Final Results

RNS Number : 5464U
Konami Corporation
15 May 2008
 





Consolidated Financial Results

for the Year Ended March 31, 2008

(Prepared in Accordance with U.S. GAAP)

May 15, 2008


KONAMI CORPORATION

Address:

7-2, Akasaka 9-chome, Minato-ku, Tokyo, Japan

Stock code number, TSE:

9766 

Ticker symbol, NYSE:

KNM

URL:

www.konami.net

Shares listed:

Tokyo Stock Exchange, New York Stock Exchange, London Stock Exchange

and Singapore Exchange

Representative:

Kagemasa Kozuki, Representative Director and Chief Executive Officer

Contact:

Noriaki Yamaguchi, Representative Director and Chief Financial Officer

(Phone: +81-3-5771-0222)

Date of General Shareholders Meeting:


June 27, 2008

Date of dividend payment:

June 6, 2008

Adoption of U.S. GAAP:

Yes


1. Consolidated Results for the Year Ended March 31, 2008

(Amounts are rounded to the nearest million)

(1) Consolidated Results of Operations

(Millions of Yen, except per share data)


Net revenues

Operating

income 

Income before income taxes  

Net income 

Year ended March 31, 2008

  % change from previous year

297,402

6.1 %

33,839

20.2%

32,834

19.1%

18,345

13.2%

Year ended March 31, 2007

  % change from previous year

280,279

6.9 %

28,145

1,034.4%

27,567

226.7%

16,211

(29.5)%



Basic net income per share (yen)

Diluted net income per share (yen)

Return on stockholders' equity

Ratio of income 

before income taxes

to total assets

Ratio of operating income 

to net revenues

Year ended 

March 31, 2008

133.63

133.57

10.3%

10.5%


11.4%

Year ended 

March 31, 2007

118.15

118.09

9.6%

9.1%


10.0%


Notes:

Equity in net income of an affiliated company


Year ended March 31, 2008:

Y180 million




Year ended March 31, 2007:

Y138 million




  

(2) Consolidated Financial Position

(Millions of Yen, except per share amounts)


Total assets

Total stockholders'

equity

Equity ratio

Stockholders'

equity per share

March 31, 2008

319,248

182,759

57.2%

1,330.88

March 31, 2007

304,657

174,662

57.3%

1,272.54


(3) Consolidated Cash Flows





(Millions of Yen)



Net cash provided by (used in)

Cash and

cash equivalents at end of year



Operating

activities

Investing

activities

Financing

activities



Year ended March 31, 2008

30,788

(15,359)

(19,818)

52,130

Year ended March 31, 2007

31,824

(11,098)

(33,212)

57,333



2. Cash Dividends



Record Date

Cash dividends per share (yen)

Total cash dividends 

(annual)

Payout ratio

(consolidated)

Cash dividend rate for stockholders' equity

(consolidated)

Interim

Year end

Annual

Year ended 

March 31, 2007

27.00

27.00

54.00

Y7,411 million

45.7%

4.4%

Year ended 

March 31, 2008

27.00

27.00

54.00

Y7,415 million

40.4%

4.1%

Year ending 

March 31, 2009

27.00

27.00

54.00

-

28.5%

-

-Forecast



3. Consolidated Earnings Forecast for the Year Ending March 31, 2009

(Millions of Yen, except per share data)


Net revenues

Operating

income 

Income before income taxes  

Net income

Net income per share

Year ending March 31, 2009

  % change from previous year

330,000

11.0%

45,000

33.0%

44,500

35.5%

26,000

41.7%

189.34


  

4. Other

(1) Changes to principal subsidiaries during the year (status changes of specified subsidiaries due to changes in the scope of consolidation) : None

(2) Changes in accounting principles, procedures and reporting policies (description of changes to important items fundamental to financial statement preparation)

 1.

Changes accompanying amendment of accounting standard: Yes


 2.

Other: None



Note: Please refer to page 26


(3)  Number of shares issued (Common Stock)

 1.

Number of shares issued: (Treasury stock included)



 Year ended March 31, 2008

143,500,000

 shares




 Year ended March 31, 2007

143,555,786

 shares



 2.

Number of Treasury Stock:




 Year ended March 31, 2008

6,178,443

 shares




 Year ended March 31, 2007

6,300,970

 shares



 3.

Average number of shares outstanding:




 Year ended March 31, 2008

137,290,259

 shares




 Year ended March 31, 2007

137,202,151

 shares




(Reference) Summary of Non-consolidated Financial Results


1. Results for the Year Ended March 31, 2008

 (1) Non-consolidated Results of Operations

(Millions of Yen, except per share data)


Operating revenues

Operating income 

Ordinary income  

Net income 

Year ended March 31, 2008

  % change from previous year

25,478

254.1%

20,843

1,348.4%

20,475

1,502.1%

17,395

1,660.6%

Year ended March 31, 2007

  % change from previous year

7,196

(94.1) %

1,439

(89.9)%

1,278

(93.4)%

988

(94.0)%



Basic net income per share (yen)

Diluted net income per share (yen)

Year ended March 31, 2008

126.70

126.65

Year ended March 31, 2007

7.16

7.15


(2) Non-consolidated Financial Position

(Millions of Yen, except per share data)


Total assets

Total net assets

Equity ratio

Net assets

per share

March 31, 2008

178,565

149,272

83.6%

1,087.03

March 31, 2007

168,423

139,179

82.6%

1,014.02




  


Cautionary Statement with Respect to Forward-Looking Statements:




Statements made in this document with respect to our current plans, estimates, strategies and beliefs, including the above forecasts, are forward-looking statements about our future performance. These statements are based on management's assumptions and beliefs in light of information currently available to it and, therefore, you should not place undue reliance on them. A number of important factors could cause actual results to be materially different from and worse than those discussed in forward-looking statements. Such factors include, but are not limited to: (i) changes in economic conditions affecting our operations; (ii) fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the U.S. dollar and the Euro; (iii) our ability to continue to win acceptance of our products, which are offered in highly competitive markets characterized by the continuous introduction of new products, rapid developments in technology and subjective and changing consumer preferences; (iv) our ability to successfully expand internationally with a focus on our digital entertainment business and gaming & system business; (v) our ability to successfully expand the scope of our business and broaden our customer base through our health & fitness business; (vi) regulatory developments and changes and our ability to respond and adapt to those changes; (vii) our expectations with regard to further acquisitions and the integration of any companies we may acquire; and (viii) the outcome of existing contingencies.

Please refer to page 8 of the attached material for information regarding the assumptions and other related items used in the preparation of these forecasts.


  

1. Business Performance and Cash Flows


1. Business Performance

Overview

In the consolidated fiscal year 2008, and with regard to the Japanese economy, in spite of the decline in consumer spending, the economy maintained a mild trend toward recovery along with the growing corporate earnings against a background of strong overseas demand in newly developing countries and countries with natural resources. In the global scene, there were concerns about the effects of the slowdown of the U.S. economy and the fallout from the subprime loan crisis. While a slight slowdown was observed in the European economy due to declines in personal consumption, solid foreign demand secured a moderate expansion overall. In China, despite concerns over inflation, economic growth continued steadily.

In the entertainment industry which KONAMI CORPORATION and its subsidiaries ('Konami') operates, the market for home video game software thrived. The prevalence of new hardware for console platforms and handheld machines, along with a growing number of users, led to record high sales in the domestic Japanese market.

In the health industry, the demand for products and services to maintain and promote good health is expected to climb further in the future. Households and corporations are focusing more closely than ever on the 'metabolic syndrome,' and the country has launched a program for 'designated checkups and health guidance' in April 2008, as a measure to prevent lifestyle diseases. 

According to these conditions, in our Digital Entertainment segment, the soccer game series in the home video game software enjoyed strong sales mainly in Europe, recording the series highest unit sales ever. Also, major titles for card games and products for amusement arcades had favorable sales. 

In our Health and Fitness segment, we have taken steps to improve various health support services. To respond to the growing interest in improved fitness and avoidance of the need for nursing care, we have introduced an IT health management system in our directly managed facilities. Also, we have developed programs with a focus on balancing 'exercise' and 'nutrition,' and enhanced our lineup of health products. Meanwhile, our expertise and track record in running outsourced facilities are now widely recognized throughout Japan, contributing to an increase in the number of our outsourced facilities.

In our Gaming and System segment, we have steadily expanded our lineup of products, mainly to cater to the growing North American market and worked to strengthen our operating bases. Through these efforts, sales of slot machines and casino management systems have increased steadily.


In terms of financial performance, for the consolidated year ended March 31, 2008, net revenues amounted to Y297,402 million (a year-on-year increase of 6.1%), operating income was Y33,839 million (a year-on-year increase of 20.2%), income before income taxes was Y32,834 million (a year-on-year increase of 19.1%), and net income was Y18,345 million (a year-on-year increase of 13.2%).




  

Performance by business segment

Summary of net revenues by business segment:



Millions of Yen




Year ended

 March 31, 2007 

Year ended

 March 31, 2008 

 % change 


Digital Entertainment 

165,044

178,939

8.4


Health and Fitness 

88,459

86,544

(2.2)


Gaming and System

16,744

18,471

10.3


Other and Eliminations

10,032

13,448

34.1


Consolidated net revenues

Y 280,279

297,402

6.1



Digital Entertainment

Computer and Video Games business. We recorded strong domestic sales for various products, including titles in our forte genre of sports PROYAKYU SPIRITS 4, JIKKYOU PAWAFURU PUROYAKYU 14, J.LEAGUE Winning Eleven 2007 CLUB CHAMPIONSHIP and WORLD SOCCER Winning Eleven 2008 and hit anime titles such as the KIRARIN☆REVOLUTION series. In Europe, sales of PRO EVOLUTION SOCCER 2008 surpassed the strong sales recorded by its predecessor in the PRO EVOLUTION SOCCER series. The DanceDanceRevolution series remains as popular as ever in North America, particularly the briskly selling DanceDanceRevolution HOTTEST PARTY debuted for Wii this year.

Toy & Hobby business. Our mainstay the YU-GI-OH! TRADING CARD GAME series continued to sell well worldwide. The BUSOUSHINKI action figures were also popular among users, with growing sales throughout the year.

Amusement business. In the video game segment, MAH-JONG FIGHT CLUB series continued selling steadily via the amusement arcades utilizing the e-AMUSEMENT system. Other strong-selling releases included BASEBALL HEROES 3 (played with baseball cards with portraits of professional baseball players), QUIZ MAGIC ACADEMY V (a nationwide online quiz series), WORLD SOCCER Winning Eleven ARCADE CHAMPIONSHIP 2008 (an arcade version of the WORLD SOCCER Winning Eleven series), and our mainstay music game pop'n music16. In the token-operated game segment, GRANDCROSS (an extra-large token-operated game machine) and SPINFEVER (a mid-sized pusher game) were warmly received by the market.

Online business. Mobile contents distribution grew steadily as a global business via major domestic carriers and major overseas carriers. Also, in January 2008, we started distributing METAL GEAR SOLID MOBILE, a mobile phone game installment in full 3D graphics.

Multimedia business. A number of newly released guides, books, music CDs, and other merchandise tied in with popular game software have sold well.


In terms of financial performance, cosolidated net revenues of this segment amounted to Y178,939 million (a year-on-year increase of 8.4%).


  

Health & Fitness

Operation of fitness clubs. We are striving to offer higher quality services through IT-enabled health management systems and improved programs. More clubs installed the e-XAX IT health management systems to help members keep track of their individual exercise histories and manage data on their fitness progress. Further efforts also went into promoting various programs, including a lifestyle disease prevention program called 6WEEKS and a diet program called Biometrics. Complimentary services which started in July 2007 were targeted for particular members of the facility membership. However, to add value, in March 2008, those services were widened to target all members of the monthly membership.

Operation of sports facilities outsourced to us. The facilities are expanding with eight new facilities added, in locations such as Spark Ayukawa (Ibaraki) and Wing Arena Kariya (Aichi). Konami runs these facilities based on its extensive know-how and proven record of achievement in the operation of public facilities, and thus plays an active role in helping local residents get in better shape. As a result, as of March 31, 2008, the number of fitness clubs run either directly or outsourced to us totaled 319 throughout Japan.

Health products. A range of our original services were developed, including the TV-linked health management tool Kenshin Keikaku TV, the computer software program for health management Kenshin Keikaku 2, and the multifunctional USB pedometer e-walkeylife2. In February 2008, we started sales of Collagen Cristal Ottimo, our original supplement, at pharmacies, drugstores, and Konami fitness clubs nationwide. We are steadily expanding our product lineup to cater to diversifying health needs.


In terms of financial performance, consolidated net revenues of this segment amounted to Y86,544 million (a year-on-year decrease of 2.2 %).



Gaming & System

A growing number of jurisdictions are legalizing gaming, while existing markets continue to expand steadily. Under these conditions, sales of the K2V series slot machines and Konami Casino Management System continued to sell well in North America. At the Global Gaming Expo (G2E) 2007, the world's biggest gaming show held in Las Vegas in November 2007, Konami exhibited and released a new mechanical 5-reel slot machine called Advantage 5. This Advantage 5 received favorable reviews, and sales of the product grew steadily.

Meanwhile, in Australia's casino market, despite the cap imposed on the number of machines that can be installed in major states and the effects of the new smoking restrictions at pubs and the latest amendments of the tax law, we have continued to provide new products while striving to enhance our services to current customers. We also plan to endeavor to acquire new customers while promoting sales in developing countries in regions such as Asia and Europe.

We worked to add value to Konami Casino Management System by concluding strategic alliances with other companies and also promoted the development of new merchandise from three regional bases: North America, Australia, and Japan. Products were exhibited at the International Casino Exhibition (ICE) held in London in January 2008. We also exhibited slot machines and system products developed and manufactured in North America and Australia. The biggest crowd pleasers included the widely acclaimed Advantage 5 (introduced in North America), Konami's original highly popular progressive products, and Konami Casino Management System with its added value.


In terms of financial performance, consolidated net revenues of this segment amounted to Y18,471 million (a year-on-year increase of 10.3%).






Outlook for Fiscal Year Ending March 31, 2009


Digital Entertainment

Computer and Video Games business. METAL GEAR SOLID 4 GUNS OF THE PATRIOTS, the latest addition to METAL GEAR SOLID series, will be released simultaneously worldwide in June 2008. WORLD SOCCER Winning Eleven (PRO EVOLUTION SOCCER in Europe), a soccer game series that earned strong reviews in the Japanese and overseas markets, will be offered on multiple platforms. In addition to the mainstay sports and anime contents, we expect to actively inject new titles into the market.

Toy & Hobby business. We expect to continue marketing the YU-GI-OH! TRADING CARD GAME series worldwide and also plan to market new card games based on anime and comics, which we aim to satisfy fans of the original published material. Also, to the figure product BUSOUSHINKI, we plan to add the BUSOUSHINKI Light Armor series to further develop the product line.

Amusement business. We will continue our efforts to expand sales of products utilizing the e-AMUSEMENT service. In video games, we have scheduled to release HORSERIDERS, a new type of online horse race game that enables players to compete with rival players all over Japan as virtual jockeys, by making free use of cards. In music games, we plan to release jubeat, a new style of rhythm-action game played by touching the screen in synch with melodies. In token-operated games FantasticFever 3 is planned to be the latest production of the series, and will be the first token-operated game to be compatible with the e-AMUSEMENT service.

Online business. In our online game distribution business which is expected to grow in the future, a game called Chaotic Eden, a dungeon adventure RPG started its production in Korea. Also, we plan to continue to provide services to users with diversifying needs using original Konami content along with an increased emphasis on communication.

Multimedia business. We plan to continue to develop multilateral products focusing on books, DVDs, and music CDs tied in with popular game software, and seek high synergy effects within the group.

Health & Fitness

Konami has been growing its business in this field by expanding the number of sports clubs and offering greater value. In addition to the operation of over 300 sports clubs, as one of the largest facility operating companies in Japan, we are also active in designing and manufacturing fitness equipment and supplements. We observe our own equipment and products at work in our own sports clubs, and bring our findings to bear in later development projects. Our core strategy in this field is to make the most of this synergy to enhance our presence in the health and fitness market. 

Looking at the market environment, as Japan has become an aging society, action is being taken at the national level to fight lifestyle diseases. Under the Medical Care System Reform laws, the country launched a program of 'designated checkups and health guidance' in April 2008 for persons at risk of developing lifestyle diseases. Konami plans to provide guidance programs built on proven achievements acquired from the operation of its facilities. We plan to offer two types of health programs to meet the diversifying needs of customers: the first type will be programs conducted at Konami facilities using Konami's network all over Japan, and the second will be visiting-type guidance programs using Konami's know-how on health promotion business for corporations and municipalities. 

Our goal is to achieve further growth in the health and fitness market as a whole, and we intend to throw ourselves wholeheartedly into the challenge with strong focuses on 'exercise,' 'leisure,' and 'nutrition.' Accordingly, Konami announced partnership programs with Kagawa Nutrition University in July 2007, and with Osaka Electro-Communication University in September 2007. Under these programs, we are training trainers on the practical skills required to supervise exercise regimes and offer nutritional guidance. These programs also involve the joint development of a more effective health-building program, one that combines 'exercise' with good 'nutrition.' We plan to work to train people in health maintenance/management and to develop more effective and practical training equipment and health-related devices.

In March 2008, Sportsplex Japan Co., Ltd. ('Sportsplex'), an operator of 13 fitness clubs in Tokyo and Kanagawa prefecture, became a consolidated subsidiary of KONAMI CORPORATION. By offering and sharing various operating know-how held by Konami Sports & Life Co., Ltd. ('KSL'), while at the same time developing the characteristics of Sportsplex we aim to further improve its services and to enhance convenience and comfort for the members of Konami, including KSL and Sportsplex.

Gaming & System

In the sales of mechanical reel slot machines, the type that dominates the North American market, we plan to continue to market merchandise with emphasis on the ever popular 5-reel mechanical slot machine Advantage 5. Additionally, we plan to expand sales of the video slot machine types widely accepted in Australia and Europe, and reinforce efforts to promote the new releases of Konami Casino Management System. We aim for a stable management and higher steady revenues by signing participation agreements (a form of equipment sale in which profits are shared among casino operators) and from maintenance and service revenue for casino management systems. 

By strengthening collaboration in R&D focused in the three hubs of the U.S., Australia, and Japan, we aim to promote efficient management, to develop new products that respond to social changes and demands, and enhance the added value of existing products. Instead of developing slot machines in isolation, we are promoting a network-type framework for product development and implementation, with the goal of streamlining and enhancing casino management overall by means of a casino management system. Besides North America, where Konami Casino Management System is already implemented, we will work to introduce the system into Australia and other overseas markets. Through these efforts, Konami aims to expand sales in the growing North American markets and overseas markets, including the rapidly developing countries of Asia and South America.


Projected consolidated results for the coming fiscal year are as follows: net revenue of Y330,000 million; operating income of Y45,000 million; income before income taxes of Y44,500 million; and net income of Y26,000 million.


Konami, as a hit business, requires flexibility in how products are released and is subject to fluctuations in sales throughout the course of the year. 


  

2. Cash Flows


Cash flow summary for the year ended March 31, 2008:





Millions of Yen



Year ended

March 31, 2007

Year ended

March 31, 2008

Change

Net cash provided by operating activities

Y 31,824   

Y 30,788  

Y (1,036)

Net cash used in investing activities

(11,098) 

(15,359)

(4,261)

Net cash used in financing activities

(33,212) 

(19,818)

13,394

Effect of exchange rate changes on cash and cash equivalents

1,125

(814)

(1,939)

Net decrease in cash and cash equivalents 

(11,361) 

(5,203)

6,158

Cash and cash equivalents, end of the year

57,333

52,130

(5,203)


Cash and cash equivalents (hereafter, referred to as 'Net cash'), for the year ended March 31, 2008, amounted to Y52,130 million, a decrease of Y5,203 million compared to the year ended March 31, 2007, or a year-on-year decrease of 9.1%.

Cash flow summary for each activity for the year ended March 31, 2008 is as follows:


Cash flows from operating activities:

Net cash provided by operating activities amounted to Y30,788 million, a year-on-year decrease of 3.3% for the year ended March 31, 2008. Despite the increase in net income and accrued income taxes, this decrease, primarily resulted from a decrease in Net cash consisted of trade notes and accounts payable.


Cash flows from investing activities:

Net cash used in investing activities amounted to Y15,359 million, a year-on-year increase of 38.4% for the year ended March 31, 2008. This resulted from the increase in lease deposits from moving office buildings and capital expenditures.


Cash flows from financing activities:

Net cash used in financing activities amounted to Y19,818 million, a year-on-year decrease of 40.3% for the year ended March 31, 2008. This decrease, despite the redemption of bonds and dividends distributed, primarily resulted from an issuance of bonds.


  

The trends of cash flow index are as follows

Year ended

 March 31, 2007 

Year ended

 March 31, 2008 


Equity-assets ratio (%)

57.3

57.2


Equity-assets ratio at fair value (%)

141.9

161.3


Liabilities to cash flow ratio (years)

1.5

1.4


Interest coverage ratio (times)

32.3

27.9



Equity-assets ratio: Total stockholders' equity / Total assets

Equity-assets ratio at fair value: Total stockholders' equity at fair value / Total assets

Liabilities to cash flow ratio: Interest-bearing liabilities / Cash flows from operating activities

  Interest coverage ratio: Cash flows from operating activities / Interest expense


Notes:

1. Each index is calculated from figures prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP).

2. Cash flows from operating activities are from the consolidated cash flow statement.

3. Interest-bearing debt covers all liabilities with interest in the consolidated balance sheet.



3. Basic Policy on the Distribution of Profits 


Our basic policy is to provide stable dividends to return profits to our shareholders. It is our policy to use retained earnings for investments focused on business fields with good future profitability to increase our corporate value.

As for dividends for the consolidated year ended March 31, 2008, a 27 yen per share dividend was approved at the Board Meeting held on May 15, 2008. As a result, on an annual basis, the dividends will be 54 yen per share, including a distributed interim dividend of 27 yen per share.

Konami plans to distribute dividends of 54 yen per share for the fiscal year ending March 31, 2009.



SSpecial Note:

In this document, forward-looking statements are based on management's assumptions and beliefs in light of information currently available, which may contain various risks and uncertainties.

As a result, you should not place undue reliance on them. A number of important factors could cause actual results to be materially different from those discussed in forward-looking statements. Such factors include, but are not limited to; changes in economic conditions affecting our operations, and market trends and fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the U.S. dollar and the Euro.




2. Organizational Structure of the Konami Group


The Konami Group is a conglomerate engaged in the amusement and health services industry providing customers with ''High Quality Life'', and is comprised of KONAMI CORPORATION (the ''Company''), and its 23 consolidated subsidiaries and one equity-method affiliate. 

Each of our subsidiaries and affiliated company is categorized into business segments based on its operations, as stated below. Business segment categorization is based on the same criteria explained below under ''8. Segment Information (Unaudited)''. 


Business Segments

Major Companies

Digital Entertainment

Domestic

Konami Digital Entertainment Co., Ltd.(Note 3)


HUDSON SOFT CO., LTD. 


Konami Manufacturing & Service, Inc., One other company


Overseas

Konami Digital Entertainment, Inc., 


Konami Digital Entertainment GmbH 


Konami Digital Entertainment B.V. 


Konami Digital Entertainment Limited


Konami Software Shanghai, Inc., One other company

Health & Fitness 

Domestic

Konami Sports & Life Co., Ltd.


COMBI WELLNES Corporation 


Konami Manufacturing & Service, Inc. 


Resort Solution Co., Ltd. (Note 2), Three other companies (Note 4)

Gaming & System

Overseas

Konami Gaming, Inc.


Konami Australia Pty Ltd., One other company 

Other

Domestic

Konami Manufacturing & Service, Inc. 


KPE, Inc., Konami Real Estate, Inc., One other company


Overseas

Konami Corporation of America


Konami Digital Entertainment B.V., One other company





Notes:

1. Companies that have operations categorized in more than one segment are included in each segment in which they operate.

2. Resort Solution Co., Ltd. is an equity-method affiliate.

3. Konami Digital Entertainment Co., Ltd. merged with Konami Career Management, Inc., Konami School, Inc. and Megacyber Corporation on April 1, 2007.

4. In March 2008, the Company acquired shares of Sportsplex Co., Ltd., and made it a consolidated subsidiary of the Company.



   

3. Management Policy


1. Management Policy


We place priority on our following corporate goal: 'We, Konami Group of Companies, aim to be a business group from which people all around the world have high expectations, through creating and providing people with 'Valuable Time'.' Furthermore, our basic management policy is to place priority on our shareholders, to maintain sound relationships with all stakeholders, including our shareholders, and to make a wide range of social contributions as a good corporate citizen. We aim to make optimum use of the group's management resources and maintain the following specific management policies: 'Adaptation to Global Standards,' 'Maintaining Fair Competition' and 'Pursuit of High Profits'. 

To place priority on the interests of our shareholders, our basic policy is to provide stable dividends to return profits to our shareholders. It is our policy to use retained earnings for investments focused on business fields with good future profitability and other prospects to increase our corporate value and as a source for paying dividends in the future. 

We are working on maintaining sound relationships with our stakeholders, including our investors, end-users, suppliers, employees and the community in general, as well as contributing to society by supporting a wide range of activities that promote education, sports and culture. Pursuant to this basic management policy, through creating and providing 'valuable time,' we aim to deliver 'dreams' and 'surprises' for people all over the world.


2. Profit Appropriation Policy


Konami always aims to improve profitability by enhancing management efficiency and striving to optimize performance based on three important management indicators: the ratio of operating income to net sales, the ratio of net income to net sales, and return on equity.


3. Medium- to Long-term Strategies and Objectives

Building a powerful organization capable of responding to changing market conditions


In the Digital Entertainment, Health & Fitness, and Gaming & System markets in which Konami operates, considerable progress has been made in developing a network environment. In the process, users have come to share information of every variety, and different communities have emerged to serve ever more diverse tastes. 

Konami has clearly separated its management and execution functions by adopting a holding company structure, in order to evolve into a flexible and speedy organization with ability to adapt to the rapidly changing market environment. In promoting globalization in each segment of our business, we have introduced a system whereby each Konami director assumes ultimate responsibility in the markets of each region, in order to ensure more accurate responses to the needs of various markets, effective as of FY2005. To secure our ability to respond more swiftly in each business, we have adopted a system whereby each director assumes ultimate responsibility in each business, effective as of April 2008. We believe that this will enable us to be more flexible and swift in our decision-making and speedier in our business management.

Expanding profitability and channeling management resources into growth areas


All hardware manufacturers in the Digital Entertainment business have now released new gaming platforms for video game consoles, and with its own distinctive features, each of these platforms offers a new way to play. As a result, users who formerly had little interest in video games are now attracted to the market which resulted to expand the user base. Moreover, previously a single home gaming platform was the market leader worldwide, but that pattern has been changed. Whichever platform best caters to users' preferences in a particular country or region, in terms of the games available to be played on it, is now the one that will dominate the local market. 


Online access is now available on a multitude of platforms, including home gaming platforms, commercial platforms, cell phones, and PCs and more and more users these days are looking for a new way to play games, in a way that allows them to make contact with others over a network. 


According to the needs of 'diversity' and 'globalization', a worldwide business execution system called 'global operating officer system,' was introduced. We have appointed staff with authorities that cross over the borders of business corporations in various areas, to production, sales, and management positions. Under this system, business can be pursued with a more global approach.


In our Health & Fitness field, as health awareness grows and the amount of leisure time on people's hands increases with the retirement of the baby boomers, we have accelerated the opening of Konami Sports Clubs and expanded the operation of facilities outsourced to us. With the aim of enhancing its fitness facility-related services, Konami acquired shares of Sportsplex in March 2008, thereby making Sportsplex a consolidated subsidiary. Sportsplex operates 13 fitness clubs in the Tokyo metropolitan area and provides high-quality services at facilities in front of and near railway stations.


In order to achieve further growth down the road, we also plan to take other aggressive steps to create value. Specifically, we expect to enhance our proprietary health management system, which assists people in their efforts to get fit by keeping an ongoing record of their exercise history in various real-life situations at sports clubs, outside the home and in the home and managing data on their health. We expect to market supplements as well. 


As for the casino market in which our Gaming & System segment operates, the number of casinos has been increasing yearly as gaming is legalized in more and more countries and regions across the globe. We therefore believe that business opportunities continue to increase for Konami as a manufacturer and vendor of slot machines and provider of services for casino management systems. We also intend to improve our business results in this field by pursuing options like strategic alliances with other companies.


In addition to our Digital Entertainment segment, Health & Fitness segment and Gaming & System segment, Konami plans to channel optimum management resources to new business fields where growth is expected in the medium to long-term.








4. Consolidated Balance Sheets (Unaudited)



Millions of Yen


Thousands of 

U.S. Dollars


March 31, 2007


March 31, 2008


March 31, 2008



%



%



ASSETS








CURRENT ASSETS:








Cash and cash equivalents 

Y 57,333



Y 52,130 



$ 520,311   

Trade notes and accounts receivable, net of allowance for doubtful accounts of Y540 million and Y260 million ($2,595 thousand) at March 31, 2007 and 2008, respectively

29,729



33,802



337,379

Inventories 

24,236



24,374



243,278

Deferred income taxes, net

14,877



18,275



182,404

Prepaid expenses and other current assets

12,086



11,498



114,762

Total current assets

138,261

45.4


140,079

43.9


1,398,134









PROPERTY AND EQUIPMENT, net

53,294

17.5


66,690

20.9


665,635









INVESTMENTS AND OTHER ASSETS:








Investments in marketable securities 

701



659



6,578

Investments in affiliates

6,213



6,414



64,018

Identifiable intangible assets 

38,585



38,161



380,886

Goodwill

22,738



21,935



218,934

Lease deposits

24,906



28,205



281,515

Deferred income taxes, net

2,593



2,687



26,819

Other assets

17,366



14,418



143,907

Total investments and other assets

113,102

37.1


112,479

35.2


1,122,657

TOTAL ASSETS

Y 304,657

100.0


Y 319,248 

100.0


$ 3,186,426





See accompanying notes to consolidated financial statements

  


Millions of Yen


Thousands of

 U.S. Dollars



March 31, 2007


March 31, 2008


March 31, 2008




%



%



LIABILITIES AND STOCKHOLDERS' EQUITY









CURRENT LIABILITIES:









Current portion of long-term debt and capital lease obligations


Y 23,073



Y 8,115



$ 80,996

Trade notes and accounts payable


24,002



20,410



203,713

Accrued income taxes


1,740



9,523



95,050

Accrued expenses 


19,179



21,934



218,924

Deferred revenue 


5,661



7,848



78,331

Other current liabilities


8,811



7,283



72,692

Total current liabilities


82,466

27.1


75,113

23.5


749,706

LONG-TERM LIABILITIES:









   Long-term debt and capital lease obligations, less

    current portion 


24,248



35,613



355,454

Accrued pension and severance costs 


2,708



2,699



26,939

Deferred income taxes, net 


12,207



11,559



115,371

Other long-term liabilities


5,669



7,181



71,674

Total long-term liabilities


44,832

14.7


57,052

17.9


569,438

TOTAL LIABILITIES


127,298

41.8


132,165

41.4


1,319,144










MINORITY INTEREST IN

CONSOLIDATED SUBSIDIARIES


2,697

0.9


4,324

1.4


43,158










COMMITMENTS AND CONTINGENCIES


















STOCKHOLDERS' EQUITY:









Common stock, no par value-









Authorized 450,000,000 shares;

issued 143,555,786 shares at March 31, 2007 and 143,500,000 shares at March 31, 2008 


47,399

15.6


47,399

14.8


473,091

Additional paid-in capital 


77,213

25.3


77,078

24.1


769,318

Legal reserve 


284

0.1


284

0.1


2,835

Retained earnings 


62,560

20.5


73,492

23.0


733,526

Accumulated other comprehensive income 


5,617

1.8


2,579   

0.8


25,741

Treasury stock, at cost-









6,300,970 shares and 6,178,443 shares at March 31, 2007 and 2008, respectively 


   (18,411)

 (6.0)


(18,073)   

 (5.6)


(180,387)

Total stockholders' equity 


174,662

57.3


182,759

57.2


1,824,124

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 


Y 304,657

100.0


Y 319,248

100.0


$ 3,186,426





See accompanying notes to consolidated financial statements




  

5. Consolidated Statements of Income (Unaudited)



Millions of Yen


Thousands of U.S. Dollars 


Year ended 

March 31,


Year ended March 31,


2007


2008


2008



%



%



NET REVENUES:








Product sales revenue 

Y 199,620



Y 218,306 



$ 2,178,920

Service revenue 

80,659



79,096



789,460

Total net revenues 

280,279

100.0


297,402

100.0


2,968,380

COSTS AND EXPENSES:








Costs of products sold

118,806



131,890



1,316,399

Costs of services rendered 

74,700



73,298



731,590

Selling, general and administrative

58,628



58,375



582,643

Total costs and expenses

252,134

90.0


263,563

88.6


2,630,632

Operating income

   28,145

10.0


33,839

11.4


337,748

OTHER INCOME (EXPENSES):








Interest income

821



894



8,923

Interest expense 

(985)



(1,105)



(11,029)

Other, net

(414)



(794)



(7,925)

Other income (expenses), net

(578)

(0.2)


(1,005)

(0.4)


(10,031)

INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND EQUITY IN NET INCOME  OF AFFILIATED COMPANIES

27,567

9.8


32,834


11.0


327,717

INCOME TAXES 

10,919

3.9


13,080

4.4


130,552

INCOME BEFORE MINORITY INTEREST AND EQUITY IN NET INCOME OF AFFILIATED COMPANIES

16,648

5.9


19,754

6.6


197,165

MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES

575

0.2


1,589

0.5


15,860

EQUITY IN NET INCOME OF AFFILIATED COMPANIES

138

0.0


180

0.1


1,797

NET INCOME

Y 16,211 

5.7


Y 18,345

6.2


$ 183,102









PER SHARE DATA:

Yen


U.S. Dollars 


Year ended 

March 31,


Year ended March 31,


2007


2008


2008

Basic net income per share

Y118.15 


Y 133.63


$ 1.33

Diluted net income per share

118.09 


133.57


1.33

Weighted-average common shares outstanding

137,202,151


137,290,259



Diluted weighted-average common shares outstanding

137,271,645


137,344,709







See accompanying notes to consolidated financial statements



6. Consolidated Statements of Stockholders' Equity (Unaudited)


Millions of Yen


Common 

Stock


Additional Paid-in Capital


Legal

 Reserve


Retained Earnings


Accumulated Other Comprehensive Income (Loss)


Treasury Stock,

at Cost


Total Stockholders' Equity

Balance at March 31, 2006

Y 47,399


Y 77,110


Y 284


Y 53,756


Y 3,957


Y (18,691)


  Y 163,815

Reissuance of treasury stock



(125)








373


248

Stock-based compensation



228










228

Net income







16,211






16,211

Cash dividends, Y 54.0 per share







(7,407)






(7,407)

Foreign currency

 translation adjustments









1,267




1,267

Net unrealized losses on

 available-for-sale securities









27




27

Minimum pension liability adjustment









16




16

Adjustment to initially apply SFAS No. 158









350




350

Purchase of treasury stock











(93)


(93)

Balance at March 31, 2007

Y 47,399


Y 77,213


Y284 


Y62,560 


Y5,617 


Y (18,411) 


Y 174,662

Reissuance of treasury stock



(47)








213


166

Cancellation of treasury stock



(156)








156


-

Stock-based compensation



68










68

Net income







18,345






18,345

Cash dividends, Y 54.0 per share







(7,413)






(7,413)

Foreign currency

 translation adjustments









(2,907)




(2,907)

Net unrealized losses on

 available-for-sale securities









(25)




(25)

Pension liability adjustment









(106)




(106)

Purchase of treasury stock











(31)


(31)

Balance at March 31, 2008

Y 47,399 


Y 77,078 


Y 284 


Y73,492 


Y 2,579


Y (18,073)


Y 182,759


See accompanying notes to consolidated financial statements



  


Thousands of U.S. Dollars


Common 

Stock


Additional Paid-in Capital


Legal

 Reserve


Retained Earnings


Accumulated Other Comprehensive Income (Loss)


Treasury Stock,

at Cost


Total Stockholders' Equity

Balance at March 31, 2007

$473,091  


$770,666 


$2,835


$624,414 


$56,063 


$(183,761) 


$1,743,308

Reissunace of treasury stock



(469)








2,126


1,657

Cancellation of treasury stock



(1,557)








1,557


-

Stock-based compensation



679










679

Net income







183,102






183,102

Cash dividends, $ 0.54 per share







(73,990)






(73,990)

Foreign currency

 translation adjustments









(29,015)




(29,015)

Net unrealized gains on

 available-for-sale securities









(250)




(250)

Pension liability adjustment









(1,058)




(1,058)

Purchase of treasury stock











(309)


(309)

Balance at March 31, 2008

$473,091 


$769,318 


$2,835 


$733,526 


$25,741


$(180,387)


$1,824,124 


See accompanying notes to consolidated financial statements


7. Consolidated Statements of Cash Flows (Unaudited)





Millions of Yen


Thousands of 

U.S. Dollars



Year ended 

March 31, 2007


Year ended 

March 31, 2008


Year ended 

March 31, 2008

Cash flows from operating activities:







Net income


Y 16,211


Y 18,345


$ 183,102

Adjustments to reconcile net income to net cash 

 provided by operating activities -







Depreciation and amortization 


11,757


12,069


120,461

Provision for doubtful receivables


(76)


(248)


(2,475)

Loss on sale or disposal of property and equipment, net


829


382


3,813

Equity in net income of an affiliated company 


(138)


(180)


(1,797)

Minority interest 


   575


1,589


15,860

Deferred income taxes


   2,621


(3,225)


(32,189)

Change in assets and liabilities, net of business acquired:







Decrease (increase) in trade notes and accounts receivable


4,716


(7,483)


(74,688)

Increase in inventories


(4,298)


(2,117)


(21,130)

Decrease (increase) in other accounts receivables


(993)


902


9,003

Decrease (increase) in prepaid expense


(195)


747


7,456

Increase (decrease) in trade notes and accounts payable


   3,354


(623)


(6,218)

Increase (decrease) in accrued income taxes


(7,190)


6,845


68,320

Increase in accrued expenses


3,567


827


8,254

Increase in deferred revenue 


309


2,192


21,879

Increase (decrease) in advance received


469


(427)


(4,262)

Other, net


306


1,193


11,907

Net cash provided by operating activities 


Y 31,824


Y 30,788


$ 307,296


See accompanying notes to consolidated financial statements


  


Millions of Yen


Thousands of 

U.S. Dollars



Year ended 

March 31, 2007


Year ended 

March 31, 2008


Year ended 

March 31, 2008

Cash flows from investing activities:







Capital expenditures


   Y (9,308)


Y (11,995)


$ (119,723)

Proceeds from sales of property and equipment 


425


8


80

Acquisition of new subsidiaries, net of cash acquired


   (202)


(367)


(3,663)

Increase in lease deposits, net


   (705)


(2,627)


(26,220)

Acquisition of business


(1,096)


-


-

Other, net


   (212)


(378)


(3,773)

Net cash used in investing activities


   (11,098)


(15,359)


(153,299)

Cash flows from financing activities:







Net decrease in short-term borrowings


   (1,119)


(1,869)


(18,655)

Repayments of long-term debt


   (1,995)


(2,969)


(29,634)

Proceeds from issuance of bonds


-


15,000


149,716

Principal payments under capital lease obligations


   (2,814)


(2,596)


(25,911)

Redemption of bonds


(20,000)


(20,000)


(199,621)

Dividends paid


   (7,420)


(7,419)


(74,049)

Purchases of treasury stock


   (93)


(31)


(309)

Other, net


   229


66


659

Net cash used in financing activities 


   (33,212)


(19,818)


(197,804)

Effect of exchange rate changes on cash and cash equivalents


1,125


(814)


(8,125)

Net decrease in cash and cash equivalents


(11,361)


(5,203)


(51,932)

Cash and cash equivalents, beginning of the year


68,694


57,333


572,243

Cash and cash equivalents, end of the year


Y 57,333


Y 52,130


$ 520,311


See accompanying notes to consolidated financial statements

  

8. Segment Information (Unaudited)


(1) . Segment information

Year ended March 31, 2007


Digital Entertainment


Health & Fitness


Gaming & System


Other,

Corporate and Eliminations


Consolidated



(Millions of Yen)

Net revenue:
















 Customers


Y

164,800


Y

88,326


Y

16,744


Y

10,409


Y

280,279

 Intersegment



244



133



-



(377)



-  

  Total



165,044



88,459



16,744



10,032



280,279

Operating expenses



134,810



80,937



14,574



21,813



252,134

Operating income (loss)


Y

30,234


Y

7,522


Y

2,170


Y

(11,781)


Y

28,145


Year ended March 31, 2008


Digital Entertainment


Health & Fitness


Gaming & System


Other,

Corporate and Eliminations


Consolidated



(Millions of Yen)

Net revenue:
















 Customers


Y

178,382


Y

86,196


Y

18,471


Y

14,353


Y

297,402

 Intersegment



557   



348



-



(905)



-

  Total



178,939



86,544



18,471



13,448



297,402

Operating expenses



143,579



81,251



15,677



23,056



263,563

Operating income


Y

35,360


Y

5,293


Y

2,794


Y

(9,608)


Y

33,839


Year ended March 31, 2008


Digital Entertainment


Health & Fitness


Gaming & System


Other,

Corporate and Eliminations


Consolidated



(Thousands of U.S. Dollars)

Net revenue:
















 Customers


$

1,780,437


$

860,325


$

184,360


$

143,258


$

2,968,380

 Intersegment



5,559   



3,473



-



(9,032)



-   

  Total



1,785,996



863,798



184,360



134,226



2,968,380

Operating expenses



1,433,067



810,969



156,473



230,123



2,630,632

Operating income


$

352,929


$

52,829　 


$

27,887


$

(95,897)


$

337,748



  

Notes:

1.

Primary businesses of each segment are as follows:



Digital Entertainment Segment:

Production, manufacture and sale of digital contents and related products of our Computer & Video Games, Toy & Hobby, Amusement, Online and Multimedia businesses.



Health & Fitness Segment:

Management of fitness clubs / Production, manufacture and sale of fitness machines and health service products.



Gaming & System Segment: 

Production, manufacture, sale and service of gaming machines and Casino Management System for casinos.


2.

'Other' consists of segments which do not meet the quantitative criteria for separate presentation under SFAS No. 131 'Disclosures about Segments of an Enterprise and Related Information.'


3.

'Corporate' primarily consists of administrative expenses of the Company.


4.

'Eliminations' primarily consist of eliminations of intercompany sales and of intercompany profits on inventories.


5.

Portal business was included in the 'Other' Segment until the year ended March 31, 2007, and will be included in the 'Digital Entertainment' Segment from Fiscal Year 2008. Also, Fiscal Year 2007 figures are converted to have consistency with the Fiscal Year 2008 presentation.








   

(2). Geographic information

Year ended March 31, 2007


Japan 


North America


Europe


Asia/

Oceania


Total 


Eliminations 


Consolidated



(Millions of Yen)

Net revenue:






















 Customers


Y

206,343


Y

34,847


Y

  31,650


Y

7,439


Y

280,279



-


Y

280,279

 Intersegment



27,219



1,904



   295



530



29,948


Y

 (29,948)



-

  Total



233,562



36,751



31,945



7,969



310,227



 (29,948)



280,279

Operating expenses



205,831



  40,346



28,860



7,249



282,286



 (30,152)



252,134

Operating income (loss)


Y

27,731 


Y

(3,595)


Y

3,085


Y

720


Y

27,941 


Y

   204


Y

28,145 


Year ended March 31, 2008


Japan 


North America


Europe


Asia/

Oceania


Total 


Eliminations 


Consolidated



(Millions of Yen)

Net revenue:






















 Customers


Y

220,462


Y

34,137


Y

35,589


Y

7,214


Y

297,402



-


Y

297,402

 Intersegment



21,147



4,802



44



658



26,651


Y

(26,651)



-

  Total



241,609



38,939



35,633



7,872



324,053



(26,651)



297,402

Operating expenses



211,643



37,532



33,810



7,304



290,289



(26,726)



263,563

Operating income (loss)


Y

29,966


Y

1,407


Y

1,823


Y

568


Y

33,764


Y

75


Y

33,839


Year ended March 31, 2008


Japan 


North America


Europe


Asia/

Oceania


Total 


Eliminations 


Consolidated



(Thousands of U.S. Dollars)

Net revenue:






















 Customers


$

2,200,439


$

340,723


$

355,215


$

72,003


$

2,968,380



-


$

2,968,380

 Intersegment



211,069



47,929



439



6,568



266,005


$

(266,005)



-

  Total



2,411,508



388,652



355,654



78,571



3,234,385



(266,005)



2,968,380

Operating expenses



2,112,416



374,608



337,459



72,901



2,897,384



(266,752)



2,630,632

Operating income (loss)


$

299,092


$

14,044 


$

18,195


$

5,670


$

337,001


$

747


$

337,748



For the purpose of presenting its operations in geographic areas above, the Company and its subsidiaries attribute revenues from external customers to individual countries in each area based on where products are sold and services are rendered.


North America presented in the table above substantially consists of the United States.


Notes: (Unaudited)


The consolidated financial statements presented herein were prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP).


  

Adoption of significant accounting standards



1.

Accounting for Uncertainty in Income Taxes

Konami has adopted FASB interpretation No.48 (FIN48) 'Accounting for Uncertainty in Income Taxes,' an interpretation of FASB Statement No.109, effective from fiscal year 2008. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of April 1, 2007, the application of FIN48 did not have a material effect on the Company's consolidated financial statements.



(Subsequent Events)



Fiscal Year 2007 (April 1, 2006 - March 31, 2007): None



Fiscal Year 2008 (April 1, 2007 - March 31, 2008): None






9. Non-consolidated Financial Statements


(1) Non-consolidated Balance Sheets (Unaudited)

(Millions of Yen)


March 31, 2007


March 31, 2008



%



%

ASSETS











CURRENT ASSETS:











Cash and cash equivalents

Y 33,319





Y31,479 





Trade accounts receivable

5,666





3,552





Prepaid expense

448





168





Deferred income taxes, net

337





577





Short-term loans to affiliates

5,618





18,763





Other accounts receivables

650





37





Income tax receivable

-





2,190





Other

1,742





209





Allowance for doubtful accounts

(13 

)




(22

)




Total current assets

47,770


28.4



56,957


31.9














FIXED ASSETS: 











Tangible fixed assets











Building improvement

9





61





Transportation equipment

14





17





Tools and fixtures

264





348





Total tangible fixed assts

289


0.2



428


0.2



Intangible fixed assets











In-house Software

3





4





Trademark

4





3





Other

0





0





Total intangible fixed assets

8


0.0



8


0.0



Investments and other assets











Investment securities

1,114





1,034





Investments in subsidiaries and affiliate

116,695





118,417





Long-term loans to subsidiaries

1,670





964





Long-term prepaid expenses

18





13





Deferred income taxes, net

-





179





Lease deposit

852





557





Other

13





6





Allowance for doubtful accounts

(9 

)




(0

)




Total investments and other assets

120,355


71.4



121,171


67.9



Total fixed assets

120,652


71.6



121,608


68.1


TOTAL ASSETS

Y 168,423


100.0



Y 178,565 


100.0














(Millions of Yen)


March 31, 2007


March 31, 2008



%



%

LIABILITIES AND NET ASSETS







CURRENT LIABILITIES:











Short-term borrowings

  Y 6,769





Y 8,418





Current portion of long-term bonds

15,000





-   





Current portion of long-term debt

  592





592





Other accounts payables

2,518





1,127





Accrued expenses

330





264





Income taxes payable

71





1,371





Deposits received

21





30





Accrued directors' bonuses

240





-





Other

599





-





Total Current liabilities

26,143


15.5



11,804


6.6



LONG-TERM LIABILITIES:











Straight bonds

-





15,000





Long-term borrowings

1,388





796





Long-term borrowings from subsidiaries

350





350





Deferred income taxes, net

29





-





Accrued pension and severance costs

-





20





Accrued directors' retirement benefits

1,332





-





Other

-





1,321





Total long-term liabilities

3,100


1.9



17,487


9.8


 

Total liabilities

29,243


17.4



29,292


16.4



NET ASSETS:











Common stock 

47,398


28.1



47,398


26.5



Capital surplus

43,443


25.8



43,240


24.2



Additional paid-in capital

36,893





36,893





Other capital surplus

6,549





6,347





Retained earnings

65,825


39.1



75,807


42.5



Legal reserve

283





283





Special reserves

52,094





52,094





Retained earnings brought forward

13,446





23,429





Treasury Stock 

(17,579 

)

(10.4) 



(17,241

)

(9.6

)


Total stockholders'equity

139,088


82.6



149,205


83.6



Difference of appreciation and conversion

91


0.0



67


0.0



Net unrealized gains on 

 available-for-sale securities

91


0.0



67


0.0



Total net assets

139,179


  82.6



149,272


83.6


TOTAL LIABILITIES AND NET ASSETS

Y 168,423


100.0



178,565


100.0





  

(2) Non-consolidated Statements of Income (Unaudited)

(Millions of Yen)


Year ended


Year ended


March 31, 2007


March 31, 2008



%



%

Operating revenues 

Y 7,196


100.0



Y 25,478 


100.0



Management fee revenue

5,418





5,992





Dividend income

1,778





19,485




Selling, general and administrative expenses 

5,757


80.0



4,635


18.2



 Operating income

1,439


20.0



20,843


81.8


Non-operating income 

229


3.2



325


1.3



Interest income

207





296





Other

21





29




Non-operating expense

391


5.4



692


2.7



Interest expenses

73





72





Bond interest expenses

224





215





Bond issuance expense

-





85





Foreign exchange loss

-





271





Other

92





48





 Ordinary income

1,278


17.8



20,475


80.4


Extraordinary losses

78


1.1



1,566


6.2



Loss on sale of equity securities

-





16





Loss on impairment of equity securities

78





-





Loss on sale of shares of an affiliated company

-





1,549





 Income before income taxes 

1,199 


16.7 



18,909


74.2


Income taxes











Current

(898

)




1,945





Deferred

1,109 





(432

)




Total income taxes

210


3.0



1,513


5.9



Net income 

Y 988 


13.7 



Y 17,395


68.3







  

(3) Non-consolidated Statement of Changes in Stockholders' Equity (Unaudited)


(Millions of yen)

Stockholders' equity

Difference of appreciation and conversion

Total net assets

Common stock

Capital surplus

Retained earnings

Treasury stock

Total stockholders'

equity

Additional paid-in capital

Other capital surplus

Total capital surplus

Legal reserve

Other retained earnings

Total retained earnings

Special reserves

Retained earnings brought forward

Net unrealized gains on available-for-

sale securities

Total difference of appreciation and conversion

Balance at 

March 31, 2006

Y47,398

Y36,893

Y6,674

Y43,568

Y283

Y34,094

Y38,168

Y72,546

Y(10,238)

Y153,275

Y64

Y64

Y153,339

Changes during the year














Cash dividends(*) 







(3,785)

(3,785)


(3,785)



(3,785)

Cash dividends







(3,704)

(3,704)


(3,704)



(3,704)

Directors' Bonuses(*) 







(220)

(220)


(220)



(220)

Accumulate for  special reserves(*) 






18,000

(18,000)

-


-



-

Net income







988

988


988



988

Purchase of treasury stock









(7,732)

(7,732)



(7,732)

Reissuance of treasury stock



(124)

(124)





392

267



267

Net change of items other  than stockholders' equity











27

27

27

Total changes during the year

-

-

(124)

(124)

-

18,000

(24,721)

(6,721)

(7,340)

(14,187)

27

27

(14,160)

Balance at 

March 31, 2007

Y47,398

Y36,893

Y6,549

Y43,443

Y283

Y52,094

Y13,446

Y65,825

Y(17,579)

Y139,088

Y91

Y91

Y139,179

(*) Appropriation of retained earnings declared at the General Shareholders Meeting held in June 2006

  


(Millions of yen)

Stockholders' equity

Difference of appreciation and conversion

Total net assets

Common stock

Capital surplus

Retained earnings

Treasury stock

Total stockholders'

equity

Additional paid-in capital

Other capital surplus

Total capital surplus

Legal reserve

Other retained earnings

Total retained earnings

Special reserves

Retained earnings brought forward

Net unrealized gains on available-for-

sale securities

Total difference of appreciation and conversion

Balance at 

March 31, 2007

Y47,398

Y36,893

Y6,549

Y43,443

Y283

Y52,094

Y13,446

Y65,825

Y(17,579)

Y139,088

Y91

Y91

Y139,179

Changes during the year














Cash dividends







(7,412)

(7,412)


(7,412)



(7,412)

Net income







17,395

17,395


17,395



17,395

Purchase of treasury stock









(33)

(33)



(33)

Reissuance of treasury stock



(46)

(46)





214

167



167

Cancellation of treasury stock



(155)

(155)





155

-



-

Net change of items other  than stockholders' equity











(24)

(24)

(24)

Total changes during the year

-

-

(202)

(202)

-

-

9,982

9,982

337

10,117

(24)

(24)

10,093

Balance at 

March 31, 2008

Y47,398

Y36,893

Y6,347

Y43,240

Y283

Y52,094

Y23,429

Y75,807

Y (17,241)

Y149,205

Y67

Y67

Y149,272

.



 


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