To Our Shareholders

Business Segment Overview

In the fiscal year ended March 2015, we made particularly significant strides in the realm of smart device content for the Japanese market. Hit titles such as “SCHOOL GIRL STRIKERS” “FINAL FANTASY Record Keeper” and “Kai-Ri-Sei Million Arthur” have added to the breadth of our pipeline and grown into major earnings pillars. In Japan’s mobile market, advances in device technology have resulted in even stronger demand for highly playable games. As such, how we go about differentiating ourselves in order to deliver unparalleled gaming experiences is an increasingly important issue. We have continued to make this our goal in the new fiscal year as demonstrated by the June 2015 launches of “MOBIUS FINAL FANTASY” and “DRAGON QUEST Dokodemo MONSTER PARADE” both of which are off to strong starts. In particular, we position “MOBIUS FINAL FANTASY” as a strategic differentiator since its quality vastly exceeds that of conventional smartphone games. Its massive popularity has significant implications for how we will approach our business going forward. In short, we hope to create a situation where we achieve further growth via competition-crushing content quality and delivery.

In the MMO space, “FINAL FANTASY XIV” and “DRAGON QUEST X Online” have developed into stable earnings generators that underpin our financial performance. We launched new services and undertook new initiatives with “DRAGON QUEST X Online” including offering “Dragon Quest X Companion App” and making the game available via the cloud on smart devices and Nintendo 3DS. We are meanwhile rolling out “FINAL FANTASY XIV” to new service territories, having launched it in China in August 2014 and with plans for a South Korean launch in September 2015. In the fiscal year ending March 2016, we are working to retain existing players and to attract new players by offering expansion discs for both games. These are examples of how we continue to promote these two games with new development efforts and services in order to ensure their position as a major earnings backbone for our Group.

In the HD (high-definition) game space, we released two new titles: “DRAGON QUEST HEROES: The World Tree’s Woe and the Blight Below” in February and “FINAL FANTASY TYPE-0 HD” in March. As the first full-fledged action RPG (role-playing game) in the DRAGON QUEST franchise, “DRAGON QUEST HEROES” has successfully added another alluring layer to the series. “FINAL FANTASY TYPE-0 HD” is the HD version of the “FINAL FANTASY TYPE-0” title we had previously made available on the PlayStation Portable (PSP) platform. Demand for the HD version was strong from European and North American game players as the PSP version had only been available in Japan. As such, the title, which includes a playable demo of “FINAL FANTASY XV” has proven a major success, selling over a million units globally. In addition to these new titles, we also saw growth in sales of full downloads of catalog titles, demonstrating that we are achieving longer product lifecycles. Given our ample catalog of assets, we are confident that this trend will work to our advantage.

We are slated to release the latest installments of multiple major franchises from our European and North American studios in the second half of the fiscal year ending March 2016. PlayStation 4 and Xbox One have been on the market for two years and uptake of both platforms by gamers is now at full steam. Meanwhile, major European and North American publishers have plans for releasing a string of new titles. We are proud to say that our lineup for the fiscal year ending March 2016 represents a strong offering that can stand up to those of any of our peers. Competition is intensifying as the market picks up, but we intend to spare no effort in readying ourselves for the key holiday season.

In the Amusement segment, our arcades continue to face a challenging environment, in part due to the hike to the consumption tax in Japan. Thanks, however, to our efficient management of our arcades, the segment was able to book operating income of ¥3.6 billion for the fiscal year ended March 2015. We did not release any major new game machines for sale, but existing titles such as “LORD of VERMILLION III” and “GUNSLINGER STRATOS2” contributed to sales thanks to brisk demand. While the Amusement segment faces a challenging environment, we believe it will occupy a unique position in our content business going forward since it offers players the opportunity to experience games in the real rather than the virtual world. We intend to mark a new era in the Amusement business by leveraging smart devices and other technological advances to provide new content that creates the feeling of live game play.

The Publication segment delivered a strong performance thanks to the success of television anime series adapted from our comic titles. In particular, we see the strong growth of anime adaptations of titles originating on our “Gangan Online” platform as an extremely important achievement that will help spur our further transition to online media going forward. Growth in e-books was also significant, serving as another indicator of the fact that digitalization is becoming a major trend.

The Merchandising segment has grown into a stable business where we leverage not only our own properties, but also make proactive use of third-party content. Our high-quality merchandise has met with a great reception from customers, and more recently our collectors’ boxes and other special fan offerings have also proven popular. We intend to continue to build up our merchandise lineup as we see it as a key element in further enriching our content offering.

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