(Incorporated in Japan with limited liability 於日本註冊成立的有限公司)

Stock Code 股份代號 : 1245

2018

Annual Report 年報
ANNUAL REPORT 2018 年報

This report is printed on environmentally friendly paper
本報告以環保紙印製

僅供識別

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

9

Corporate Governance Report

15

Profile of Directors and Senior Management

24

Report of the Directors

27

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 55 halls at present, stretching from Tokyo Metropolitan Area to
Northeast Honshu, equipped with over 29,000 pachinko and pachislot machines serving customers in ten prefectures inJapan.

*

2

For identification purpose only

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Corporate Information and Information for Investors
CORPORATE INFORMATION
Executive Director

Mr. Hisanori TANIGUCHI (Chairman)(also known as Mr. JEONG Seonggi)

Non-Executive Director

Mr. Hiroshi BANNAI

Independent Non-Executive Directors

Mr. Hiroaki MORITA
Mr. Norio NAKAYAMA
Mr. Michio MINAKATA
Mr. Yoshihiro KOIZUMIAudit Committee

Mr. Michio MINAKATA (Committee Chairman)
Mr. Hiroaki MORITA
Mr. Hiroshi BANNAI

Remuneration Committee

Mr. Hiroaki MORITA (Committee Chairman)
Mr. Norio NAKAYAMA
Mr. Hisanori TANIGUCHI

Nomination Committee

Mr. Hisanori TANIGUCHI (Committee Chairman)
Mr. Norio NAKAYAMA
Mr. Yoshihiro KOIZUMIINFORMATION FOR INVESTORS
Principal Bankers

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

AuditorPricewaterhouseCoopers

Compliance Adviser

Shenwan Hongyuan Capital (H.K.) Limited

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

505, 5/F Hutchison House,
10 Harcourt Road,
Central, 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 20183

Financial and Operational Highlights
The following table summarises the results of the Group for the financial years ended 31 March 2018, 2017, 2016, 2015
and 2014.

2018¥ million HK$ million

For the year ended 31 March
2017
2016
¥ million HK$ million¥ million

2015¥ million

2014¥ million

138,493(113,230)

10,229(8,363)

143,130(114,734)

9,625(7,716)

158,095(127,900)

175,592(143,473)

236,449(203,455)

25,263

1,866

28,396

1,909

30,195

32,11932,994

417
874

31
65

N/A
784

N/A
53

N/A
800

N/A
767

N/A
853

Revenue

26,554

1,961

29,1801,962

30,99532,88633,847

Hall operating expenses
Administrative and otheroperating expenses
Profit before income tax(Loss)/profit attributable to theshareholders of the Company(22,640)(1,672)(24,110)(1,621)(25,207)(22,982)(22,798)(3,918)
213

(289)
16

(4,391)
902

(295)
61

(4,815)633(5,336)
4,994(4,636)
6,008

(15)

(1)

492

33

181

3,030

3,698

(Loss)/earnings per share(expressed in Japanese Yenor Hong Kong dollar)(0.013)(0.001)

0.41

0.028

0.15

3.38

4

Overall revenue margin

18.2%

–

19.8%

–

19.1%

18.3%

14.0%

Net (loss)/profit margin(0.2%)

–

1.7%

–

0.6%

9.2%

10.9%

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

4

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Financial and Operational Highlights

2018¥ million HK$ million
Current assets
Current liabilities
Net current assets/(liabilities)
Total assets
Total assets less current liabilities
Gearing ratio

17,3638,815
8,548
52,171
43,356
69.6%

1,282
651
631
3,853
3,202
–

As at 31 March2017¥ million HK$ million

2016¥ million

2015¥ million

2014¥ million

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

15,5978,287
7,310
52,25743,97072.4%

14,734
11,1203,614
50,97739,85792.4%

11,9698,951
3,018
46,90537,954
91.7%

1,027
485
542
3,323
2,838
–

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.

¥13.54 to HK$1.00, the exchange rate prevailing on 29 March 2018 (i.e. the last business day in March 2018);2.

¥14.87 to HK$1.00, the exchange rate prevailing on 31 March 2017 (i.e. the last business day in March 2017).

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 2018

5

Chairman’s Statement
To our shareholders

OUR VISIONOur Group embarked on expanding its business into Asia lastyear. Asian countries, particularly Southeast Asian countries, areexpected to experience great economic development in the
future, and their populations are also predicted to rise. As
people’s lives become richer, their leisure time also increases,
and an expansion of the entertainment market is predicted. This
was the route that Japan once followed during the post-war
period of rapid economic growth, and in the near future, maturesocieties and markets will surely emerge in Asian countries.
There, the importance of the community as a place where people
can gather and enjoy themselves, and where people can interact
with one another, is expected to increase. We intend to continue
expanding our business in this rapidly growing region.
In the long term, we will develop our entertainment business in a
broader sense, including the amusement business and restaurant
business, both in Japan and Asia. In the medium term, forpachinko hall operations as our core business, we will proactively
promote a plan to open halls, while securing the market byoffering higher quality services. Furthermore, in our restaurant
business, which we have already started in Japan, we will be opening additional establishments. In Asia, which isexperiencing rapid growth, with an eye on future expansion of our business, we will seek out opportunities for further
business investment and focus on forming a stable foundation for our existing businesses.
Our philosophy of ‘Happy Time, Creation’ meaning “providing happy times for people by making the world cheerful, funand entertaining” applies not only to our mainstay pachinko business, but also to the activities of the entire Group.
Furthermore, this philosophy is not limited to specific countries and regions — it has universal significance. The Groupcan create opportunities to conduct business in Asia, triggered by its listing on the Stock Exchange, and in addition to thepachinko business, which evolved independently in Japan, in anticipation of the future, we have started taking steps
along the path towards globalisation in order to boost the development of the Group as a whole.

Pachinko businessIn the fiscal year ended 31 March 2018, we opened the “Niraku Hitachi-omiya hall” (in Hitachi-omiya city, Ibaraki
prefecture). This “Niraku Hitachi-omiya hall”, as a new style of hall for the future, is based on the concept of becoming acommunity space in the area. We are making efforts to provide places of relaxation for the people of local communities,
create halls where people can spend a relaxing and enjoyable time, with our motto of a familiarity that allows visitors whoeven not play pachinko or pachislot would also pay a visit. Meanwhile, we closed the “Niraku Annaka-itahana hall” (inAnnaka City, Gunma Prefecture) due to environmental changes within the marketing area and in order to strengthen ourbusiness structure. As a result, the number of pachinko halls at the end of this financial year stands at 55 (excluding the“Niraku Tomioka hall”, for which the prospect of resumption of business has yet to be determined due to nuclear
disaster).

6

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Annual Report 2018

Chairman’s Statement
In the pachinko hall industry, we expect the situation persists in which it has been difficult to see any significant
improvement. According to the Japan Productivity Center “Leisure White Paper 2017”, the participating population was
9.4 million (a year-on-year decrease of 12.1%) — the lowest figure ever on record. The market size (gross pay-ins) also
fell to ¥21.626 trillion (a year-on-year decrease of 6.9%), and the negative trend continues.
With the shrinking of the industry as a whole, the pachinko hall market is moving towards a polarised market, with the
major companies pushing ahead with large-sized halls and the small- and medium-sized parlors set to withdraw from theindustry. It is thought that this downward trend will continue for the time being, as efforts to cultivate the youngster
people’s market, which is a problem for the industry as a whole, and to prevent the retreat of existing customer, arefailing to have a noticeable effect.
In addition, in December 2016, the “Act on the Promotion of the Development of Integrated Resort Areas (IR PromotionAct)” was passed and enacted, and the pachinko industry has also been feeling the pressure of measures to counter thegambling addiction associated with the legalisation of casinos, and it is expected that further amendments will be madeto gaming machine regulations in the future, as well as further measures being taken to counter the gambling aspect ofgaming machines through restrictions on advertising and promotion.
In such an industry environment, in the pachinko hall business, we have been working on streamlining cost structure,
increasing customers return rate and providing a gaming environment to meet the needs of diverse fans, while complying
with various regulations, as an important part of our sales strategy. Although the conditions remain severe for thepachinko industry as a whole, including changes in the market due to change of machine regulations and downturn insales (gross pay-ins), as a result of such efforts, we have been able to maintain greater customer traffic than last year atmany halls.
Going forward, we will continue to make improvements on replacing machines in each hall to match customer preference,
improve our gaming environment and customer service from the customer’s point of view, and we will aim to strengthen
our organization by further promoting the streamlining of expenses, and work together to create halls that our customers
will support.

Amusement arcade business
On 20 November 2017, the Group acquired Dream Games Singapore Pte. Ltd. (“Dream Games”) and its subsidiaries,
which engages in amusement arcades operation in Vietnam and Cambodia.
Dream Games is a young company established in 2013, but since its inception, its business strategy is to ally with large
Japanese mall developer, focusing on opening amusement arcades in new shopping malls. Currently, Dream Games
operates a total of seven amusement arcades, with six in Vietnam and one in Cambodia. The economies of Vietnam andCambodia are growing fast, and their leisure markets are expected to expand. Although the median ages of the
populations of both countries are young and their populations are growing, there are still very few facilities for people togather and enjoy their leisure time, and it is predicted that the use of amusement facilities will also continue to enjoy
further growth in the leisure market.
In the future, we will work on developing new types of operation for selling our services to respond to a variety of needs,
starting with existing markets, and focus on strategies to expand our market share, without missing opportunities to open
new arcades. We will also be looking to other Southeast Asian markets, and we plan to expand our amusement businessthroughout Asia in the future. Our plan is to accurately capture the economic growth of the countries of Asia, theaccompanying expansion of their leisure markets, and their various needs, and actively invest in them to expand thebusiness and make it one of our pillars of income in the future.

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Annual Report 2018

7

Chairman’s Statement
Restaurant business
As for our restaurant business, we are currently operating two restaurants, in Shinbashi and Nishi Shinjuku, as afranchisee of Spanish restaurant chain “Lizarran” developed by the Spain-based Comess Group, which operates
restaurants mainly in Europe. We plan to open another restaurant in fiscal year 2018/2019.
The “Lizarran” brand that the Comess Group is deploying in its home country of Spain is a brand that is full of fun — not
only serving food but also offering an entertaining style of service.
We are convinced that, with our profound experiences that we had gained through our pachinko business, we can takefull advantage of the efficient store operation, service and quality maintenance and management systems and open morerestaurants in the future. We plan to continue to roll out more restaurants in major urban areas in Japan.

Strengthening relations with the local community
In the pachinko industry that is the mainstay of our business, the market shrinkage shows no signs of halt. Under suchcircumstances, what is important is how well we can maintain our customer base. To that end, we must maintain close
relationships with our customers and pachinko halls that customers would choose to patronise. The pachinko hall has thecharacteristic of a “neighborhood marketing style”, in which the marketing area is small, and close relationships are built
up with customers. Rather than drawing in customers from far and wide, it is necessary to have customers from theneighborhood visit the halls regularly in their daily lives. To that end, we believe that how we are perceived and evaluatedby the local people, and how we can coexist as and live in symbiosis as a member of the local community will become an
important factor.
Currently, the Group is working on how to live in harmony with the local communities, primarily with our pachinko halls.
For that purpose, we have started our “Active Local Engine” initiative as one of our branding activities. These activities
will turn halls into intersections of various forms of entertainment in local communities and deepen their connection withthe local area. Specifically, the idea is to bring together the small “interesting” and “fun” things in the marketing area ofthe pachinko hall, and introduce them to create common talking points with the members of community and, byextension, with our customers, share the “interesting” and “fun” together. In addition, we will integrate our existing
Corporate Social Responsibility (CSR) activities and charitable donation activities directed at local communities into thesebranding activities and promote them under a unified concept.
These activities are not something that will directly lead to attracting customers; however, if our value in the local
community can be increased through these activities, and we can come to be recognized as a member of the community
by even those locals who do not play pachinko themselves, we believe that they will have an indirect effect to our sales
activities.
Two years from now, in 2020, we will be celebrating our 70th anniversary of the establishment of the core pachinkobusiness. I and the entire management team are very thankful to all the staff in our Group for their professionalism andperseverance, as well as to our customers for their trust and continued support. Our next goal is to be able to celebrate
our 100th anniversary in an even stronger position, with the support of many of our customers, by “Creating Happy Time”
for as many people as possible. To that end, we aim to expand our business beyond Japan. We exert our effort
throughout the entire Group, to enhance our corporate value, and maintain better relationships with all stakeholders,
including employees, and continue to grow together.

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Annual Report 2018

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 declined from ¥28,396 million in 2017 to ¥25,263 million in 2018. The
decrease in revenue by ¥3,133 million, or 11.0%, was primarily due to the recession of the pachinko and pachislot
industry.
Gross pay-ins
For the year ended 31 March 2018, the Group’s gross pay-ins from pachinko and pachislot business amounted to¥138,493 million, comprising revenue from suburban halls of ¥131,811 million (2017: ¥136,122 million) and urban halls of¥6,682 million (2017: ¥7,008 million), representing a decrease of ¥4,311 million, or 3.2%, and ¥326 million, or 4.7%,
respectively, as compared to last year. The decline, apart from shrinkage of customer base, was resulted from thereplacement of high-gaming element machines to low-gaming element machines which in turn generate less revenue;
closure of Annaka-Ibahana hall in current year; netted with the additional revenue from Hitachi-Omiya hall which was
opened in late December 2017.
Gross pay-out
Gross pay-out declined from ¥114,734 million in 2017 to ¥113,230 million in 2018, a decrease of ¥1,504 million, or 1.3%,
generally mirrored the decline in gross pay-ins.
Revenue margin
The revenue margin decreased from 19.8% in 2017 to 18.2% in 2018. The decrease of 1.6% was due to strategic
increase in pay-out ratio to stimulate higher customer visit, which lowered the gross profit in the short term. The merit has
been witnessed by the increase in the machine utilisation rate from 23.2% for both pachinko and pachislot machine in2017 to 23.3% for pachinko machine and 23.9% for pachislot machine in current year.

Revenue from Amusement Arcade Business
In November 2017, the Group acquired 100% of equity interest in Dream Games, a company engages in the operation ofentertainment and amusement facilities in Cambodia and Vietnam. As a result of the acquisition, the financial results ofDream Games and its subsidiaries were consolidated into the Group’s financial statements.
For the year ended 31 March 2018, the revenue contributed from amusement arcade business amounted to ¥417 million,of which ¥349 million and ¥68 million were derived from Vietnam and Cambodia, respectively.

Other revenue
Other revenue represents incomes from vending machines and hotel and restaurant operations.
Vending machine income amounted to ¥536 million in 2018. The slight decrease of ¥28 million as compared to ¥564
million in 2017 was resulted from the drop in customer visit.
Revenue from hotel operations increased from ¥130 million in 2017 to ¥158 million in 2018 as a result of increase inaverage occupancy rate from 70.30% in 2017 to 75.7% in 2018.
Revenue from restaurant increased drastically from ¥90 million in 2017 to ¥180 million in 2018. The hike was due to fullyear effect of revenue from Nishi-Shinjuku restaurant which was opened in June 2016; and the third restaurant located in
Shinbashi was opened in August 2017. Approaching to the end of financial year, in late February 2018, the Groupdecided to close down the restaurant in Akasakamitsuke due to its unsatisfactory performance.

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Annual Report 20189

Management Discussion and Analysis
Administrative and other operating expenses
Administrative and other operating expenses decreased by ¥473 million, or 10.8%, from ¥4,391 million in 2017 to ¥3,918
million in 2018, primarily due to impairment loss of ¥271 million was provided in last year but nil in current year; andcontinuous implementation of cost savings measures during the current year.

Finance costs, net
Finance costs, net declined by ¥21 million, or 4.0%, from ¥531 million in 2017 to ¥510 million in 2018. The drop was
attributable to the centralisation of borrowings from individual subsidiaries level to the Company, allowing higher costsavings on borrowings.

Profit before income tax, (loss)/profit attributable to shareholders of the Company, basic (loss)/earnings per share and dividend
Profit before income tax amounted to ¥213 million, a plunge of ¥689 million, or 76.4%, as compared to ¥902 million in2017. Net profit margin dropped from 1.7% in 2017 to -0.2% in 2018.
Loss attributable to shareholders of the Company of ¥15 million was recorded for the year ended 31 March 2018, ascompared to the profit to shareholders of ¥492 million in 2017. The turn around from profit to loss was mainly due to thedrop in gross pay-in by 3.2%; and increase in pay-out ratio which lower the profit margin in the short term.
Basic loss per share was ¥0.013 (basic earnings per share in 2017: ¥0.41). The board of directors of the Company (the“Board”) has declared a final dividend of ¥0.12 per share for the year ended 31 March 2018 (2017: ¥0.03 per share) on
30 May 2018.

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.

10

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Annual Report 2018

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 2018 and2017, and operating cash flows before movements in working capital of the Group for the years ended 31 March 2018and 2017, respectively:
As at 31 March
2018
2017
¥ million¥ million
Cash and cash equivalents
Bank deposits

Bank loans
Syndicated loans
Obligations under finance leases

Working capital
Total equity
Gearing ratio

15,59490

13,404287

15,684

13,691

3,574
11,166
4,135

2,860
8,190
5,208

18,875

16,258

8,548
27,13669.6%

8,066
27,49959.1%

For the year ended 31 March
2018
2017
¥ million¥ million
Operating cash flows before movements in working capital

2,925

4,156

Net current assets of the Group totalled ¥8,548 million as at 31 March 2018 (31 March 2017: ¥8,066 million), and current
ratio was 1.97 as at 31 March 2018 (31 March 2017: 2.12). As at 31 March 2018, there were cash and cash equivalentsof ¥15,594 million (31 March 2017: ¥13,404 million), in which ¥14,865 million was denominated in Japanese Yen, ¥456
million was denominated in United States dollar, ¥218 million was denominated in Hong Kong dollar and ¥55 million was
denominated in other currencies. The Group had total borrowings of ¥18,875 million as at 31 March 2018 (31 March
2017: ¥16,258 million). Current portion of borrowings and current portion of obligations under finance leases amounted to¥4,774 million as at 31 March 2018 (31 March 2017: ¥3,554 million).
The Group’s bank borrowings during the current period comprised bank loans and syndicated loans. As at 31 March
2018, the total bank borrowings amounted to ¥14,740 million (31 March 2017: ¥11,050 million) with the average effective
interest rates ranged from 0.8% to 1.1% (31 March 2017: 1.1% to 1.8%) per annum. Approximately 4.2% of bankborrowings as at 31 March 2018 were fixed rate borrowings.
Details of borrowings and obligations under finance leases are provided in Notes 27 and 28 to the consolidated financial
statements.

NIRAKU GC HOLDINGS, INC.

Annual Report 201811

Management Discussion and Analysis
HEDGING OF FLOATING RATE BORROWINGS AND FOREIGN EXCHANGE
As at 31 March 2018, the Group had one floating to fixed interest rate swap contract with a bank in Japan (i.e. the Grouppays fixed interest rates and receives interests at floating rate). This interest rate swap contract was entered into as ameasure to manage interest rate risk in relation to loans of the Group. As interest rates of some of the Group’s loans areon a floating rate basis, the floating to fixed interest rate swap contracts enabled the Group to reduce the volatility in theamount of interest being paid. For the year ended 31 March 2018, the gain on fair value for interest rate swap contracts
amounted to ¥3 million.
The Group’s debts were primarily denominated in Japanese Yen. After the acquisition of Dream Games, the Group
maintains an appropriate level of external borrowings in Vietnam Dong for natural hedging of Vietnam Dong attributed toprojects in Vietnam. The Vietnam Dong exposure of the Group is mainly derived from the translation of non-current
assets and liabilities of the Vietnam subsidiary with functional currency of Vietnam Dong and the Vietnam Dong deposits
held for future development costs. As at 31 March 2018, the translation of non-current assets and liabilities of subsidiaries
with functional currency other than Japanese Yen to Japanese Yen by using exchange rates at that day resulted in a lossof ¥93 million is recognised in equity. Apart from this, the Group does not have any material foreign exchange exposure.

GEARING RATIOThe gearing ratio, defined as the aggregate of interest-bearing loans and obligations under finance leases, divided bytotal equity, was 69.6% as at 31 March 2018 (31 March 2017: 59.1%). The increase of 10.5% as compared with that as
at 31 March 2017 was mainly due to the increase in total borrowings of ¥2,617 million and decrease in total equity of ¥363
million.

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
2018
2017
¥ million¥ million
Property, plant and equipment
Investment properties
Others12

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

1,915
3
1

653
–
5

1,919

658

Management Discussion and Analysis
CHARGES ON ASSETS
As at 31 March 2018 and 2017, the carrying values of charged assets were as below:

Property, plant and equipment
Investment properties
Deposits and other receivables

2018¥ million

2017¥ million

8,340
662
582

8,195
678
585

9,584

9,458

CONTINGENT LIABILITIESThe Group did not have any material contingent liabilities as at 31 March 2018 and 2017.

CAPITAL COMMITMENTS
Details of the Group’s capital commitments as at 31 March 2018 and 2017 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
On 31 October 2017, the Company entered into sale and purchase agreement with the shareholders of Dream Games topurchase the entire issued shares of Dream Games at a cash consideration of approximately ¥1,870 million. As at thedate of acquisition, Dream Games was principally engaged in the operation of entertainment and amusement facilities in
Cambodia and Vietnam. The acquisition was completed on 20 November 2017, and Dream Games and its subsidiaries
became the wholly-owned subsidiaries of the Company.
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 has occurred since the end of the financial year.

EMPLOYEES AND REMUNERATION POLICY
As at 31 March 2018, the Group had 1,776 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 37 to the consolidated financial statements.

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Annual Report 201813

Management Discussion and Analysis
USE OF NET PROCEEDS FROM LISTING
The net proceeds from the initial public offering in April 2015 amounted to approximately HK$339 million. As at 31 March
2018, all the net proceeds were utilised according to the originally planned purposes as set out in the Company’s
prospectus dated 24 March 2015.

FINAL DIVIDENDThe Board has declared a final dividend of ¥0.12 per share for the year ended 31 March 2018 (31 March 2017: ¥0.03 pershare) on 30 May 2018, the final dividend will be payable on 13 July 2018 to the shareholders of the Company (the“Shareholders”) whose names appear on the register of members of the Company at close of business on 14 June 2018.
The exchange rate for the conversion of Japanese Yen to Hong Kong dollar for the dividend distributed to the
Shareholders in the currency other than Japanese Yen is based on the average currency rates prevailing five trading
days immediately prior to 30 May 2018 (being 23 to 25 May 2018 and 28 to 29 May 2018).

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Corporate Governance Report
CORPORATE GOVERNANCE
During the year ended 31 March 2018, 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 (the “Listing Rules”), with the
exception for code provision A.2.1, which requires the roles of chairman and chief executive to be separated and shouldbe performed by different individuals.

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 leader of our Group who has been primarily involved in the formulation of business strategies anddetermination of the overall direction of our Group. He has also been chiefly responsible for our Group’s operations as hedirectly 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 of the Company (the “Directors”)(including our independent non-executive Directors) consider our Chairman is the best candidate for both positions andthe present arrangements are beneficial to and in the interests of our Company and Shareholders as a whole.

DELEGATION BY THE BOARD
The Board reserves for its decision all major matters of the Company, including: approval and monitoring of all policy
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 other significant financial
and operational matters. The Board is accountable to the Shareholders. Directors could have recourse to seek
independent professional advice in performing their duties at the Company’s expense and are encouraged to access andto 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 from theBoard prior to any significant transactions entered into by the management.

BOARD OF DIRECTORSThe Board oversees the management, businesses, strategic directions and financial performance of the Group. The
Board currently comprises a total of six Directors, with one executive Director, namely Mr. Hisanori TANIGUCHI (alsoknown as JEONG Seonggi), one non-executive Director, namely Mr. Hiroshi BANNAI, and four independent nonexecutive Directors, namely Mr. Hiroaki MORITA, Mr. Norio NAKAYAMA, Mr. Michio MINAKATA and Mr. Yoshihiro
KOIZUMI. The biographies of the Directors are set out on pages 24 to 26 of this annual report.

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Annual Report 201815

Corporate Governance 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 with a view to achieve a sustainable and balanced development of theGroup. In designing the Boards composition, Board diversity has been considered from a number of aspects, including
but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge
and length 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. The Board’s composition (including gender,
ethnicity, age, length of service) will be disclosed in the Corporate Governance Report annually. This diversity policy isreviewed annually by the Nomination Committee, and where appropriate, revisions will be made with the approval fromthe Board.

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.

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 2018 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 2018
and interim financial statements for the six months ended 30 September 2017 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. Hiroaki MORITA (森田弘昭) 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.

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Corporate Governance Report
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. Norio NAKAYAMA (中山宣男) and Mr. Hiroaki MORITA (森田弘昭) and an executive Director, namely Mr.
Hisanori TANIGUCHI (谷口久徳) (also known as Mr. JEONG Seonggi). It is currently chaired by Mr. Hiroaki MORITA (森田弘昭), an independent non-executive Director. The Remuneration Committee held 3 meetings during the year ended
31 March 2018 to review and approve 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 making recommendations to the Board about the remuneration of non- executive
Directors.
For the year ended 31 March 2018, 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 ¥110,000,000

8
2
–
1
1

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, assessing theindependence of the independent non-executive Directors and making recommendations to the Board on theappointment and re-appointment of Directors.
The Nomination Committee currently consists of three members, including two independent non-executive Directors,
namely Mr. Norio NAKAYAMA (中山宣男) and Mr. Yoshihiro KOIZUMI, (小泉義広), and an executive Director, namely Mr.
Hisanori TANIGUCHI (谷口久徳) (also known as Mr. JEONG Seonggi). It is currently chaired by Mr. Hisanori TANIGUCHI(谷口久徳), an executive Director. The Nomination Committee held 4 meetings during the year ended 31 March 2018 toreview the structure, size and composition of the Board, approve the renewal of the term of appointment for those
Directors, assess the independence of the independent non-executive Directors and review the measurable 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 by rotation in accordance with the Articles of Incorporation. At the Company’s 2017
annual general meeting (“AGM”), six of the Directors retired from office by rotation in accordance with the Articles ofIncorporation. All of them were re-elected by Shareholders to continue their offices as Directors. The Nomination
Committee has reviewed the Directors’ rotation plan to ensure that every Director will retire by rotation at least once
every year at an annual general meeting.

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Corporate Governance Report
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 2018

Name of Directors
Mr. Hisanori TANIGUCHI (谷口久徳)
Mr. Hiroshi BANNAI (坂內弘)Mr. Hiroaki MORITA (森田弘昭)
Mr. Norio NAKAYAMA (中山宣男)
Mr. Masaharu TOGO (東郷正春) Note
Mr. Michio MINAKATA (南方美千雄)
Mr. Yoshihiro KOIZUMI (小泉義広)

GeneralMeeting

Board
Meeting

Audit
Committee
Meeting

Remuneration
Committee
MeetingNomination
Committee
Meeting

1/1
1/1
1/1
1/1
1/1
1/1
1/1

16/16
16/16
15/16
16/16
2/4
16/16
16/16

–
14/14
13/14
–
–
14/14
–

3/3
–
3/3
3/3
–
–
–

4/4
–
1/1
3/3
–
–
4/4

Note: Mr. Masaharu TOGO retired as the independent non-executive Director on 29 June 2017.

There were 16 meetings of the Board held during the year ended 31 March 2018.
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. Hiroshi BANNAI, Mr. Hiroaki MORITA, Mr. Norio NAKAYAMA, Mr. Masaharu
TOGO, Mr. Michio MINAKATA and Mr. Yoshihiro KOIZUMI received this training. Ms. YIU Wai Man Karen, the jointcompany secretary of the Company, from time to time updates and provides written training material relating to the roles,
functions and duties of a Director and all the aforesaid Directors (except Mr. Masaharu TOGO who retired as theindependent non-executive Director on 29 June 2017) study such materials, and they are asked to submit a signed
training record to the Company on an annual basis.

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Corporate Governance Report
Corporate Governance Function
The Board recognises that corporate governance should be the collective responsibility of Directors which includes:(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 and Directors;(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.

AUDITOR’S REMUNERATION
During the year ended 31 March 2018, the total fee in relation to the annual audit of the Group amounted to ¥89 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:
2018¥ million
Types of services
Statutory audit
Non-audit services (Note)

76
13

Total

89

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

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Corporate Governance Report
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, senior manager 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.
During the year ended 31 March 2018, 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 2018.

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Corporate Governance Report
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.

Right 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 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, 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 thenotices of the Shareholders’ meetings. The Company will notify the Shareholders of the date on which an annual
Shareholders’ meeting is to be held no less than ten weeks prior to the date of such meeting by making a voluntaryannouncement on the websites of the Company and the Stock Exchange.

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, 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 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 follow:

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Corporate Governance Report
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.

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; andmonitors and reviews the systems and report 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.

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Corporate Governance Report
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

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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Annual Report 201823

Profile of Directors and Senior Management
CHAIRMAN OF THE BOARD, EXECUTIVE DIRECTOR AND CHIEF EXECUTIVE OFFICER
Mr. Hisanori TANIGUCHI (谷口久徳) (also known as Mr. JEONG Seonggi), aged 55, is the primary leadership figureof the Group. He was appointed as the Representative Director and President* (代表取締役社長) of the Company on 10
January 2013, the date of incorporation of 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 andbusiness 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 35 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 Niraku Merrist Corporation (“Merrist”).

NON-EXECUTIVE DIRECTOR
Mr. Hiroshi BANNAI (坂內弘), aged 79, 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. Hiroaki MORITA (森田弘昭), aged 81, has been appointed as an independent non-executive Director since June
2014. Mr. Morita is also a director of IPO Research Institute, Ltd.* (IPO総合研究所株式会社) since April 2000. He also
worked for Nomura Securities Co., Ltd.* (野村證券株式会社) between April 1960 and June 1989 and served various
positions in its underwriting and finance divisions. He has also been the representative director (代表取締役) of Morita
Office* (株式会社 森田 • 栗山事務所), which provides management consulting services, since August 1997. With hiscurrent and previous positions in these institutions in Japan and as a chartered member of the Securities Analysts
Association of Japan* (日本証券アナリスト協会) since August 1981, he has extensive experience in securities dealings,
financial analysis, corporate governance and other aspects relating to listed companies in Japan.

24

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Profile of Directors and Senior Management
Mr. Norio NAKAYAMA (中山宣男), aged 71, has been appointed as an independent non-executive Director since June
2014. Mr. Nakayama joined Kaneka Corporation* (株式会社カネカ), a listed company on both The Tokyo Stock
Exchange (4118: JP) and Nagoya Stock Exchange (4118:JP), in April 1969, and was its corporate auditor prior to his
departure in May 2009. Through his positions within Kaneka Corporation* (株式会社カネカ), Mr. Nakayama acquired
experiences in on-going compliance matters and corporate governance of a listed corporation in Japan. Until November
2006, Mr. Nakayama also served as an external corporate auditor for Asahi Homes Co. Ltd * (旭ホームズ株式会社). Mr.
Nakayama was a director of Fire Stove Japan Co., Ltd.* (株式会社ファイヤーストーブジャパン) between December
2010 and April 2015.
Mr. Michio MINAKATA (南方美千雄), aged 51, 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* (やまと税理士法人). 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
the Market 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 63, 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.

EXECUTIVE OFFICERS
Mr. Akinori OHISHI (大石明徳), aged 53, has been appointed as Executive Officer since June 2014. He is a prominent
management figure in the Group and manages day-to-day operations. Mr. Ohishi joined the Group in April 2010 as anadvisor of Niraku Corporation. He was promoted to director and head of corporate planning of Niraku Corporation in June
2012, chiefly responsible for implementing the corporate and business strategies of pachinko and pachislot halloperations. Mr. Ohishi was elected as a Director of the Company upon incorporation in January 2013, and was redesignated as an Executive Officer on 25 June 2014. Mr. Ohishi’s industry positions include his directorship* (理事) at
Pachinko Chain Store Association* (一般社団法人パチンコ チェーンストア協会).

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Annual Report 201825

Profile of Directors and Senior Management
Mr. Hidenori MOROTA (諸田英模), aged 52, 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 64, 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.
Mr. Tadashi UCHIYAMA (內山忠), aged 66, joined the Group in 2011 as statutory auditor* (監査役) of Niraku
Corporation. Mr. Uchiyama has over 38 years of experience in banking, information system and business consultationand management. Mr. Uchiyama has been a member of the Civil Dispute Resolution Committee* (民事調停委員会) of theJapanese government since October 2012.
Mr. Tsuneo NAKAJIMA (中島常夫), aged 70, joined the Group in 2016 as statutory auditor* (監査役) of Niraku
Corporation. Mr. Nakajima has served as a police officer in Fukushima Prefecture from 1966 to his retirement from thepolice force in 2008, during which he successively filled various important posts, including head of police station and chiefof detective division.
* For identification purpose only

26

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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 2018.

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, hotel operations and restaurant business in Japan. During
the year under review, the Company acquired the entire issued shares of Dream Games Singapore Pte. Ltd., a company
engaged in entertainment and amusement facilities operations. Subsequent to this acquisition, the principal activity of theGroup has extended to amusement arcade operations in South-east Asia. 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 2018 is set out in Note 5 to the consolidated financial statements.

BUSINESS OVERVIEW
Pachinko business continues to be severe following the effect of new regulations imposed by pachinko industry
associations which require pachinko operators to replace pachinko machines of higher gaming element with pachinko
machines of lower gaming element, which attracts less hall traffic. The pachinko industry is further dampened with thepassage of the “IR Promotion Act” in December 2016, of which, establishment of casinos resorts in Japan becomeslegitimate. Despite the Act creates an opportunity for pachinko operators to step in the casino resorts business, it is likely
to trigger discussion of the “gambling addiction problem”, and strong calls for the pachinko industry to take initiatives andactions to address the social issues, including other gambling activities currently exist will be resulted.
For the year ended 31 March 2018, the Group’s revenue from pachinko business amounted to ¥25,263 million (2017:¥28,396 million) and revenue margin at 18.2% (2017: 19.8%). The fall in revenue by 11.0% and the drop in revenue
margin by 1.6% is attributable to the replacement of machines of high-gaming element to low-gaming element which inturn generates less revenue than high-gaming element machines; and strategic increase in pay-out ratio to trigger higher
customer visits which lower the gross profit in the short term.
Despite the headwinds, the Group strives to grab every opportunity that could secure and expand the business. In late
December 2017, a new concept hall was opened in Hitachi-Omiya city, Ibaraki prefecture. It is a new style of hall for the
future, with the idea of providing places for people of local communities who spend a relaxing and enjoyable time in thehall. For the year ended 31 March 2018, revenue generated from this hall amounted to ¥799 million.
In respect of restaurant business, in August 2017, the third Spanish restaurant under the brand “LlZARRAN” was openedin Shinbashi, a commercial area and business centre in Tokyo. The new outlet has brought in ¥81 million revenue to theGroup.
In November 2017, the Group acquired the entire issued shares of Dream Games. Dream Games is engaged in theoperation of entertainment and amusement facilities in Cambodia and Vietnam. Currently, Dream Games has six outlets
in Vietnam and one outlet in Cambodia, all of them are located in large shopping malls which are mainly operated by
reputable Japanese developer. This acquisition has opened the door of Southeast market, enabling the Group to stretch
its arm to the Asian market.
The management is convinced that its profound experience in pachinko operation will prove to be useful in managing thisnew gaming business; and in return, bringing in new revenue and enhancing shareholders’ investment return.

NIRAKU GC HOLDINGS, INC.

Annual Report 201827

Report of the Directors
Apart from securing business profits, the Group is endeavour to create mechanisms in order to establish an organisationthat upholds the corporate value — not only in the medium- to long-term, but for the future as well.
Further details about the Group’s business, prospects and development, and analysis of the Group’s performance for theyear ended 31 March 2018 can also be found in the sections “Chairman’s Statement” on pages 6 to 8 and “Management
Discussion & Analysis” on pages 9 to 14 of this annual report.

Financial Key Performance Indicators
Certain financial key performance indicators which complement and supplement the financial disclosures are set out in“Financial Review” on pages 9 to 10 and the “Consolidated Financial Statements” on pages 43 to 108 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 center 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 2018.

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 2018, the Group employed 1,432 staff for pachinko and pachislot business; and 344 staff foramusement arcades 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 2018.

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

RESULTS AND APPROPRIATIONThe results of the Group for the year ended 31 March 2018 are set out in the consolidated statement of comprehensive
income on page 43.
The Directors have declared the payment of a final dividend of ¥0.12 per share totaling ¥143 million to the Shareholders.
Such payment of dividends will be payable to Shareholders whose names appear on the register of members of theCompany at the close of business on 14 June 2018.

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 2018 are set out in Note 23 to the consolidated financial
statements.

EQUITY-LINKED AGREEMENTS
During the year ended 31 March 2018, 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 2018 amounted to approximately ¥3,748 million.

NIRAKU GC HOLDINGS, INC.

Annual Report 201829

Report of the Directors
BANK LOANS AND OTHER BORROWINGSParticulars of bank loans and other borrowings of the Company and the Group as at 31 March 2018 are set out in Note
27 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 2018 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 2018 and up to the date of this annual report.

DIRECTORSThe Directors during the year and up to the date of this annual report are:Executive Director
Mr. Hisanori TANIGUCHI (谷口久徳) (also known as Mr. JEONG Seonggi)

Non-Executive Director
Mr. Hiroshi BANNAI (坂內弘)Independent Non-Executive Directors
Mr. Hiroaki MORITA (森田弘昭)
Mr. Norio NAKAYAMA (中山宣男)
Mr. Masaharu TOGO (東郷正春) Note
Mr. Michio MINAKATA (南方美千雄)
Mr. Yoshihiro KOIZUMI (小泉義広)
Note: Mr. Masaharu TOGO was retired as the independent non-executive Director on 29 June 2017.

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.

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Report of the Directors
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.

PERMITTED INDEMNITY PROVISION
The Articles of Incorporation provides 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 out and maintained directors’ liability
insurance throughout the year and up to date of this annual report, which provides appropriate cover for the Directors of
the Group.

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 2018 and 2017 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 37 to the consolidated financial statements.

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Annual Report 201831

Report of the Directors
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 2018, the interests and short positions of the Directors and the chief executives 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)(also known as Mr. JEONG Seonggi)

Beneficial owner; interest ofcontrolled corporation(1)224,480,460
common Shares

18.77%

Hiroshi BANNAI (坂內弘)Beneficial Owner

216,000
common Shares

0.01%

Notes:(1)

The interests held by Hisanori TANIGUCHI (谷口久徳) (also known as Mr. JEONG Seonggi) shown above include the 212,980,460 Shares held in
his own name for his own benefit and the 11,500,000 Shares held by Densho Limited* (有限会社伝承), a company collectively wholly-owned by hischildren, 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 2018.

Save as disclosed above, as at 31 March 2018, 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 taken under such provisions of the SFO), or required to be recorded in the register tobe 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.

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Report of the Directors
SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND/OR SHORT POSITIONS IN THE SHARESAND UNDERLYING SHARES OF THE COMPANY
As at 31 March 2018, 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%CHOI Jung Ae (崔正愛)Interest of a spouse(5)224,480,460
common shares

18.77%

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%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%

NIRAKU GC HOLDINGS, INC.

Annual Report 201833

Report of the Directors

Capacity/Nature of interest

Total

Approximate %of shareholding

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. CHOI Jung Ae (崔正愛) is the spouse of our Chairman and is therefore deemed to be interested in the Shares that our Chairman is interested inunder 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.

(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 2018.

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Report of the Directors
Save as disclosed above, and as at 31 March 2018, 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 Executives’ Interests and Short Positions in the
Shares, Underlying Shares and Debentures of the Company or 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 of shares 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 ¥1 million.

CONNECTED TRANSACTIONSThe Directors confirm that during the year ended 31 March 2018, 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.

MAJOR CUSTOMERS AND SUPPLIERS
During the year ended 31 March 2018, less than 1.0% of the Group’s revenue were attributed by the Group’s five largest
customers; while 70% and 91% of the Group’s total purchases were attributed by the Group’s largest and the five largest
suppliers, respectively. The largest supplier of the Group supplies G-prize to the Group’s pachinko halls and has abusiness 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 2018 or any of
their respective associates held any interest in any of the five largest suppliers of the Group.

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Annual Report 201835

Report of the Directors
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 Director 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 37 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 2018.

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 2018.
The consolidated financial statements have been audited by PricewaterhouseCoopers who shall retire in theforthcoming AGM and, being eligible, will offer itself for re-appointment. A resolution for the re-appointment ofPricewaterhouseCoopers as auditor of the Company will be proposed at the forthcoming AGM.

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 (also known as JEONG Seonggi)
Fukushima, Japan, 30 May 2018
* For identification purpose only

36

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

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 108, which comprise:•the consolidated statement of financial position as at 31 March 2018;•

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 2018, 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 201837

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

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Independent Auditor’s Report
Key Audit Matter

How our audit addressed the Key Audit Matter

Impairment assessment of property,
plant and equipment
Refer to Note 4 (Critical accounting estimates andjudgements) and 13 (Property, plant and equipment) tothe consolidated financial statements for the related
disclosures.
As at 31 March 2018, the Group has property, plant andequipment of ¥26,207 million related to the cashgenerating units (“CGUs”) of each individual pachinko
and pachislot hall, a pachinko and pachislot hall withhotel business, and each individual restaurants andamusement arcades.
The performance of the Group’s pachinko and pachislot
hall operations were impacted by keen competition
among the pachinko and pachislot hall operators inJapan. Management reviews for impairment whenever
events or changes in circumstances indicate thatcarrying amount of a CGU may not be recoverable. In
the view that some of the CGUs had performed below
management’s expectation, management considered
there was impairment indicatiors for these CGUs.
Management performed impairment assessment toassess the recoverable amounts of these CGUs, whichwere determined as the fair value less cost to sell or
value-in-use, whichever was higher. The value-in-use
calculations were based on future cash flow forecasts of
the CGUs. Based on management’s assessment, noprovision for impairment loss is necessary as at 31
March 2018.
We focused on this area due to the significant judgments
and estimates involved in the determination of value-inuse calculations, including the revenue growth rate anddiscount rate.

In relation to the impairment assessment of property, plantand equipment performed by management, we assessed
the reasonableness of management’s assessment which is
to identify impairment indicators for the CGUs that had
performed below management’s expectation. We challenged
management’s criteria for identification of impairment
indication by comparing to the historical performance andoperational development of the CGUs.
Our procedures in relation to management’s value-in-use
calculations include:•

Challenged management’s assumption of revenue
growth rate by comparing the rate to industry trends,
the Group’s historical performance and operational
development;•

Assessed management’s assumption of discount rateby comparing to the cost of capital and cost of debt ofcomparable organisations in the industry;•

Compared the current year actual results with the prioryear forecasts to consider the reasonableness ofmanagement’s forecasts; including that the relevant
factors such as the Group’s business development etc,
had been taken into account in the current year
forecasts;•

Reconciled the data input to supporting evidence, suchas 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
have been appropriately considered.

Based on the procedures performed, we found thejudgements and estimates made by management in relation
to the value-in-use calculations were supportable byavailable evidence.

NIRAKU GC HOLDINGS, INC.

Annual Report 201839

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 2018

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 201841

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, 30 May 2018*42

For identification purpose only

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Consolidated Statement of Comprehensive Income
For the year ended 31 March 2018

Note

2018
¥ million

2017¥ million

Revenue

526,55429,180

Other income
Other gains/(losses), net
Hall operating expenses
Administrative and other operating expenses

6
6
7
7

606
121
(22,640)(3,918)801(47)(24,110)(4,391)

Operating profit

723

1,433

Finance income
Finance costs

51
(561)

55
(586)

Finance costs, net

9

(510)

(531)

Profit before income tax
Income tax expense

10

213
(273)

902
(410)

(Loss)/profit for the year

(60)

492

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

(15)
(45)

492
–

(60)

492

(0.013)

0.411

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

(179)
(93)

138
–

Total comprehensive (loss)/income for the year

(332)

630

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

(287)
(45)

630
–

(332)

630

(Loss)/earnings per share for (loss)/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 201843

Consolidated Statement of Financial Position
As at 31 March 2018ASSETS
Non-current assets
Property, plant and equipment
Investment properties
Intangible assets
Prepayments, deposits and other receivables
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Deferred income tax assets
Long-term bank deposits

Current assets
Inventories
Trade receivables
Prepayments, deposits and other receivables
Bank deposits with maturity over 3 months
Cash and cash equivalents
Current income tax recoverable

Total assets

44

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Note

2018
¥ million

2017¥ million

13
14
15
21
17
17
29
22

26,207
662
1,571
3,751
52
953
1,565
47

26,406
678
182
3,866
104
1,210
1,656
35

34,80834,137

57
57
1,312
43
15,594
300

20
88
1,457
252
13,40455

17,363

15,27652,171

49,413

19
20
21
22
22

Consolidated Statement of Financial Position
As at 31 March 2018

Note

2018
¥ million

2017¥ million

23
24

3,000
24,1763,000
24,499Non-controlling interest

27,176(40)

27,499–Total equity

27,13627,49910,854
3,247
2,111
8

8,656
4,048
1,989
11

16,22014,704

247
3,886
888
3,793
1

123
2,394
1,160
3,532
1

8,815

7,210

Total liabilities

25,035

21,914

Total equity and liabilities

52,171

49,413

EQUITY
Equity attributable to owners of the Company
Share capital
Reserves

LIABILITIES
Non-current liabilities
Borrowings
Obligations under finance leases
Provisions and other payables
Derivative financial instruments

27
28
26
18

Current liabilities
Trade payables
Borrowings
Obligations under finance leases
Accruals, provisions and other payables
Derivative financial instruments

25
27
28
26
18

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
The financial statements on pages 43 to 108 were approved by the Board of Directors on 30 May 2018 and were signed
on its behalf.

Hisanori Taniguchi
Director

NIRAKU GC HOLDINGS, INC.

Annual Report 201845

Consolidated Statement of Changes in Equity
For the year ended 31 March 2018

Attributable to owners of the Company
Investment
Share

Balance at 1 April 2016

CapitalCapitalsurplusreserve

Legal revaluation
reserveNon-reserve

Retained

Exchange

controlling

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

earnings

reserve

Sub-totalinterest

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

3,000

13,954(16,028)107

134

25,930–27,097–27,097

–

–

–

–

–

492

–

492

–

492

–

–

–

–

138

–

–

138

–

138

–

–

–

–

138

492

–

630

–

630

Comprehensive income
Profit for the year
Other comprehensive income
Financial assets at fair value through othercomprehensive income, net of tax
Total comprehensive income for the year
Final dividend relating to 2016

–

–

–

–

–

(120)

–

(120)

–

(120)

Interim dividend relating to 2017

–

–

–

–

–

(108)

–

(108)

–

(108)

Total transaction with owners

–

–

–

–

–

(228)

–

(228)

–

(228)

3,000

13,954(16,028)107

272

26,194–27,499–27,499

–

–

–

–

–

(15)

–

(15)

(45)

(60)

Balances at 31 March 2017 and 1 April 2017
Comprehensive loss
Loss for the year
Other comprehensive loss
Financial assets at fair value through other

–

–

–

–

(179)

–

–

(179)

–

(179)

Currency translation differencecomprehensive income, net of tax

–

–

–

–

–

–

(93)

(93)

–

(93)

Total comprehensive loss for the year

–

–

–

–

(179)

(15)

(93)

(287)

(45)

(332)

Issuance of shares of a subsidiary to
–

–

–

–

–

–

–

–

5

5

Final dividend relating to 2017 (Note 30)

a non-controlling shareholder

–

–

–

–

–

(36)

–

(36)

–

(36)

Total transactions with owners

–

–

–

–

–

(36)

–

(36)

5

(31)

3,000

13,954(16,028)107

93

26,143(93)

27,176(40)

27,136

Balance at 31 March 2018

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

46

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Consolidated Statement of Cash Flows
For the year ended 31 March 20182018
¥ million

2017¥ million

3,797
(423)
(424)

5,257
(493)
556

2,950

5,320

(1,753)(1,787)
(3)
(1)
539
50
309
(100)
(12)
–
–
3
57

–
(478)
–
(5)
–
100
3,300
(3,255)
–
150
(149)
3
61

Net cash used in investing activities(2,698)(273)

Cash flows from financing activities
Repayment of obligations under finance leases
Proceeds from bank borrowings
Repayment of bank borrowings
Dividends paid

(1,285)5,589(2,326)(36)(1,655)2,640(4,710)(228)

Net cash generated from/(used in) financing activities

1,942(3,953)

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange loss on cash and cash equivalents

2,194
13,404(4)

1,094
12,310–Cash and cash equivalents at end of the year

15,594

13,404

Note
Cash flows from operating activities
Cash generated from operations
Interest paid
Income tax (paid)/refund

31

Net cash generated from operating activities
Cash flows from investing activities
Payment for acquisition of a subsidiary, net of cash acquired
Purchase of property, plant and equipment
Purchase of investment properties
Purchase of intangible assets
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of financial assets at fair value
Proceeds from bank deposits with maturity over 3 months
Placement of bank deposits with maturity over 3 months
Placement of long-term bank deposits
Proceeds from long-term bank deposits
Deposit for acquisition of a restaurantInterest received
Dividend received

34(b)
14
15

21

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

Annual Report 201847

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 comprising the Group(together, the “Group”) are principally engaged in pachinko and pachislot hall operations, hotel and restaurant
operations in Japan, and entertainment and amusement arcade operations in Asian countries.
The Company’s shares were listed on the Main Board of the Stock Exchange of Hong Kong Limited on 8 April
2015.
These consolidated financial statements are presented in millions of Japanese Yen (“¥”), unless otherwise
stated.

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 2018

Notes to the Consolidated Financial Statements
2

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

New and amended standards adopted by the GroupThe following amendments to standards are mandatory for accounting periods beginning on or after 1
April 2017:
Amendments to IAS 12
Amendments to IAS 7

Income taxes
Statement of cash flows

The adoption of these amendments did not have material impact on the financial statements for thecurrent and prior year, except for amendments to IAS 7 require disclosure of changes in liabilities arisingfrom financing activities (Note 31).
(iv)

New standards and amendments to existing standards not yet adopted by the GroupThe following are standards and amendments to existing standards that have been published and are
relevant and mandatory for the Group’s accounting periods beginning on or after 1 April 2018 or later
periods, but have not been early adopted by the Group.
Effective
for accounting
year beginningon or after
IFRS 2 (Amendment)
IFRS 15IFRS 15 (Amendment)
IFRIC 22
IAS 40 (Amendment)
Annual Improvements Project IFRS 1
and IAS 28 (Amendment)
IFRIC 22IFRS 16IFRIC 23
Amendment to IFRS 3, IFRS 11,
IAS 12 and IAS 23
IFRS 17IFRS 10 and IFRS 28 (Amendment)

Classification and measurement of share-based
payment transactions
Revenue from contracts with customers
Clarification to IFRS 15
Foreign currency transactions and advanceconsideration
Transfers of investment property
Annual improvements 2014–2016 cycle

1 January 2018

Foreign currency transactions and advanceconsideration (new interpretation)
Leases
Uncertainty over income tax treatments
Annual improvements 2015–2017 cycle

1 January 2018

Insurance contracts
Sale or contribution of assets between an investor
and its associate or joint venture

NIRAKU GC HOLDINGS, INC.

1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018

1 January 2019
1 January 2019
1 January 2019
1 January 2021
To be determined

Annual Report 201849

Notes to the Consolidated Financial Statements
2

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

New standards and amendments to existing standards not yet adopted by the Group (Continued)
IFRS 15 “Revenue from Contracts with Customers” — This new standard replaces the previous revenue
standards: IAS 18 “Revenue” and IAS 11 “Construction Contracts”, and the related Interpretations onrevenue recognition. IFRS 15 establishes a comprehensive framework for determining when torecognise revenue and how much revenue to recognise through a 5-step approach: (1) Identify thecontract(s) with customer; (2) Identify separate performance obligations in a contract; (3) Determine thetransaction price; (4) Allocate transaction price to performance obligations; and (5) Recognise revenue
when performance obligation is satisfied. The core principle is that the Group should recognise revenue
to depict the transfer of promised goods or services to the customer in an amount that reflects theconsideration to which the Group expects to be entitled in exchange for those goods or services. It
moves away from a revenue recognition model based on an “earnings processes” to an “asset liability”
approach based on transfer of control. IFRS 15 provides specific guidance on capitalisation of contract
cost, license arrangements and principal versus agent considerations. It also includes a cohesive set ofdisclosure requirements about the nature amount, timing and uncertainty of revenue and cash flows
arising from the entity’s contracts with customers.
The Group has performed an initial assessment on the impact of this new standard. Currently,
management does not anticipate any significant impact on the Group’s financial positions and results ofoperations upon adopting this new standard.
IFRS 16, “Leases” (effective from 1 January 2019). Under IFRS 16, a lease is a contract (or part of acontract) that conveys the right to control the use of an identified asset for a period of time in exchange
for consideration. IFRS 16 eliminates the classification of leases by the lessee as either finance leases(on balance sheet) or operating leases (off balance sheet). IFRS 16 requires a lessee to recognise a“right-of-use” of the underlying asset and a lease liability reflecting future lease payments for mostleases. The right-of-use asset is depreciated in accordance with the principle in IAS 16 “Property, Plant
and Equipment” and the lease liability is accreted over time with interest expense recognised in the
consolidated statement of comprehensive income. For lessors, IFRS 16 retains most of therequirements in IAS 17. Lessors continue to classify all leases as either operating leases or financeleases and account for them differently.

The Group plans to apply the new standards and amendments when they become effective. The Group has
already commenced assessments of the related impacts of new and amended standards not yet effective on
1 January 2018 to the Group and it is not yet in a position to state whether any substantial changes to theGroup’s significant policies and presentation of the financial information will result.

50

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.2 Principles of consolidation and equity accounting(i)

Subsidiaries
Subsidiaries are entities (including structured entities) over which the Group has control. The Group
controls entities when the Group is exposed to, or has rights to, variable returns from its involvementwith the entities and has the ability to affect those returns through its power over the entities.
Subsidiaries are consolidated from the date on which control is transferred to the Group. They aredeconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the group (refer
to Note 2.3).
Intercompany 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)

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 or permitted byapplicable IFRSs.

NIRAKU GC HOLDINGS, INC.

Annual Report 201851

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.3 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. Acquisitionrelated costs are expensed as incurred.
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.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial
liability are subsequently remeasured to fair value 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.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.4 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost also 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.

2.5 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 chief operating decision-maker,
who is responsible for allocating resources and assessing performance of the operating segments, has been
identified as the executive directors of the Company that makes strategic decisions.

2.6 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
prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
the profit or loss.
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 profit or loss
on a net basis within “Other gains/(losses), net”.
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 financial assets at fair value through othercomprehensive income are recognised in other comprehensive income.

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Annual Report 201853

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.6 Foreign currency translation (Continued)(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.

2.7 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 the
profit or loss during the financial period in which they are incurred.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.7 Property, plant and equipment (Continued)
Depreciation is calculated using the straight-line method to allocate their cost to their residual values overtheir estimated useful lives, 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.
Gains and losses on disposals are determined by comparing the proceeds with carrying amount and arerecognised within “Other gains/(losses), net” in profit or loss.

2.8 Investment properties
Investment properties, principally comprising land and buildings, are held for long-term rental yields or forcapital appreciation or both, and that is not occupied by the Group. The Group adopts the alternative
treatment by using the cost model provided under the IAS 40 “Investment Property”. Investment properties
are initially measured at cost, including related transaction costs and where applicable borrowing costs. Afterinitial recognition, investment properties are stated at historical cost less accumulated depreciation andimpairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of theitems.
Depreciation of investment properties, except for the freehold land which is not subject to depreciation, iscalculated using the straight-line method to allocate their costs to their residual values over their estimateduseful lives of 27 to 31 years.
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.

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Annual Report 201855

Notes to the Consolidated Financial Statements
2

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

Goodwill
Goodwill is measured as described in Note 2.10. 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 and contract relationship
Trademarks and contract relationship acquired in a business combination are recognised at fair value atthe acquisition date. They have a finite useful life and are subsequently carried 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 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.

2.10 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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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.11 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.

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2

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

Recognition, derecognition and measurement (Continued)
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.
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 gains/(losses), net” in the period in which they arise. Changes in the fair value of financial assets throughother comprehensive income are recognised in other comprehensive income except for the impairment
loss (if any) 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.

2.12 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount 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. Arrangements entered by
the Company that do not meet the criteria for offsetting are still allowed for the related amounts to be set off incertain circumstances, such as bankruptcy or the termination of a contract.

2.13 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 and other receivables innature and 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.

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2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.14 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.

2.15 Trade and other receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in theordinary course of business. If collection of trade and other receivables is expected in one year or less (or in
the normal operating cycle of the business if longer), they are classified as current assets. If not, they arepresented as non-current assets.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less provision for impairment.

2.16 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.

2.17 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.

2.18 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.

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Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.19 Borrowings and borrowing costs
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings aresubsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) andthe redemption value is recognised in the consolidated statement of comprehensive income 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 the loan to the extent
that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until thedraw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will bedrawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the
facility to which it relates.
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 end of the reporting period.
General and specific borrowing costs directly attributable to the acquisition, construction or production ofqualifying assets, which are assets that necessarily take a substantial period of time to get ready for theirintended use or sale, are added to the cost of those assets, until such time as the assets are substantially
ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

2.20 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)60

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’s 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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Annual Report 2018

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.20 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.

2.21 Employee benefits(i)

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.
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.

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Annual Report 201861

Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.21 Employee benefits (Continued)(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.

2.22 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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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.23 Revenue recognition
The Group recognises revenue when the amount of revenue can be reliably measured; when it is probablethat future economic benefits will flow to the entity; and when specific criteria have been met for each of theGroup’s activities, as described 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.

(ii)

Hotel income is recognised at the time of occupancy.

(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.

(iv)

Restaurant income is recognised when catering services have been provided to customers.

(v)

Amusement arcade business is recognised when customers utilised the tokens, or when services areprovided.

(vi)Interest income is recognised on a time-proportion basis using the effective interest method.

(vii) Rental income from investment properties is recognised on a straight-line basis over the term of theleases.
(viii) Income from expired prepaid integrated circuit (“IC”) and membership cards is recognised upon the
expiry of the usage period.
(ix)

Dividend income is recognised when the right to receive payment is established.

(x)

Sundry income is recognised when the right to receive payment is established.

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Notes to the Consolidated Financial Statements
2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.24 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.

2.25 Leases(i)

As lessee
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks andrewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s
inception at the fair value of the leased property or, if lower, the present value of the minimum lease
payments. The corresponding rental obligations, net of finance charges, are included in other short-termand long-term payables. Each lease payment is allocated between the liability and finance cost. The
finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each period. The property, plant andequipment acquired under finance leases is depreciated over the asset’s useful life or over the shorterof the asset’s useful life and the lease term if there is no reasonable certainty that the group will obtainownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to theGroup as lessee are classified as operating leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to profit or loss on a straight-line basis over the periodof the lease.
Lease income from operating leases where the Group is a lessor is recognised in income on a straightline basis over the lease term. The respective leased assets are included in the balance sheet based on
their nature.

(ii)

As lessor
When the Company leases out assets under operating leases, the assets are included in the
consolidated statement of financial position according to the nature of the assets. Revenue arising fromassets leased out under operating leases is recognised over the term of the lease on a straight-line
basis.

2.26 Dividend distribution
Dividend distribution to the Company’s/certain subsidiaries’ shareholders is recognised as a liability in theGroup’s, the Company’s and certain subsidiaries’ financial statements in the period in which the dividends areapproved by the Company’s/certain subsidiaries’ shareholders or directors, where appropriate.

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Notes to the Consolidated Financial Statements
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 cash and cash
equivalents denominated in Hong Kong dollar (“HK$”), US dollar (“US$”) and Vietnamese dong(“VND”).
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.
At 31 March 2018, if HK$ had strengthened/weakened by 5% against the ¥, with all other variables
held constant, post-tax profit for the year would have been approximately ¥16 million higher orlower (2017: ¥25 million), mainly as a result of foreign exchange differences on translation of HK$
denominated cash at bank balance.
At 31 March 2018, 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 ¥27 million, higher orlower (2017: ¥12 million), mainly as a result of foreign exchange differences on translation of US$
denominated cash at bank balance.
At 31 March 2018, if VND had strengthened/weakened by 5% against the ¥, with all othervariables held constant, post-tax profit for the year would have been approximately ¥2 million,
higher or lower (2017: Nil), mainly as a result of foreign exchange differences on translation of
VND denominated cash at bank balance.

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Notes to the Consolidated Financial Statements
3

FINANCIAL RISK MANAGEMENT (CONTINUED)
3.1 Financial risk factors(Continued)(a)Market risk(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 2018, if interest rates were increased or decreased by 25 basis points and all othervariables were held constant, the Group’s pre-tax profit would decrease or increase byapproximately ¥2 million (2017: ¥6 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 2018 (2017: 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%

66

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Annual Report 20182018
¥ million

2017¥ million

41
(41)

54
(54)

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, financial assets at fair value through profit or loss and through other comprehensive
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% (2017: 99%) of the Group’s revenue is received in cash. The Group’s credit risk
mainly arises from vending machine income receivable from vending machines providers.
As at 31 March 2018, top 5 customers of the Group accounted for approximately 63% (2017: 85%) to
the trade receivables of the Group. The Group has set up long-term cooperative relationship with thesecustomers. 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.

(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.

NIRAKU GC HOLDINGS, INC.

Annual Report 201867

Notes to the Consolidated Financial Statements
3

FINANCIAL RISK MANAGEMENT (CONTINUED)
3.1 Financial risk factors (Continued)(c)Liquidity risk (Continued)

As at 31 March 2018
Trade payables
Other payables (excluding accruals)
Borrowings
Obligations under finance leases

As at 31 March 2017
Trade payables
Other payables (excluding accruals)
Borrowings
Obligations under finance leases

Within1 year¥ million

Between
1 and
2 years¥ million

Between
2 and
5 years¥ millionOver
5 years¥ million

Total¥ million

247
1,817
4,054
1,041

–
1
2,942
817

–
30
5,211
1,206

–
2,407
3,100
1,985

247
4,255
15,307
5,049

7,159

3,760

6,447

7,492

24,858

123
1,589
2,544
1,364

–
1
2,060
999

–
12
4,790
1,709

–
2,792
2,229
2,264

123
4,394
11,623
6,336

5,620

3,060

6,511

7,285

22,476

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.

68

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Annual Report 2018

Notes to the Consolidated Financial Statements
3

FINANCIAL RISK MANAGEMENT (CONTINUED)
3.2 Capital management (Continued)
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.
2018¥ million

2017¥ million

Borrowings
Obligations under finance leases

14,7404,135

11,0505,208

Total debt
Equity18,875
27,136

16,25827,499

Gearing ratio

69.6%

59.1%

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).

NIRAKU GC HOLDINGS, INC.

Annual Report 201869

Notes to the Consolidated Financial Statements
3

FINANCIAL RISK MANAGEMENT (CONTINUED)
3.3 Fair value estimation (Continued)
Level 1¥ million

Level 2¥ million

Level 3¥ million

Total¥ million

–

52

–

52

823
-

–
–

–
130

823
130

823

52

130

1,005

Liabilities
Derivative financial liabilities— Interest rate swaps

–

9

–

9

As at 31 March 2017
AssetsFinancial assets at fair value through profit or loss
— Unlisted securities

–

104

–

104

1,080
–

–
–

–
130

1,080
130

1,080

104

130

1,314

–

12

–

12

As at 31 March 2018
AssetsFinancial assets at fair value through profit or loss
— Unlisted securities
Financial assets at fair value through othercomprehensive income— Listed securities— Unlisted securities

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

Liabilities
Derivative financial liabilities— Interest rate swaps

70

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

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 2018,
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 2018, 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 2018.

3.4 Offsetting financial assets and financial liabilities
As at 31 March 2018 and 2017, there were no financial assets or financial liabilities which were subject tooffsetting, enforceable master netting or similar agreements.

NIRAKU GC HOLDINGS, INC.

Annual Report 201871

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 assessment of property, plant and equipment
The Group has substantial investments in property, plant and equipment. Judgement is required in the area ofasset impairment, particularly in assessing: (1) whether an event has occurred that may indicate that therelated asset values may not be recoverable: (2) 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 netpresent value of future cash flows which are estimated based upon the continued use of the asset in thebusiness; and (3) 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 growth rate assumptionsin the cash flow projections, could materially affect the net present value used in the impairment test and as aresult affect the Group’s financial condition and results of operations. If there is a significant adverse change
in the projected performance and resulting future cash flow projections, it may be necessary to take an
impairment change to the profit or loss.

(c)

Classification of leases
The Group has numerous buildings for pachinko and pachislot machines arranged under finance leases. The
Group classifies leases into finance leases or operating leases in accordance with the accounting policies
stated in Note 2.25. Classification as a finance lease or operating lease determines whether the leased asset
is capitalised and recognised on the statement of financial position or charged to the profit or loss.
Determining whether a lease transaction is a finance lease or an operating lease is a complex issue andrequires substantial judgement as to whether the lease agreement transfers substantially all the risks andrewards of ownership to or from the Group. Careful and considered judgement is required on various complex
aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased
asset, whether renewal options are included in the lease term and determining an appropriate discount rate tocalculate the present value of the minimum lease payments.

72

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

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 business
Vending machine income
Revenue from hotel operations
Revenue from restaurant operations

2018¥ million

2017¥ million

138,493(113,230)

143,130(114,734)

25,263
417
536
158
180

28,396
–
564
130
90

26,55429,180(b) Segment information
Management has determined the operating segments based on the reports reviewed by the chief operating
decision maker 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 a service
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 and assessing
performance. These reports are prepared on the same basis as this consolidated financial statements.
Management has identified three reportable segments based on the types of services, namely (i) pachinko
and pachislot hall operations, (ii) amusement arcade operations, and (iii) others, representing hotel andrestaurant operations.
Segment assets consist primarily of property, plant and equipment, investment properties, inventories, tradereceivables, prepayments, deposits and other receivables, bank deposits and cash and bank balances. They
exclude deferred income tax assets, and assets used for corporate functions including financial assets at fairvalue through profit or loss and financial assets at fair value through other comprehensive income.
Capital expenditure comprises additions to property, plant and equipment, investment properties andintangible assets. Unallocated corporate expenses and income tax expenses are not included in segment
results.

NIRAKU GC HOLDINGS, INC.

Annual Report 201873

Notes to the Consolidated Financial Statements
5

REVENUE AND SEGMENT INFORMATION (CONTINUED)(b) Segment information (Continued)
The segment information provided to the executive directors for the years ended 31 March 2018 and 2017 are
as follows:

Pachinko andpachislot halloperations

Total

Japan
¥ million

SoutheastAsia¥ millionJapan¥ million¥ million

Segment revenue from external customers

25,799417

338

26,554

Segment results
Corporate expenses

1,223

(74)

(213)

936
(723)

Profit before income tax
Income tax expense

213
(273)

Loss for the year

(60)

Other segment items
Depreciation and amortisation expenses
Finance income
Finance costs
Capital expenditures

74

Year ended 31 March 2018
Amusement
arcadeoperations
OthersNIRAKU GC HOLDINGS, INC.

Annual Report 2018(2,243)
49
(539)
1,768

(95)
2
(22)
76

(45)
–
–
75

(2,383)
51
(561)
1,919

Notes to the Consolidated Financial Statements
5

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

Pachinko andpachislot halloperations

Year ended 31 March 2017
Amusement
arcadeoperations
Others

Total

Japan
¥ million

SoutheastAsia¥ millionJapan¥ million¥ million

Segment revenue from external customers

28,960–220

29,180

Segment results
Corporate expenses

1,576

–

(118)

1,458
(556)

Profit before income tax
Income tax expense

902
(410)

Profit for the year

492

Other segment items
Depreciation and amortisation expenses
Finance income
Finance costs
Capital expenditures(2,392)
55
(586)
524

NIRAKU GC HOLDINGS, INC.

–
–
–
–

(28)
–
–
134

Annual Report 2018

(2,420)
55
(586)
658

75

Notes to the Consolidated Financial Statements
5

REVENUE AND SEGMENT INFORMATION (CONTINUED)(b) Segment information (Continued)
The segment assets as at 31 March 2018 and 2017 are as follows:
Pachinko andpachislot
hall operations

Amusement
arcadeoperations

Others

Total

Japan
¥ million

SoutheastAsia¥ millionJapan¥ million¥ million

42,247980

1,108

As at 31 March 2018
Segment assets
Unallocated assets
Deferred income tax assets
Total assets

44,335
6,271
1,565
52,171As at 31 March 2017
Segment assets
Unallocated assets
Deferred income tax assets

40,437–636

Total assets

41,0736,684
1,656
49,413

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

2018
¥ million

2017¥ million

31,609629

31,167–32,23831,167

No single external customer contributed more than 10% revenue to the Group’s revenue for the years ended
31 March 2018 and 2017.

76

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Notes to the Consolidated Financial Statements
6

OTHER INCOME AND OTHER GAINS/(LOSSES), NET

Other income
Rental income
Income from expired IC and membership cards
Dividend income
Compensation and subsidies
Income from scrap sales of used pachinko and pachislot machines
OthersOther gains/(losses), net
Loss on fair value for financial assets at fair value throughprofit or loss
Gain on fair value for derivative financial instruments
Gain/(loss) on disposal of property, plant and equipment
Net exchange (loss)/gain

NIRAKU GC HOLDINGS, INC.

2018
¥ million

2017¥ million

154
31
57
4
331
29

148
33
61
13
500
46

606

801

(2)
3
215
(95)

(2)
4
(64)
15

121

(47)

Annual Report 201877

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 investment properties
Write off of other receivables (Note 21)
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 35)
Impairment loss on property, plant and equipment
Legal and professional fees
Loss on termination of existing/opening of outlets (Note (ii))
Others2018¥ million

2017¥ million

76
13

62
34

5,176
1,635
2,835
2,315
19
54
49
25
52
132
348
226
952
1,438
962
763
7,699
1,102
35
–
155
46
451

5,110
1,576
2,816
2,368
19
17
33
25
78
134
385
183
971
1,741
1,008
778
8,836
1,264
35
271
66
72
619

26,55828,501

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 2018, a pachinko and pachislot hall and a restaurant were closed. The amount of ¥46 million represents
penalty charge of ¥8 million for early termination of rental contract and forfeiture of rental deposits of ¥3 million in relation to the closure of arestaurant; and ¥35 million penalty charge in relation to closure of a pachinko and pachislot hall.
During the year ended 31 March 2017, a loss of ¥72 million was incurred in relation to abandoning the plan for opening of a new hall. The
said amount included forfeiture of rental deposit of ¥39 million, write off of construction in progress of ¥14 million (Note 13) and penalty
charge for early termination of the rental contract of ¥19 million.

78

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

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)

2018
¥ million

2017¥ million

5,554
78
1,179

5,430
76
1,180

6,811

6,686

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 (2017: Nil).

(b) Five highest paid individuals
The five individuals whose emoluments were the highest in the Group for the year ended 31 March 2018
include 1 director (2017: 1 director) whose emoluments are reflected in the analysis shown in Note 37. The
emoluments payable to the remaining 4 (2017: 4) individuals during the year ended 31 March 2018 are as
follows:

Salaries, allowances and other benefits
BonusesPension cost — defined contribution plan2018
¥ million

2017¥ million

85
–
3

82
–
3

88

85

The number of highest paid individuals whose remuneration fell within the following band is as follows:
Number of individuals
2018
2017
Emolument bands¥Nil to ¥13,540,000 (equivalent toapproximately HK$Nil to HK$1,000,000)

2

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

1¥20,310,001 to ¥27,080,000 (equivalent toapproximately HK$1,500,001 to HK$2,000,000)–

2¥27,080,001 to ¥33,850,000 (equivalent toapproximately HK$2,000,001 to HK$2,500,000)

2–Annual Report 2018

79

NIRAKU GC HOLDINGS, INC.

Notes to the Consolidated Financial Statements
9

FINANCE COSTS, NET2018¥ million

2017¥ million

3
48

3
52

51

55

(195)
(228)
(138)

(213)
(280)
(93)

(561)

(586)

(510)

(531)

2018
¥ million

2017¥ million

Current income tax— Japan— Other Asian Countries

170
9

344
–

Deferred income tax (Note 29)

179
94

344
66

273

410

Finance income
Bank interest income
Other interest income

Finance costs
Bank borrowings
Obligations under finance leases
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 has been made for the years ended 31 March 2018 and 2017 as the Group
did not generate any assessable profits arising in Hong Kong during the years ended 31 March 2018 and 2017.

80

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

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:
2018¥ million

2017¥ million

Profit before income tax

213

902

Tax calculated at the domestic tax rates applicable to profits
in the respective countries
Income not subject to tax
Expenses not deductible for tax purpose
Unrecognised tax losses
Utilisation of previously unrecognised tax losses
Effect of change in tax rate
Tax deduction

64
(3)
138
71
(4)
7
–

272
(4)
94
32
–
24
(8)

273

410

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 30.2% (2017: 30.2%) for the year ended
31 March 2018.
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 Asian countries profits has been calculated on the estimated profit for the year at the rate of taxation
prevailing in the countries in which the Group operates. These rates range from 17.0% to 20.0% (2017: N/A).

11 (LOSS)/EARNINGS PER SHARE
Basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to owners of the Company by
the weighted average number of ordinary shares in issue during the years ended 31 March 2018 and 2017.

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

2018

2017

(15)

492

1,195,850

1,195,850(0.013)0.41

No diluted (loss)/earnings per share is presented as there was no potential dilutive shares during the years ended
31 March 2018 and 2017. Diluted (loss)/earnings per share is equal to the basic (loss)/earnings per share.

NIRAKU GC HOLDINGS, INC.

Annual Report 201881

Notes to the Consolidated Financial Statements
12 SUBSIDIARIESThe following is a list of the principal subsidiaries at 31 March 2018 and 2017:
Country and dateof incorporation

Principal activities

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%

–

Dream Games Singapore
Pte. Ltd.

Singapore
3 November 2014

Wholesale of computer
games, sportingand otherrecreational goods

Limited liability
company

US$2,912,412

100%

–

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%–

Dream Games (Japan)
C0., Ltd.

Japan
9 April 2013

Amusement facilities
management andprovision consulting
service

Limited liability
company¥100 million

100%

–

Dream Games Vietnam
Co., Ltd.

Socialist Republicof Vietnam
10 April 2013

Provide entertainment Limited liability
and catering services
company

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

100%

–

Dream Games Cambodia
Co., Ltd

Cambodia
1 February 2011

Provide entertainment
services including
family karaoke andkid centres

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

100%

–

Name

Directly held
Niraku Corporation

Indirectly held
Nexia Inc.

Type oflegal status

Limited liability
company

Issued andpaid up capital

None of the subsidiaries had issued any debt securities at the end of the reporting period.

82

NIRAKU GC HOLDINGS, INC.

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Effective interest held
as at 31 March
2018
2017

Notes to the Consolidated Financial Statements
13 PROPERTY, PLANT AND EQUIPMENT
Freeholdland¥ million
Cost
At 1 March 2016
Additions
DisposalsWrite off
Transfer between categories

Leasehold
Buildings improvements¥ million¥ million

Equipment
and tools¥ million

Motor Construction
vehicles in progress¥ million¥ million

Total¥ million

7,752
–
–
–
–

17,515
16
(61)
–
44

12,346
164
(418)
–
238

12,433
138
(397)
–
28

165
11
(24)
–
–

29
324
–
(14)
(310)

50,240
653
(900)
(14)
–

7,752
–

17,514102

12,330521

12,202
412

152
44

29
836

49,979
1,915

–
(502)
–
–

–
(174)
209
–

216
(529)
359
(12)

351
(304)
245
(21)

–
(66)
–
–

12
(38)
(813)
–

579
(1,613)–(33)

At 31 March 2018

7,250

17,651

12,885

12,885130

2650,827

Accumulated depreciationand impairment
At 1 March 2016
Depreciation (Note 7)
Disposals
Impairment (Note 7)

(189)
–
–
–

(6,654)
(748)
61
(83)

(6,991)
(662)
356
(120)

(7,838)
(930)
395
(68)

(98)
(28)
24
–

–
–
–
–

(21,770)(2,368)836(271)

At 31 March 2016 and1 April 2017
Depreciation (Note 7)
Disposals
Translation differences

(189)
–
189
–

(7,424)
(744)
174
–

(7,417)
(663)
521
2

(8,441)
(883)
301
15

(102)
(25)
66
–

–
–
–
–

(23,573)(2,315)1,251
17

At 31 March 2018–

(7,994)(7,557)(9,008)(61)–(24,620)

Net book value
At 31 March 2018

7,250

9,657

5,328

3,877

69

26

26,207

At 31 March 2017

7,563

10,090

4,913

3,761

50

29

26,406

At 31 March 2016 and1 April 2017
Additions
Acquisition of subsidiaries(Note 34)
Disposals
Transfer between categories
Translation differences

NIRAKU GC HOLDINGS, INC.

Annual Report 201883

Notes to the Consolidated Financial Statements
13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Depreciation expenses of ¥2,287 million (2017: ¥2,312 million) has been charged in “hall operating expenses” and¥28 million (2017: ¥56 million) has been charged in “administrative and other operating expenses” for the year
ended 31 March 2018.
Construction in progress as at 31 March 2018 and 2017 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 2018 and 2017 has been disclosed in Note 27.
The Group’s property, plant and equipment held under finance leases included in the total amount of buildings andequipment were as follows:

As at 31 March 2018
Cost — capitalised finance leases
Accumulated depreciation

As at 31 March 2017
Cost — capitalised finance leases
Accumulated depreciation

Buildings¥ million

Equipment
and tools¥ million

Total¥ million

6,864(3,105)

206
(125)

7,070
(3,230)

3,759

81

3,840

Buildings¥ million

Equipment
and tools¥ million

Total¥ million

6,864(2,773)––

6,864(2,773)

4,091

–

4,091

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 2018, in view that some of the CGUs in Japan are performing below management’s
expectation, the directors have reviewed the recoverability of the relevant carrying amounts of these loss-making
CGUs.

84

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

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 2018 and 2017.

Revenue growth rate
Discount rate2018
¥ million

2017¥ million

0%
8.6%

0%
8.5%

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.
No impairment loss was recognised for the year ended 31 March 2018. For the year ended 31 March 2017, as aresult of the impairment review, the carrying amounts of certain CGUs exceeded their recoverable amounts.
Accordingly, impairment loss of approximately ¥271 million has been recognised in respect of buildings andleasehold improvements of the pachinko halls
If the forecast revenue was lower by 5%, with all other variable held constant, the change of result would be insignificant.

14 INVESTMENT PROPERTIES
2018¥ million

2017¥ million

854
(176)

854
(157)

678

697

At costAt beginning of year
Additions
Depreciation

678
3
(19)

697
–
(19)

At end of year

662

678

At 31 March
Cost
Accumulated depreciation

857
(195)

854
(176)

662

678

Annual Report 201885

At 1 April
Cost
Accumulated depreciation

NIRAKU GC HOLDINGS, INC.

Notes to the Consolidated Financial Statements
14 INVESTMENT PROPERTIES (CONTINUED)
The investment properties have been pledged to secure general facilities granted to the Company (Note 27).
The Group had no unprovided contractual obligations for future repairs and maintenance as at 31 March 2018 and2017.
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:
As at 31 March
2018
2017
¥ million¥ million
Rental income
Direct operating expenses from property that generated rental income

90
(16)

87
(16)

74

71

The Group’s investment properties were valued as at 31 March 2018 and 2017 by independent professionallyqualified valuer, JLL Morii Valuation & Advisory K.K. and Cushman & Wakefield K.K., respectively, who holdrecognised relevant professional qualifications and has recent experience in the locations and segments of theinvestment properties valued. The valuations were determined using the income capitalisation approach (term andreversionary method) which largely used observable and unobservable inputs, including market rent, yield andestimation 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 2018 is ¥813 million (2017: ¥803 million). No impairment
loss was recognised.

86

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Notes to the Consolidated Financial Statements
15 INTANGIBLE ASSETS

Goodwill¥ million

Computersoftware¥ million

Trademarks¥ million

Supplier
contracts¥ million

Total¥ million

At 1 April 2016
Cost
Accumulated amortisation

104
–

608
(502)

–
–

–
–

712
(502)

Net book amount

104

106

–

–

210

Year ended 31 March 2017
Opening net book amount
Additions
Amortisation (Note 7)

104
–
–

106
5
(33)

–
–
–

–
–
–

210
5
(33)

Closing net book amount

104

78

–

–

182

At 1 April 2017
Cost
Accumulated amortisation

104
–

506
(428)

–
–

–
–

610
(428)

Net book amount

104

78

–

–

182

Year ended 31 March 2018
Opening net book amount
Additions
Acquisition of business (Note 34)
Amortisation (Note 7)
Translation difference

104
–
1,109
–
(59)

78
1
–
(32)
–

–
–
126
(5)
(7)

–
–
282
(12)
(14)

182
1
1,517
(49)
(80)

Closing net book amount

1,154

47

114

256

1,571

At 31 March 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

Amortisation expenses of ¥49 million was charged in “hall operating expenses” for the year ended 31 March 2018(2017: ¥33 million).

NIRAKU GC HOLDINGS, INC.

Annual Report 201887

Notes to the Consolidated Financial Statements
15 INTANGIBLE ASSETS (CONTINUED)
Impairment test for goodwill
Goodwill is monitored by management at the level of operating segments identified in Note 2.9.
A segment-level summary of the goodwill allocation is represented below.

Pachinko and pachislot business
Amusement arcade business2018¥ million

2017¥ million

104
1,050

104
–

1,154

104

Goodwill is allocated to each CGU, which is determined as each individual pachinko and pachislot hall andamusement arcade. Management reviews annually whether the carrying amount of a CGU is higher than therecoverable amount which results in impairment of goodwill. The recoverable amount of a CGU is determinedbased on value-in-use calculation. The calculation use pre-tax cash flow projections based on financial budget
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 estimated growth rates stated in Note 13. As a result of theimpairment review, the recoverable amounts of the CGUs in which goodwill has been allocated are higher thantheir carrying amounts as at 31 March 2018 and 2017. As a result, no impairment loss was charged during theyears ended 31 March 2018 and 2017.
For the amusement arcade business, the goodwill is determined provisionally as at 31 March 2018. The
management of the Group considered that no provision for impairment loss was necessary as the management has
not identified any impairment indicator as at 31 March 2018.

88

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Notes to the Consolidated Financial Statements
16 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
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
Obligations under finance leases

NIRAKU GC HOLDINGS, INC.

2018
¥ million

2017¥ million

52
953

104
1,210

1,005

1,314

57
3,200
15,68488
3,159
13,691

18,941

16,93819,946

18,252

9

12

247
3,930
14,740
4,135

123
3,540
11,0505,208

23,052

19,921

23,061

19,933

Annual Report 201889

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

Financial assets at fair value through profit or loss

Unlisted securities
Less: non-current portion
Current portion2018¥ million

2017¥ million

52
(52)

104
(104)

–

–

Change in fair value of financial assets at fair value through profit or loss are recorded in “other gains/(losses),
net” in the 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
2018¥ million

2017¥ million

Listed securities— Equity securities

823

1,080

Unlisted securities— Equity securities

130

130

953

1,210

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.

18 DERIVATIVE FINANCIAL INSTRUMENTS
2018¥ million

2017¥ million

Interest rate swaps
Less: non-current portion

9
(8)

12
(11)

Current portion

1

1

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 2018, the notional amount of the outstanding interest rate swaps agreement with the banks amounted to¥900 million (2017: ¥1,200 million).

90

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Notes to the Consolidated Financial Statements
19 INVENTORIES

Supplies

2018¥ million

2017¥ million

57

20

The cost of inventories recognised as expenses and included in “hall operating expenses” amounted to ¥7,699
million (2017: ¥8,836 million) and “administration and other operating expenses” amounted to ¥1 million (2017: ¥1
million) for the year ended 31 March 2018.

20 TRADE RECEIVABLES

Trade receivables
Less: provision for impairment of trade receivables

2018¥ million

2017¥ million

57
–

88
–

57

88

Trade receivables represent income receivable from vending machines. The credit terms granted by the Groupgenerally ranged from 0 to 30 days.
The creation and release of provision for impaired receivables have been included in “administrative and otheroperating expenses” in the consolidated statement of comprehensive income. Amounts charged to the allowanceaccount are generally written off when there is no expectation of recovering the amount.
As at 31 March 2018 and 2017, the ageing analysis of the trade receivables, based on invoice date, is as follows:

Less than 30 days
31 days to 90 days2018
¥ million

2017¥ million

53
4

88
–

57

88

As at 31 March 2018 and 2017, no trade receivables was past due or impaired.
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 2018 and 2017.

NIRAKU GC HOLDINGS, INC.

Annual Report 201891

Notes to the Consolidated Financial Statements
21 PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Non-current portion
Rental and other deposits
Rental prepayments
Loans to other employees
Other prepayments and receivables

Current portion
Prepayment for prizes in operation for pachinko and pachislot halls
Rental prepayments
Loans to other employees
Deposit for acquisition of a restaurant (Note)
Other prepayments and receivables

2018¥ million

2017¥ million

2,609
1,010
1
131

2,586
1,173
1
106

3,751

3,866

339
486
1
97
389

500
363
1
149
444

1,312

1,457

The carrying amounts of prepayment, deposits and other receivables approximate their fair values as at 31 March2018 and 2017.
Certain deposits and other receivables have been pledged to secure general facilities granted to the Company(Note 27).
Note: On 19 May 2016, the Company entered into the sales and purchase agreement (the “Agreement”) with Coastal Heritage Limited (the “Seller”)
to purchase 66.7% of equity interest in Nha Trang Holdings Limited, a company engaged in Vietnamese and pinot duck restaurants
operation, at an aggregate consideration of HK$100 million. During the year ended 31 March 2017, the Group paid a deposit of HK$10
million (equivalent to approximately ¥146 million) to the Seller. Pursuant to the announcement dated 15 June 2016, the Group has terminated
the Agreement with the Seller. On 10 April 2018, the Group and the Seller reached an agreement on the settlement amount of HK$7 million
and the amount was fully recovered on 10 May 2018. The remaining amount of HK$3 million was written off to “administrative and otheroperating expenses” in the consolidated statement of comprehensive income during the year ended 31 March 2018.

92

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Notes to the Consolidated Financial Statements
22 CASH AND BANK BALANCES
2018¥ million

2017¥ million

47

35

Current portion
Cash on hand
Cash at banks
Short term bank deposits

1,113
13,334
1,147

911
11,397
1,096

Cash and cash equivalents
Bank deposits with maturity over 3 months

15,59443

13,404
252

15,637

13,656

15,684

13,691

Number ofsharesSharesCapital¥ million

1,195,850,460

3,000

Non-current portion
Bank deposits with maturity over 1 year

Total cash and bank balances

23 SHARE CAPITAL

Ordinary shares, issued and fully paid:
At 31 March 2017, 1 April 2017 and 31 March 2018

24 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.
NIRAKU GC HOLDINGS, INC.

Annual Report 201893

Notes to the Consolidated Financial Statements
25 TRADE PAYABLES
The ageing analysis of the trade payables based on invoice dates as at 31 March 2018 and 2017 were as follows:

Less than 30 days
31 – 90 days
Over 90 days2018
¥ million

2017¥ million

72
162
13

42
81
–

247

123

The carrying amounts of trade payables approximate their fair values as at 31 March 2018 and 2017.

26 ACCRUALS, PROVISIONS AND OTHER PAYABLES

Non-current portion
Provision for reinstatement costs
Provision for long service payment
Vending machine rental deposit and rental receipt in advance
Other payables

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

2018¥ million

2017¥ million

1,961
39
81
30

1,868
38
72
11

2,111

1,989

406
118
963
220
923
384
624
46
109

366
128
823
125
721
718
494
82
75

3,793

3,532

The carrying amounts of other payables approximate their fair values as at 31 March 2018 and 2017.

94

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Notes to the Consolidated Financial Statements
27 BORROWINGS

Non-current portion
Bank loans
Syndicated loans

Current portion
Bank loans
Syndicated loans

Total borrowings

2018¥ million

2017¥ million

2,761
8,093

1,922
6,734

10,854

8,656

813
3,073

939
1,455

3,886

2,394

14,74011,0502018¥ million

2017¥ million

3,886
2,821
4,991
3,042

2,394
1,944
4,560
2,152

14,74011,050

Annual Report 201895

As at 31 March 2018 and 2017, the Group’s borrowings were repayable as follows:

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

NIRAKU GC HOLDINGS, INC.

Notes to the Consolidated Financial Statements
27 BORROWINGS (CONTINUED)
The average effective interest rates (per annum) at the end of each reporting period were set out as follows:

Bank loans
Syndicated loans

2018

2017

0.8%
1.1%

1.8%
1.1%

As at 31 March 2018, the borrowings under sales and leaseback arrangements with a third party lessor amounted
to ¥1,674 million (2017: ¥1,472 million). These sales and leaseback arrangements included sell of certain leasehold
improvements and pachislot machines at an aggregate consideration of ¥2,801 million and lease-back to the Groupfor a total lease payment of ¥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 andpachislot 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 no cost.
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

2018¥ million

2017¥ million

8,340
662
582

8,195
678
585

9,584

9,458

2018
¥ million

2017¥ million

1,663

2,000

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 2018 and 2017.

96

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Notes to the Consolidated Financial Statements
28 OBLIGATIONS UNDER FINANCE LEASES
2018¥ million

2017¥ million

Gross finance lease liabilities — minimum lease payments
No later than 1 year
Later than 1 year and no later than 2 years
Later than 2 year and no later than 5 years
Later than 5 years

1,041
817
1,206
1,985

1,364
999
1,709
2,264

Future finance charges on finance leases

5,049
(914)

6,336
(1,128)Present values of finance lease liabilities

4,135

5,208

2018
¥ million

2017¥ million

No later than 1 year
Later than 1 year and no later than 2 years
Later than 2 year and no later than 5 years
Later than 5 years

888
683
918
1,646

1,160
835
1,371
1,842

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

4,135
(888)

5,208
(1,160)Non-current obligations under finance leases

3,247

4,048

The present values of finance lease liabilities are as follows:

Assets arranged under finance leases represent buildings for pachinko and pachislot halls, pachinko and pachislot
machines, and gaming machines for amusement arcades. The average lease term range from 1 to 20 years witheffective interest rate range from 3.22% to 4.42% per annum as at 31 March 2018 (2017: 3.22% to 4.42% perannum) for pachinko and pachislot business; and from 2 to 3 years with effective interest rate range from 8.06% to20.0% for amusement arcade business. No arrangements have been entered into for contingent rental payments
during the reporting periods.

NIRAKU GC HOLDINGS, INC.

Annual Report 201897

Notes to the Consolidated Financial Statements
29 DEFERRED INCOME TAX
The analysis of deferred income tax assets is as follows:
2018¥ million

2017¥ million

970
1,881

1,024
1,897

2,851

2,921

Deferred income tax liabilities— to be recovered after more than 12 months(1,286)(1,265)

Deferred income tax assets, net

1,565

1,656

2018
¥ million

2017¥ million

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

1,656
3
(94)

1,781
(59)
(66)

Deferred income tax assets

1,565

1,656

Deferred income tax assets— 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:

98

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

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 2018 and 2017,
without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred income tax assets

Property,plant andequipment¥ million

Fair value
Assetthrough profit
retirement
and loss
obligation financial assets¥ million¥ million

Other
provisions¥ million

Total¥ million

Balances at 1 April 2016
(Charged)/credited to profit or loss

1,882
(25)

446
48

12
1

647
(90)

2,987
(66)

Balances at 31 March 2017 and
1 April 2017
(Charged)/credited to profit or loss

1,857
(263)

494
33

13
14

557
146

2,921
(70)

Balance at 31 March 2018

1,594

527

27

703

2,851

Deferred income tax liabilities

Property,plant andequipment¥ million

Fair value
through othercomprehensive
income¥ million

Total¥ million

Balance at 1 April 2016
Charged to other comprehensive income(1,187)
–

(19)
(59)

(1,206)(59)

Balances at 31 March 2017 and 1 April 2017
Charged to profit or loss
Credited to other comprehensive income(1,187)
(24)
–

(78)
–
3

(1,265)(24)
3

Balance at 31 March 2018

(1,211)(75)(1,286)

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 2018 and 2017, the Group haveunrecognised tax losses of approximately ¥38 million. The unrecognise deferred income tax assets ofapproximately ¥31 million in respect of losses for the year ended 31 March 2014 amounting to approximately ¥81
million can be carried forward for 7 years when the Company sale or dissolve its subsidiaries.
Other than the above, there was no material unprovided deferred income tax as at 31 March 2018 and 2017.

NIRAKU GC HOLDINGS, INC.

Annual Report 201899

Notes to the Consolidated Financial Statements
30 DIVIDENDS
During the year ended 31 March 2018, the Company paid dividend of ¥36 million (¥0.03 per ordinary share) to its
shareholders in respect of the year ended 31 March 2017.
The board of directors of the Company proposes the payment of a final dividend of ¥0.12 per ordinary sharetotalling ¥143 million in respect of the year ended 31 March 2018. These consolidated financial statements do notreflect this dividend payable.

31 CASH GENERATED FROM OPERATIONSProfit before income tax
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of investment properties
Amortisation of intangible assets(Gain)/loss on disposal of property, plant and equipment
Write off of property, plant and equipment
Impairment loss of property, plant and equipment
Write off of other receivables
Finance costs, net
Dividend income
Gain on fair value for derivative financial instruments
Loss on fair value for financial assets at fair value through profit or loss
Changes in working capital:
Inventories
Trade receivables
Prepayments, deposits and other receivables
Trade payables
Accruals, provisions and other payables
Cash generated from operations

2018¥ million

2017¥ million

213

902

2,315
19
49
(215)
38
–
54
510
(57)
(3)
2

2,368
19
33
64
14
271
17
531
(61)
(4)
2

(17)
31
595
124
139

393
(24)
656
(9)
85

3,797

5,257

In the consolidated statement of cash flows, proceeds from disposal of property, plant and equipment andcomprise:2018¥ million

2017¥ million

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

324
215

64
(64)

Proceeds from disposal of property, plant and equipment

539

–

100

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Notes to the Consolidated Financial Statements
31 CASH GENERATED FROM OPERATIONS (CONTINUED)
Major non-cash transactions:
For the year ended 31 March 2018, certain finance lease obligations amounting to ¥111 million (2017: ¥141 million)
were settled through reduction of rental prepayments.
For the year ended 31 March 2018, certain property, plant and equipment amounting to ¥45 million (2017: ¥122
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 2018presented.
2018¥ million
Long-term bank deposits
Cash and cash equivalents
Bank deposits with maturity over 3 months
Obligation under finance leases — non-current
Obligation under finance leases — current
Borrowings — non-current
Borrowings — current

47
15,59443(3,247)(888)(10,854)(3,886)

Net debt(3,191)Other assets

Liabilities from financing activities
Obligation

Obligation

Cash and Bank deposits under finance under financeLong-termbank deposits

with maturity

leases —equivalents over 3 months

cash

non-current

leases — Borrowings —current

non-current

Borrowings— current

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

Net debt as at 1 April 201735

13,404252(4,048)(1,160)(8,656)(2,394)(2,567)

Cash flows

12

2,194

(209)

947

338

(2,773)(490)

19Foreign exchange adjustments

–

(4)

–

–

–

–

–

(4)

Other non-cash movements

–

–

–

(146)

(66)

575

(1,002)(639)

Net debt as at 31 March 201847

15,59443(3,247)(888)(10,854)(3,886)(3,191)32 CONTINGENCIES
As at 31 March 2018, the Group did not have any significant contingent liabilities (2017: Same).

NIRAKU GC HOLDINGS, INC.

Annual Report 2018101

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 2018and 2017 are as follows:

Contracted but not provided forPurchase of property, plant and equipment

2018¥ million

2017¥ million

6220(b) Operating lease commitments(i)

As a lessee
As at 31 March 2018, 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

(ii)

2018
¥ million

2017¥ million

1,251
4,585
4,874

1,058
3,569
5,150

10,7109,777

As a lessor
As at 31 March 2018 and 2017, 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

2018
¥ million

2017¥ million

43

40

34 BUSINESS COMBINATION(a)

Summary of acquisition
On 20 November 2017, the company acquired 100% of the issued share capital of Dream Games Singapore
Pte. Ltd. and its subsidiaries (“Dream Games”) at a cash consideration of ¥1,870 million. Dream Games is
engaged in the operation of entertainment and amusement facilities in Cambodia and Vietnam. The
Acquisition represents a strategic opportunity for the Group to establish its leading presence in gaming andentertainment industry in Southeast Asia and broaden the types of entertainment provided by the Group.

102

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Notes to the Consolidated Financial Statements
34 BUSINESS COMBINATION (CONTINUED)(a)

Summary of acquisition (Continued)
Details of the net assets acquired and goodwill are as follows:
Fair value¥ million
Cash and cash equivalents
Prepayments, deposits and other receivables
Inventories
Property, plant and equipment
Deferred tax assets
Intangible assets
Provisions and other payables
Borrowings and obligation under finance leases
Deferred tax liabilities
Current income tax liabilities

117
236
21
579
15
408
(170)
(351)
(89)
(5)

Net identifiable assets acquired
Add: goodwill

761
1,109

Net assets acquired

1,870

The fair value of assets have been determined on a provisional basis as the fair value of identifiable assets
acquired may be adjusted upon the completion of initial accounting year which shall not exceed one year fromthe respective acquisition date. The fair value is being valued by Roma Group Limited, an independent
qualified professional valuer, not connected to the Group.
The goodwill arose in the acquisition of Dream Games included amounts in relation to the benefit of expectedsynergies, revenue growth, future business development and expansion in Asian markets. None of goodwill
recognised is expected to be deductible for income tax purpose.
Revenue and loss attributable to the acquisition during the year are ¥417 million and ¥86 million, respectively.
Had the above acquisition completed on 1 April 2017, total Group pro-forma revenue and loss for the year
ended 31 March 2018 would have been ¥27,320 million and ¥56 million, respectively. The pro-forma
information is for illustrative purposes only and is not necessarily an indication of revenue and results ofoperations of the Group that actually would have been achieved had the above acquisition been completed
on 1 April 2017, nor is it intended to be a projection of future results.

(b) Purchase consideration — cash outflow
2018¥ million
Net cash outflow arising from acquisition of subsidiaries
Cash paid
Cash and cash equivalents acquired

1,870
(117)

Net outflow of cash

1,753

NIRAKU GC HOLDINGS, INC.

Annual Report 2018103

Notes to the Consolidated Financial Statements
35 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 condensed consolidated interim financial
information, the following 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 2018 and 2017:

Service fee expenses
Niraku USA, Inc.

2018
¥ million

2017¥ million

35

35

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

104

NIRAKU GC HOLDINGS, INC.

Annual Report 20182018
¥ million

2017¥ million

232
26
3

194
–
3

261

197

Notes to the Consolidated Financial Statements
36 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY

Note
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deposits and other receivables
Loans to subsidiaries
Investments in subsidiaries
Deferred income tax assets

At 31 March
2018
2017
¥ million¥ million

4
12
6
5,366
18,206
139

4
18
6
4,782
16,28615

23,733

21,111

481
2,733
420
4,343
-

250
1,145
470
4,012
610

7,977

6,487

31,71027,5983,000
17,8193,000
17,066

Total equity

20,81920,066

LIABILITIES
Non-current liabilities
Borrowings
Other payables
Derivative financial instruments

7,792
25
8

6,153
7
11

7,825

6,171

Annual Report 2018

105

Current assets
Prepayments, deposits and other receivables
Loans to subsidiaries
Bank deposits with maturity over 3 months
Cash and cash equivalents
Current income tax recoverable

Total assets
EQUITY
Share capital
Reserves(a)

NIRAKU GC HOLDINGS, INC.

Notes to the Consolidated Financial Statements
36 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY (CONTINUED)
At 31 March
2018
2017
¥ million¥ million

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

3,014
45
1
6

1,335
25
1
–

3,066

1,361

Total liabilities

10,891

7,532

Total equity and liabilities

31,71027,598Note (a)Reserves movement of the Company
Share

CapitalRetained

capitalsurplusearnings

Total¥ million¥ million¥ million¥ million

Balances at 1 April 2016

3,000

13,954

2,228

19,182

Profit for the year

–

–

1,112

1,111

Final dividend related to 2016

–

–

(120)

(120)

Interim dividend relating to 2017

–

–

(108)

(108)

Balance at 31 March 2017 and 1 April 2017

3,000

13,954

3,112

20,066

Profit for the year

–

–

789

789

Final dividend related to 2017

–

–

(36)

(36)

3,000

13,954

3,865

20,819Balances at 31 March 2018

106

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

Notes to the Consolidated Financial Statements
37 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 2018and 2017 is set out below:
For the year ended 31 March 2018Fee¥ million

Salaries,
allowancesand otherbenefits¥ million

Definedcontribution
pension costs¥ million

Total¥ million

139

–

1

140

Non-executive director
Hiroshi Bannai

3

–

–

3

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

4
4
1
6
4

–
–
–
–
–

–
–
–
–
–

4
4
1
6
4

161

–

1

162

Annual Report 2018

107

Name

Director
Hisanori Taniguchi (also the Chief Executive)

Note: Mr. Masaharu Togo was retired as independent non-executive directors on 29 June 2017.

NIRAKU GC HOLDINGS, INC.

Notes to the Consolidated Financial Statements
37 BENEFITS AND INTERESTS OF DIRECTORS (CONTINUED)
Directors and chief executive’s emoluments (Continued)
For the year ended 31 March 2017Fee¥ million

Salaries,
allowancesand otherbenefits¥ million

Definedcontribution
pension costs¥ million

Total¥ million

100

–

1

101

Non-executive director
Hiroshi Bannai

3

–

–

3

Independent non-executive directors
Hiroaki Morita
Norio Nakayama
Masaharu Togo
Michio Minakata
Yoshihiro Koizumi
Hiroaki Kumamoto

4
4
4
5
3
2

–
–
–
–
–
–

–
–
–
–
–
–

4
4
4
5
3
2

125

–

1

126

Name

Director
Hisanori Taniguchi (also the Chief Executive)*

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 2018 and 2017.
There was no arrangement under which a director waived or agreed to waive any emoluments during the years
ended 31 March 2018 and 2017.
During the year ended 31 March 2018, the Group does not pay consideration to any third parties for making
available directors’ services (2017: Nil).
As at 31 March 2018, there is no loans, quasi-loans and other dealing arrangements in favour of directors,
controlled bodies corporate by and connected entities with such directors (2017: Nil).
Save as disclosed in Note 35, 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 (2017: Nil).

108

NIRAKU GC HOLDINGS, INC.

Annual Report 2018

(Incorporated in Japan with limited liability 於日本註冊成立的有限公司)

Stock Code 股份代號 : 1245

2018

Annual Report 年報
ANNUAL REPORT 2018 年報

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