than 30 days
31 days to 90 days

2020
¥ million

2019¥ million

48
–

52
1

48

53

The maximum exposure to credit risk at the reporting date is the carrying value of the receivable mentioned above.
The Group does not hold any collateral as security.
The carrying amounts of trade receivables approximate their fair values as at 31 March 2020 and 2019 and aredenominated in ¥.

22 PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Non-current portion
Rental and other deposits
Rental prepayments
Lease receivables (Note)
Loan to an associate
Loans to other employees
Other prepayments and receivables

Current portion
Prepayment for prizes in operation for pachinko and pachislot halls
Rental prepayments
Lease receivables (Note)
Loan to an associate
Loans to other employees
Other prepayments and receivables

2020¥ million

2019¥ million

2,902
–
1,375
281
1
560

2,816
873
–
354
1
164

5,119

4,208

466
130
58
70
2
300

298
406
–
–
1
315

1,026

1,020

Note: In October 2019, the Group entered into a sub-lease agreement with an independent third party to sub-lease properties located in Japan fora period of approximately 19 years.

The carrying amounts of prepayment, deposits and other receivables approximate their fair values as at 31 March
2020 and 2019.
Certain deposits and other receivables have been pledged to secure general facilities granted to the Company (Note 28).

100

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
23 CASH AND BANK BALANCES
2020¥ million
Current portion
Cash on hand2019
¥ million

747

1,251

Cash at banks
Short term bank deposits

12,744637

12,670
1,255

Cash and cash equivalents
Bank deposits with maturity over 3 months

14,128750

15,17643

14,87815,21914,87815,2192020¥ million

2019¥ million

13,604

14,383

856
250
152
16

445
252
139
–

14,87815,219Number of
SharesShare
Capital¥ million

1,195,850,460

3,000

Total cash and bank balances
Cash and cash equivalents are denominated in the following currencies:

Japanese Yen
United States dollar
Hong Kong dollar
Vietnamese dong
Others24 SHARE CAPITAL

Ordinary shares, issued and fully paid:
At 31 March 2019, 1 April 2019 and 31 March 2020

NIRAKU GC HOLDINGS, INC.

Annual Report 2020101

Notes to the Consolidated Financial Statements
25 RESERVES(a)Capital surplus
Under the Japan Companies Act, certain portion of the consideration from the issuance of share capital shallbe credited to the share capital and the remaining of the consideration shall be credited to capital surplus.

(b) Capital reserve
Capital reserve represents the difference between the value of net assets of the subsidiary acquired by theCompany and the share capitals in acquired subsidiaries under common control.

(c)Legal reserve
The Japan Companies Act provides that a 10% dividend paid during the year shall be appropriated as legal
reserve (a component of either capital surplus or retained earnings) until an aggregate amount of legal capitalreserve and retained earnings equals 25% of share capital. The legal reserve may be used to reduce a deficit
or transfer to share capital upon approval of the general meeting of shareholders.

(d) Investment revaluation reserve
The investment revaluation reserve comprises the cumulative net change in the fair value of financial assets
through other comprehensive income held at the end of the reporting period.

26 TRADE PAYABLES
The ageing analysis of the trade payables based on invoice dates as at 31 March 2020 and 2019 were as follows:

Less than 30 days
31–90 days
Over 90 days

2020
¥ million

2019¥ million

114
–
–

47
242
5

114

294

The carrying amounts of trade payables approximate their fair values as at 31 March 2020 and 2019.

102

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
27 ACCRUALS, PROVISIONS AND OTHER PAYABLES

Non-current portion
Provision for reinstatement costs
Provision for long service payment
Rental deposit receipt in advance
Other payables

Current portion
Accrued purchases for pachinko and pachislot machines
Accrued purchases for property, plant and equipment
Accrued staff costs
Contract liabilities:
Vending machine rental receipt in advance
Unutilised balls and tokens
Other tax payable
Office expenses and consumables
Utilities payable
Other payables

2020¥ million

2019¥ million

2,059
40
145
26

2,054
40
102
30

2,270

2,226

434
236
878

269
264
1,072

194
1,132
745
554
43
188

201
1,078
491
766
49
163

4,404

4,353

The carrying amounts of other payables approximate their fair values as at 31 March 2020 and 2019.
During the year ended 31 March 2020, revenue recognised that was included in the contract liability balances ofrental receipt in advance and unutilised balls and tokens at the beginning of the year amounted to ¥116 million and¥55 million, respectively. As at 31 March 2020, the aggregate amount of transaction price allocated to the contact
liabilities that are unfulfilled was ¥1,326 million of which ¥525 million are expected to be recognised as revenue
during the next reporting period.

NIRAKU GC HOLDINGS, INC.

Annual Report 2020103

Notes to the Consolidated Financial Statements
28 BORROWINGS

Non-current portion
Bank loans
Syndicated loans

Current portion
Bank loans
Syndicated loans

Total borrowings

2020¥ million

2019¥ million

3,365
6,488

3,247
8,545

9,853

11,792

1,427
1,806

1,047
3,243

3,233

4,290

13,086

16,0822020¥ million

2019¥ million

3,233
2,389
5,454
2,010

4,290
2,445
5,676
3,671

13,086

16,082As at 31 March 2020 and 2019, the Group’s borrowings were repayable as follows:

Within 1 year
Between 1 and 2 years
Between 2 and 5 years
Over 5 years

The average effective interest rates (per annum) at the end of each reporting period were set out as follows:

Bank loans
Syndicated loans

104

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

2020

2019

1.80%
1.08%

1.91%
1.00%

Notes to the Consolidated Financial Statements
28 BORROWINGS (CONTINUED)
As at 31 March 2020, the borrowings under sales and leaseback arrangements with a third party lessor amounted
to ¥3,290 million (2019: ¥2,686 million). These sales and leaseback arrangements included sell of certain leasehold
improvements and pachislot machines at an aggregate consideration of ¥3,983 million (2019: ¥2,801 million andlease-back to the Group for a total lease payment of ¥4,244 million (2019: ¥2,979 million) covering the periods
ranged between 24 months to 84 months. During the lease period, the Group cannot transfer or pledge to any party
the relevant leasehold improvements and pachislot machines. For leasehold improvement, the Group has an option
to renew for a further term of 1 year on the 20th of the preceding month before the end of each lease term at nocost.
At the end of each reporting period, the total borrowings are pledged by certain assets and their carrying values areshown as below:

Property, plant and equipment
Investment properties
Deposits and other receivables

2020¥ million

2019¥ million

10,475630
178

11,050650
18011,283

11,8802020¥ million

2019¥ million

600

995

The undrawn borrowing facilities of the Group at each reporting period are as follows:

Floating rate
— Expiring over 1 year

The carrying amounts of borrowings of the Group approximate their fair values as at 31 March 2020 and 2019.

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

105

Notes to the Consolidated Financial Statements
29 DEFERRED INCOME TAX
The analysis of deferred income tax assets is as follows:2020¥ million

2019¥ million

1,219
1,603

76
1,512

2,822

1,588

2020
¥ million

2019¥ million

At 1 April
Adjustment on adoption of IFRS 16

1,588
471

1,565
–

At 1 April (Restated)
Credited to the consolidated statement of other comprehensive income
Credited to profit or loss

2,059
105
658

1,565
20
3

Deferred income tax assets

2,822

1,588

Deferred income tax assets, net— to be recovered after more than 12 months— to be recovered within 12 months

The net movement on the deferred income tax account is as follows:

106

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
29 DEFERRED INCOME TAX (CONTINUED)
The movement in deferred income tax assets and liabilities during the years ended 31 March 2020 and 2019 is asfollows:

Property,plant andequipment¥ million

Assetretirement
obligation¥ million

Fair value
through
profit andloss
financialassets¥ million

Balance at 1 April 2018
Credited/(charged) to profit or loss
Credited to other comprehensive
income

383
14

527
18

27
8

–
–

–

–

–

Balance at 31 March 2019
Adjustment on adoption of IFRS 16(Note 14)

397

545

–

Balance at 1 April 2019 (Restated)
Credited to profit or loss
Credited to other comprehensive
incomeBalance at 31 March 2020

Fair value
throughother
Right-of-use comprehensive
assetsincome¥ million¥ million

Other
provisions¥ million

Total¥ million

(75)
–

703
(37)

1,565
3

–

20

–

20

35

–

(55)

666

1,588

–

–

471

–

–

471

397
388

545
15

35
–

471
121

(55)
–

666
134

2,059
658

–

–

–

–

105

–

105

785

560

35

592

50

800

2,822

The deferred tax assets and liabilities are offset when there is a legally enforceable right to set off and when thedeferred income taxes relate to the same taxation authority. The amounts shown in the consolidated statement offinancial position are determined after appropriate offsetting.
Deferred income tax assets are recognised for tax losses carry-forwards to the extent that the realisation of therelated tax benefits through the future taxable profits is probable. As at 31 March 2020, the Group has unrecognised
tax losses of approximately ¥246 million (2019: ¥220 million) to carry forward for offsetting against future taxable
income. These tax losses have no expiry dates except for the tax losses of ¥102 million (2019: ¥87 million) which
will be carried forward for 9 years.
Other than the above, there was no material unprovided deferred income tax as at 31 March 2020 and 2019.

NIRAKU GC HOLDINGS, INC.

Annual Report 2020107

Notes to the Consolidated Financial Statements
30 DIVIDENDS
During the year ended 31 March 2020, the Company paid interim dividend of ¥120 million (¥0.10 per ordinary
share) and final dividend of ¥84 million (¥0.07 per ordinary share) to its shareholders in respect of the years ended
31 March 2020 and 2019, respectively.
The board of directors of the Company has resolved not to declare a final dividend in respect of the year ended 31
March 2020 (2019: ¥0.07 per ordinary share).

31 CASH GENERATED FROM OPERATIONSProfit before income tax
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-used assets
Depreciation of investment properties
Amortisation of intangible assets(Gain)/loss on disposal of property, plant and equipment
Loss on disposal of investment property
Impairment loss of property, plant and equipment
Impairment of right-of-use assets
Impairment of intangible assets
Finance costs, net
Dividend income(Gain)/loss on fair value for derivative financial instruments
Loss on fair value for financial assets at fair value through profit or loss
Gain on lease and sub-lease arrangement
Share of loss of an associate
Release of obligations under finance lease upon closure of halls
Changes in working capital:
Inventories
Trade receivables
Prepayments, deposits and other receivables
Trade payables
Accruals, provisions and other payables
Cash generated from operations

108

NIRAKU GC HOLDINGS, INC.

Annual Report 20202020
¥ million

2019¥ million

581

1,093

2,178
2,734
20
76
(317)
–
213
463
11
1,374
(55)
(5)
–
(151)
–
–

2,532

69
5
(825)
(175)
90

(51)
5
370
47
433

6,286

5,082

19
81
54
7
195
–
–
455
(55)
23
2
–
5
(133)

Notes to the Consolidated Financial Statements
31 CASH GENERATED FROM OPERATIONS (CONTINUED)
In the consolidated statement of cash flows, proceeds from disposal of property, plant and equipment comprise:2020¥ million

2019¥ million

Net book amount
Gain/(loss) on disposal of property, plant and equipment

1,674
317

58
(54)

Proceeds from disposal of property, plant and equipment

1,991

4

Major non-cash transactions:
For the year ended 31 March 2020, certain finance lease obligations amounting to ¥321 million (2019: ¥138 million)
were settled through reduction of rental prepayments.
For the year ended 31 March 2020, certain property, plant and equipment amounting to ¥12 million (2019: ¥259
million) were settled through finance lease obligations.

Net debt reconciliation
This section sets out an analysis of net debt and the movements in net debt for the year ended 31 March 2020 and2019 presented.
2020¥ million

2019¥ million

Cash and cash equivalents
Bank deposits with maturity over 3 months
Lease liabilities
Borrowings

14,128750(34,577)(13,086)

15,17643(3,420)(16,082)

Net debt(32,785)(4,283)

Annual Report 2020

109

NIRAKU GC HOLDINGS, INC.

Notes to the Consolidated Financial Statements
31 CASH GENERATED FROM OPERATIONS (CONTINUED)
Liabilities fromfinancing activities

Other assets

Long-term
Cash andbank
cash
deposits equivalents¥ million¥ millionBankdepositswithmaturityover
3 months¥ millionLease
liabilities Borrowings¥ million¥ million

Total¥ million

Net debt at 1 April 201847

15,59443(4,135)(14,740)(3,191)

Cash flows
Foreign exchange adjustments
Other non–cash movements

(47)
–
–

(415)
(3)
–

–
–
–

981
–
(266)

(1,226)
–
(116)

(707)
(3)
(382)

Net debt at 31 March 2019
Adoption of IFRS 16––

15,176–43–(3,420)(32,205)(16,082)–(4,283)(32,205)

Net debt at 1 April 2019 (restated)
Cash flows
Foreign exchange adjustments
Acquisition – lease

–
–
–
–

15,176(1,032)
(16)
–

43
707
–
–

(35,625)
2,011
–
(963)

(16,082)
2,996––(36,488)
4,682
(16)
(963)

Net debt at 31 March 2020–

14,128750(34,577)(13,086)(32,785)

32 CONTINGENCIES
As at 31 March 2020, the Group did not have any significant contingent liabilities (2019: Same).

110

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
33 COMMITMENTS(a)Capital commitments
The outstanding commitments not provided for in the consolidated financial statements as at 31 March 2020
and 2019 are as follows:

Contracted but not provided forPurchase of property, plant and equipment

2020¥ million

2019¥ million

66419(b) Operating lease commitments(i)

As a lessee
As at 31 March 2020, the Group had future aggregate minimum lease payments under non-cancellable
operating leases in respect of office premises and pachinko and pachislot halls as follows:

No later than one year
Later than one year and no later than five years
Over five years

2020¥ million

2019¥ million

–
–
–

1,298
4,333
4,545

–

10,176

From 1 April 2019, the Group has recognised right-of-use assets for these leases, except for short-termand low-value leases.
(ii)

As a lessor
As at 31 March 2020 and 2019, the Group’s future aggregate minimum lease receipts under noncancellable operating leases in respect of investment properties are as follows:

No later than one year

NIRAKU GC HOLDINGS, INC.

2020
¥ million

2019¥ million

43

40

Annual Report 2020111

Notes to the Consolidated Financial Statements
34 RELATED PARTY TRANSACTIONS
For the purposes of these consolidated financial statements, parties are considered to be related to the Group if theparty has the ability, directly or indirectly, to exercise significant influence over the Group in making financial andoperating decisions. Related parties may be individuals (being members of key management personnel, significant
shareholders and/or their close family members) or other entities and include entities which are under the significant
influence of related parties of the Group where those parties are individuals. Parties are also considered to berelated if they are subject to common control.
Other than those transactions and balances disclosed elsewhere in the consolidated financial statements, thefollowing transactions were carried out with related parties:(a)Transactions with related parties
The following transactions were undertaken by the Group with related parties during the years ended 31
March 2020 and 2019:

Service fee expenses
Niraku USA, Inc.

2020
¥ million

2019¥ million

33

32

The service fee paid was related to provision of gaming research services carried out by Niraku USA, Inc. andprovision of training to employees of the Group in the United States of America. Niraku USA, Inc. is a firm
controlled by certain parties among the controlling shareholders of the Company. The transactions withrelated parties were conducted in the ordinary course of the business based on terms mutually agreed
between the relevant parties.

(b) Key management compensation
Key management includes directors (executive, non-executive and external directors) and the senior
management of the Group. The compensation paid or payable to key management for employee services isshown below:

Directors’ fees
Basic salaries, allowances and other benefits in kind
Employee’s contribution to pension scheme

112

NIRAKU GC HOLDINGS, INC.

Annual Report 20202020
¥ million

2019¥ million

285
42
5

250
65
4

332

319

Notes to the Consolidated Financial Statements
35 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY
At 31 March2020¥ million

2019¥ million

31
1
5
5,593
18,206
348
47

9
6
5
6,756
18,206100
33

24,231

25,115

957
1,612
707
3,590
100

535
2,906
570
4,460
–

6,966

8,471

Total assets

31,19733,586EQUITY
Share capital
Reserves

3,000
18,5033,000
17,829Total equity

21,503

20,829LIABILITIES
Non-current liabilities
Borrowings
Lease liabilities
Other payables
Derivative financial instruments

6,943
11
24
22

9,142
–
30
27

7,000

9,199

Annual Report 2020

113

Note
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deposits and other receivables
Loans to subsidiaries
Investments in subsidiaries
Financial assets at fair value through profit or loss
Deferred income tax assets

Current assets
Prepayments, deposits and other receivables
Loans to subsidiaries
Bank deposits with maturity over 3 months
Cash and cash equivalents
Financial assets at fair value through profit or loss(a)

NIRAKU GC HOLDINGS, INC.

Notes to the Consolidated Financial Statements
35 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY (CONTINUED)
At 31 March2020¥ million

2019¥ million

2,032
14
63
4
581

3,466

2,694

3,558

Total liabilities

9,694

12,757

Total equity and liabilities

31,19733,586

Note
Current liabilities
Borrowings
Lease liabilities
Other payables
Derivative financial instruments
Current income tax liabilities

72
4
16

Note (a): Reserves movement of the Company
Retained
Share capital

Capital surplus

earnings

Total¥ million¥ million¥ million¥ million

20,819Balance at 1 April 2018

3,000

13,954

3,865

Profit for the year

–

–

249

249

Final dividend related to 2018

–

–

(143)

(143)

Interim dividend related to 2019

–

–

(96)

(96)

Balances at 31 March 2019 and 1 April 2019

3,000

13,954

3,875

20,829Profit for the year

–

–

878

878

Final dividend related to 2019

–

–

(84)

(84)

Interim dividend related to 2020

–

–

(120)

(120)

3,000

13,954

4,549

21,503

Balances at 31 March 2020

114

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
36 BENEFITS AND INTERESTS OF DIRECTORS
Directors and chief executive’s emoluments
The remuneration of every director of the Company paid/payable by the Group for the year ended 31 March 2020
and 2019 is set out below:
For the year ended 31 March 2020

Name

Directors
Hisanori Taniguchi (also the Chief Executive)
Akinori Ohishi (Note (i))
Masataka Watanabe (Note (i))

Fee¥ million

Salaries,
allowances
Definedand other contribution
benefits pension costs¥ million¥ million

Total¥ million

151
29
8

–
–
–

1
1
1

152
30
9

Non-executive director
Hiroshi Bannai

4

–

–

4

Independent non-executive directors
Hiroaki Morita (Note (iii))
Michio Minakata
Yoshihiro Koizumi
Kuraji Kutsuwata (Note (ii))

3
6
4
3

–
–
–
–

–
–
–
–

3
6
4
3

208

–

3

211

Notes:(i)

Mr. Akinori Ohishi and Mr. Masataka Watanabe were appointed as executive directors on 27 June 2019.

(ii)

Mr. Kuraji Kutsuwata was appointed as independent non-executive director on 27 June 2019.

(iii)

Mr. Hiroaki Morita was resigned as independent non-executive director on 30 November 2019.

NIRAKU GC HOLDINGS, INC.

Annual Report 2020115

Notes to the Consolidated Financial Statements
36 BENEFITS AND INTERESTS OF DIRECTORS (CONTINUED)
Directors and chief executive’s emoluments (Continued)
For the year ended 31 March 2019Fee¥ million

Salaries,
allowancesand otherbenefits¥ million

Definedcontribution
pension costs¥ million

Total¥ million

151

–

1

152

Non-executive director
Hiroshi Bannai

4

–

–

4

Independent non-executive directors
Hiroaki Morita
Norio Nakayama (Note)
Michio Minakata
Yoshihiro Koizumi

4
2
6
4

–
–
–
–

–
–
–
–

4
2
6
4

171

–

1

172

Name

Director
Hisanori Taniguchi (also the Chief Executive)

Note: Mr. Norio Nakayama was resigned as independent non-executive directors on 31 October 2018.
*

Insignificant amount less than ¥1 million

The remuneration shown above represents remuneration received from the Group by these directors in theircapacity as employees to the Group and/or their capacity as directors of the Company during the years ended 31
March 2020 and 2019.
There was no arrangement under which a director waived or agreed to waive any emoluments during the years
ended 31 March 2020 and 2019.
During the year ended 31 March 2020, the Group does not pay consideration to any third parties for making
available directors’ services (2019: Nil).
As at 31 March 2020, there is no loans, quasi-loans and other dealing arrangements in favour of directors,
controlled bodies corporate by and connected entities with such directors (2019: Nil).
Save as disclosed in Note 34, no significant transactions, arrangements and contracts in relation to the Group’sbusiness to which the Group was a party and in which a director of the Group had a material interest, whether
directly or indirectly, subsisted at the end of the year or at any time during the year (2019: Nil).

116

NIRAKU GC HOLDINGS, INC.

Annual Report 2020

Notes to the Consolidated Financial Statements
37 SUBSIDIARIESThe following is a list of the principal subsidiaries at 31 March 2020 and 2019:

Name

Directly held
Niraku Corporation

Country and dateof incorporation

Principal activities

Type oflegal status

Issued andpaid up capital

Effective interest held
as at 31 March
2020

2019

Japan,
27 August 1969

Pachinko and pachislot Limited liability
hall operations
company¥257 million

100%

100%

NGCH Hong Kong Limited

Hong Kong,
4 May 2017

Investment holding

Limited liability
company

HK$700,000

100%

100%

Dream Games Singapore
Pte. Ltd.

Singapore,
3 November 2014

Wholesale of computer
games, sporting andother recreational
goods

Limited liability
company

US$2,912,412

100%

100%

Indirectly held
Nexia Inc.

Japan, 19 June 2009

Property investment

Limited liability
company¥30 million

100%

100%

Niraku Merrist Corporation

Japan,
24 February 2010

Provision of cleaning
service

Limited liability
company¥5 million

100%

100%

NPJ Hong Kong Limited

Hong Kong,
10 May 2017

Investment holding

Limited liability
company

HK$700,000

51%

51%

Dream Games (Japan)
C0., Ltd.

Japan, 9 April 2013

Investment holding

Limited liability
company¥100 million

100%

100%

Dream Games Vietnam
Co., Ltd.

Socialist Republic ofVietnam,
10 April 2013

Amusement centre
operation

Limited liability
company

VND35,145,000,000(equivalents to
US$1,650,000)

100%

100%

Dream Games Cambodia
Co., Ltd

Cambodia,
1 February 2011

Amusement centre
operation

Limited liability
company

9,100,000,000 Riels(equivalents to
US$2,275,000)

100%

100%

NPJ China Yokocho Co., Ltd. China,
31 January 2018

Restaurant operation

Limited liability
company

US$2,100,000

51%

51%

NIRAKU GC HOLDINGS, INC.

Annual Report 2020117

Notes to the Consolidated Financial Statements
38 EVENTS OCCURRING AFTER THE REPORTING PERIOD
On 7 April 2020, the Japan government declared the state of emergency declaration in response to the outbreak of
COVID-19. Entertainment facilities including pachinko and pachislot halls were requested to be suspended fromoperation by the local government. As a result, the Group had suspended operation of all 53 pachinko and pachislot
halls and the restaurants in Japan since April 2020. With the decreasing number of infected cases in early May
2020, the Japan government has eased its restriction measure gradually and most of the Group’s pachinko andpachislot halls had resumed operations sequentially in the same month.
As a result of the temporarily lockdown of pachinko and pachislot halls in Japan, the Group anticipates that thefinancial results and business operations will be negatively impacted after March 2020. Although the restriction andsocial-distancing measures imposed have been released subsequently, the Group expects the adverse effects may
continue in the future. As of the reporting date, the management is still in process of assessing the overall financial
effect and is subject to further evaluation. The Group will pay close attention to the development of the COVID-19
outbreak and evaluate its impact on the financial position and operating results of the Group.
IAS 10 “Events After the Reporting Period” defines an adjusting event as an event that provides evidence ofconditions that existed at the reporting date. A non-adjusting event indicates conditions that arose after thereporting date. The measurement of assets and liabilities as well as the impairment assessments as at 31 March
2020 prepared by management reflect the conditions that existed as of that date and have not reflected the possible
effects of the outbreak. The effects will be reflected in the financial results for the year ending 31 March 2021.
Up to the date on which the consolidated financial statements were authorised for issue, the Group is continuously
assessing the impact of the COVID-19 on the performance of the Group based on the latest development.
In addition, the estimated future cash flows of the Group’s various cash-generating units (“CGUs”) which are used
for the impairment tests will be updated continuously based on the development of the COVID-19 outbreak. The
recoverable amount of the Group’s CGUs may be lower if the COVID-19 outbreak continues for a prolonged period.
Notwithstanding the recent negative impact on the Group’s operations, management’s assessment indicates thatthe going concern basis continues to be appropriate for the Group for the next 12 months from the reporting date
and the Group will be able to comply with all bank covenants for the year ending 31 March 2021.

118

NIRAKU GC HOLDINGS, INC.

Annual Report 2020