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On Nov 9th, Falcom has unveiled the 2017 EOY financial report, along with the forecast and explanation of the said forecast for the 2018 fiscal year. (ed note: Oct 1, 2017 ~ Sept 30, 2018 is the 2018 fiscal year.)

Falcom has credited this year’s numbers to a variety of releases. The Japanese releases for 2017 are as follows:

Ys VIII -Lacrimosa of Dana- released to the PlayStation 4 in May 2017.

The Legend of Heroes Sen no Kiseki III released to the PlayStation 4 in Sept 2017.

Additionally, Falcom saw several older titles have English language download-only releases, as well as collaborations with other major game developers. Along with those, the following games were also released internationally:

Ys VIII on the PlayStation Vita saw releases in Korean, English, and French.

Ys VIII on the PlayStation 4 saw releases in Chinese, Korean, English, and French.

Ys Origin saw both Japanese and multilingual releases to PlayStation Vita and PlayStation 4 consoles.

Tokyo Xanadu for PlayStation Vita saw releases in Chinese, Korean, English, and French.

Tokyo Xanadu eX+ for PlayStation 4 saw Chinese and Korean releases.

The numbers are listed in the table below:

In one million yen increments.

Total Sales Operating Profit Operating Income EOY Net Income FY 2017 2,065 40.4% 970 66.1% 968 65.7% 642 66.1% FY 2016 1,464 ? 7.0% 584 ? 15.7% 584 ? 15.3% 386 ? 15.2%

Falcom’s forecast for 2018 comes from four major points:

The Sen no Kiseki series- which has been given many awards, including recognition from the Japan Game Awards, the PlayStation Awards, and Famitsu Awards- will see a new title released for the PlayStation 4.

Sen no Kiseki I and II, which have broken a combined 1,000,000 units worldwide in sales, will be released for the PlayStation 4.

The company will be engaging in continued sales promotions for the widely well accepted Ys VIII -Lacrimosa of Dana- through the year.

Falcom will maintain a proactive stance in seeing that their original contents are integrated in collaborative works, as well as new titles released for a variety of platforms and smartphones throughout Japan, Asia, North America, and Europe.

The numbers for the forecast can be found below:

In one million yen increments.

Period EOY 2017 Results EOY 2018 Forecast Rate of Change Total Sales 2,056 1,800 ? 12.5% Operating Profit 970 750 ? 22.7% Operating Income 968 750 ? 22.6% Net Income 642 500 ? 22.2%

For details of the financial report, please check out the cut below.

Date: 11/9/2017

Listed Company Name: Nihon Falcom

Company Code Number: 3723

URL: http://www.falcom.co.jp

TEL: 042-527-0555

Delegate: Board Selected President Toshihiro Kondo

Contact Representative: Board Member Takashi Nakano

Scheduled Shareholder Meeting Date: 12/20/2017

Scheduled Dividend Payout Date: 12/21/2017

Scheduled Securities and Bonds Reporting Date: 12/21/2017

Do Supplemental Documents Exist? No

Is A Meeting to Explain Documents Planned? No.

Table of Contents

1. Operational Results and Analysis of Financial Condition

( 1 ) Analysis Concerning Operational Results

1. Financial Results

In the game industry, mobile gaming continues its growth. For console gaming in both domestic and foreign markets the PlayStation 4 has become more popular and commonplace. Additionally, the Nintendo Switch that was released in March 2017 has seen favorable sales as well. The competition with these two systems has fostered a market of excellent titles.

This company continued to create game software to draw in for many more users to enjoy, and production continues onward.

As such, this year both Ys VIII -Lacrimosa of Dana, and the Legend of Heroes Sen no Kiseki III were released for the PlayStation 4.

Additionally, many contents by this company were used one after another for various smartphone apps and online games. There was an increase in miscellaneous DLC and collaborative contents, live concerts, and all kinds of events were promoted.

Due to these, total sales for this company were at 2,065 million yen (an increase of 40.4% from last year), an operating income of 968 million yen (an increase of 65.7% from last year), and a net income of 642 million yen , (an increase of 66.1% from last year).

Manufactured Goods Division

This fiscal year saw the release of Ys VIII -Lacrimosa of Dana for the PlayStation 4 in May 2017. This is a new title in the Ys action RPG series, which has become loved by many fans since its first title in 1987 through postive reviews and word of mouth.

Additionally, the Sen no Kiseki series , which has seen over 1 million copies sold worldwide through its first two titles had its third game, The Legend of Heroes Sen no Kiseki III, released in September 2017. This title has gained quick popularity and was awarded the Japan Game Award for Future titles at Tokyo Game Show 2017.

As a result, the manufactured goods division brought in a total of 1,143 million yen , an increase of 39.9% from last year.

Licensing Division

Contents from this company being released on multiple platforms and regions, as well as permissions being granted for other companies to license and use characters created by this company affect this division’s numbers. In this situation, Ys VIII -Lacrimosa of Dana- was released in Korean, English, and French for the PlayStation Vita. Ys Origin also saw a PlayStation Vita and PlayStation 4 release in Japan and a variety of other languages.

Additionally, Tokyo Xanadu was released for PlayStation Vita in Chinese, Korean, and English with Tokyo Xanadu eX+ being released for PlayStation 4 in Chinese and Korean. The Nintendo 3DS also saw the release of Gurumin 3D in both English and Japanese.

In May 2017, Chinese and Korean language versions of Ys VIII -Lacrimosa of Dana- were released to the PlayStation 4 simultaneously with the Japanese release, and an English language version of the title was released in Sept 2017.

Other events were the releases of multiple older PC titles through English language game download services, the online story RPG Akatsuki no Kiseki, and collaborative contents added to Hortensia Saga, Seven Nights, Lapis Chronicle, and other titles. Through these efforts, the company has drawn in more users.

As a result, the licensing division brought in a total of 913 million yen , an increase of 41.1% from last year.

2. Forecast for Next Term

The next term will see the continuation of the Sen no Kiseki series with the new title being released to PlayStation 4. There are plans for Sen no Kiseki and Sen no Kiseki II to also see PlayStation 4 releases, as well.

The Kiseki series is one of this company’s masterpiece works, having a large number of fans and having received many awards, including the Japan Game Award of Excellence, the Japan Game Award for Future Titles, the Famitsu Award, PlayStation User’s Choice Award, and others. Other games in the series include Sora no Kiseki FC, Sora no Kiseki SC, Sora no Kiseki the 3rd, Zero no Kiseki, and Ao no Kiseki. This particular series, Sen no Kiseki, has had two other titles sell over 1 million copies world wide, and just saw the release of its third title, Sen no Kiseki III in this past year.

In regards to the highly praised Ys VIII -Lacrimosa of Dana- this company plans to make an effort to ensure the title has continued sales promotions throughout the year.

For the licensing division, contents from this company will be released to multiple platforms and in smartphone apps throughout Japan, Asia, North America, and Europe. Additionally, collaborative efforts for various apps will continue as well.

For the term ending in 9/2018, this company is forecasting a total sales of 1,800 million yen , an operating income of 750 million yen , and a net income of 500 million yen .

Furthermore, a distinctive trait of the financial results is due to the general months of release. As most of the financial numbers come about from the second half of the year, the results are heavily weighted towards the last two quarters of the year.

( 2 ) Analysis Concerning Financial Condition

1. Property, Liabilities, and Net Worth

When compared to last year, this company’s assets have increased 867 million yen to 5,023 million yen . The primary causes for this were an increase of cash on hand to 34 million yen and an increase to accounts receivable to 824 million yen.

In terms of liabilities, this fiscal year saw a 297 million yen increase to 612 million yen . The primary causes for this would be from accounts payable increasing to 122 million yen , and unpaid corporate taxes increasing to 149 million yen .

This company’s net worth has increased 570 million yen to 4,410 million yen , caused by surplus shares increasing to 71 million yen . This ends up with a current net income of 642 million yen .

2. Situation with Cash Flow

Cash and cash equivalent goods (futhermore known as ‘capital.’) increased this year by 34 million yen, to 3,847 million yen .

Information regarding this fiscal year’s cash flow follows.

(Cash flow from business activities.)

Due to this year’s business activities, the company’s capital has increased to 113 million yen. The cause for this is from paying 187 million yen in corporate taxes, and a total credit increase to 824 million yen. This year’s net income is 968 million yen before taxes.

(Cash flow from investment activities.)

There was a decrease of 6 million yen through investment activities. This is based on the value of tangible fixed assets.

(Cash flow from financial activities.)

There was a 71 million yen reduction in capital from financial activities. This is caused by divident expenses being at 71 million yen.

(Reference) Transition of Related Cash Flow Indices

2013 Term 2014 Term 2015 Term 2016 Term 2017 Term Capital-to-Asset Ratio 78.2 75.4 91.4 92.4 87.8 Capital-to-Asset Ratio of

Market Value Base 382.5 367.5 265.7 154.6 206.9 Ratio of Interest Bearing Debt

Against Cash Flow — — — — — Interest Coverage Ratio — — — — —

(Annotation) Capital-to-Asset Ratio: Net Worth / Total Assets

Capital-to-Asset Ratio of a Market Value Base : Stock Market Cap / Total Assets

Ratio of Interest Bearing Liabilities against Cash Flow : Interest Bearing Liabilities / Operational Cash Flow

Interest Coverage Ratio : Operational Cash Flow / Interest Payment

1. Stock Market Cap is calculated by (Stock Closing Price at End of Term) x (End of Term Issued Stock Count)

2. Ratio of Interest Bearing Debt Against Cash Flow and Interest Coverage Ratio were not recorded for the terms listed above.

( 3 ) Policies Regarding Profit Distribution and Analysis of Current and Upcoming Terms

Management takes the shareholder concerns of profit returns as an important subject. When considering profit distribution, we have to take into account future enterprise developments, as well as the required internal reserves to ensure long-term business reinforcement.

In line with these requirements, we have opted dividend payouts to be 8 yen per share.

( 4 ) Risks to the Company

The section below details the potential risks that can befall the company and its development activities. While these things may not necessarily be actively impacting the company, these are things that investors must be made aware of, so that they can be proactive in their decision making. Additionally, it’s in the company’s best interests to be aware of these potential risks so that it can either avoid them entirely, or react appropriately should they happen. Please take these issues into account when making decisions regarding the company’s stocks.

1. Risks Within the Company

a. Lengthening Development Times

Currently for this company, game software development can be as short as half a year to taking 2 or 3 years. There can be differences between what is the planned development time and what is considered as practical development times. Furthermore, development times can also increase from the recent speed of technological advancements as well as increasing demand for manufactured goods. This company works to counteract this by continuously gathering as much information as possible regarding technology advancements in this industry.

b. Trends Changing the Sales of Manufactured Goods

The fiscal quarters for this company rely heavily on the release and positive sales of its manufactured goods and the need to continuously bring out new items for sale. As such, it’s fully possible for financial results to change based entirely on the quarterly sales.

c. Issues Involving Intellectual Property

As this company relies on the intellectual property that is developed within it, a lot of care is taken to ensure that these products are not used without obtaining the proper rights for them. Should the case of another company utilizing the know-how, technology, or patented rights of this company, it could have an affect on this company’s financial results.

Furthermore, all manufactured products for this company are handled by third parties. Should an issue involving the company’s intellectual property arise, lawsuits or claims will be necessary to handle it, and this can impact the period’s results.

d. Securing and Training Personnel

One of the most important factors for the company is recruiting and securing personnel and in particular individuals who are both skilled in the current technologies, as well as those that can be easily trained are essential in being hired to bolster the current staff on hand. Moreover, reward programs to recognize achievements are necessary to implement in order to minimize the numbers that would leave the company outside of retirement and career changes. Additionally, because of the use of personnel recruiting services, the objective is to retain as many employees as possible. However, it is impossible to guarantee the ability to continously secure new personnel. As such, missed opportunities in this area have the ability to impact the financial results of this company.

2. Risks Based on External Influences

a. Concerns Regarding Regulation

This company currently does not create products that are rated as ‘R18’ (based on film moral standards determined by the regulations from an official management commitee and are deemed inappropriate for consumers below the age of 18). However, the possibility of strengthened regulations from the government on such topics have the potential to impact the company.

b. Piracy of Game Software

Piracy and non-consentual copies of game software is currently a major problem that is being seen by the video game industry. Currently, as the company has no special actions for dealing with piracy, an overwhelming number of illegal copies can damage potential sales and cause a negative effect on the company’s end of period results.

c. Handling of Personal Information

Part of this company’s services include mail order sales and as a result, we possess personal information on direct customers. Additionally, as more people sign up for the email service offered on the website, this company maintains an in-house database to store the personal information for this use. We have a high awareness of information management, and access restrictions in place so that we can ensure that this personal information is not disclosed.

However, in the situation that personal information is leaked through internal situation or outside hacking, public confidence on this company would be lost, and the resulting damages would have the ability to impact the firm’s financial results.

2. State of the Enterprise

As there are no affiliate corporations connected to this company, there is no relevant information for this.

3. Operational Policies

( 1 ) Standard Policies of the Company’s Operations

This company holds individual creativity in high-regard and encourages affective teamwork so that game contents and services filled with originality can be created. This company strives to continuously boost appealing contents over multiple platforms for the enjoyment of customers worldwide.

( 2 ) Benchmarks and Operational Indices

Because of the efficiency of its management policies, this company maintains a high profit ratio, which gives it the opportunity to focus on strengthening its sales for contents and services.

( 3 ) Mid-to-Long Term Corporate Strategies

Since the formation of this company, the management has always followed a balanced ‘offensive and defensive’ strategy to cultivate a foundation of both know-how and branding. ‘Offensive’ in taking on new challenges to focus on innovative technological developments for console, social, and network gaming. Additionally, the ‘defensive’ aspect is to maintain a healthy speed, and always show improvements in quality while being prepared to deal with issues involving internal themes and personnel. Because of these methods, the company can continue its growth while maintaining a stable foundation underneath its feet.

( 4 ) All Issues Affecting the Enterprise

1. Development of Human Resources

To remain competitive alongside other content makers, this company commits to recruiting and training skilled personnel. This company has a great tradition of long-standing veterans in the game industry with a great deal of know-how, skills, and values, training of the new personnel is a very important issue that the deals with.

2. Speedy Operation and Implementation

This company has a business cycle of planning, development, public relations, and sales. The company realizes that these cycles must be handled quickly, as the pace to supply games and services increases.

3. Brand Evolution

This firm develops an extensive list of game contents and licensing for a variety of platforms, including PC, home consoles, smartphones and online games. With in-house developments and licensed goods performing well both domestically and internationally, this firm can strengthen brand recognition in order to maximize profits.

4. Advertising and Public Relations

To expand the knowledge of this company’s games and services and to ascertain cost-effectiveness for the company, advertising and public relations will need to be reinforced. As the public becomes more aware of the company, more license agreements can be made, more corporate tie-ins, and more job-seekers will apply which will allow the company to push towards more lucrative developments

( 5 ) Miscellaneous and Other Important Matters

There is no relevant information.

4. Fundamentals on the Selection of Accounting Standards

As this firm does not prepare consolidated financial statements, there has been consideration on using international standards for drawing up said statements, but they were instead prepared using Japanese standards.

5. Tables for Financial Affairs

( 1 ) Balance Sheet

Prev. Year (2016) Current Year (2017) Property Division Current Assets Cash on Hand 3,812,687 3,847,502 Accounts Receivable 137,653 961,969 Manufactured Goods 1,301 3,053 Raw Materials 1,994 3,311 Prepaid Expenses 4,399 6,468 Deferred Tax Assets 36,598 26,154 Misc. 1,281 911 Current Assets Sum 3,995,916 4,849,371 Fixed Assets Tangible Property Facilities Related Installations 16,281 16,281 Total Depreciation Amount ? 13,895 ? 14,698 Facilities Related Installations

(Net Amount) 2,386 1,582 Tools, Equipment, and Furnishings 27,977 33,949 Total Depreciation Amount ? 25,798 ? 28,492 Tools, Equipment, and Furnishings

(Net Amount) 2,178 5,457 Fixed Assets Sum 4,564 7,040 Intangible Fixed Assets Software 2,453 776 Telephone Procurement 757 757 Intangible Fixed Assets Sum 3,210 1,533 Assets from Additional Investments Security Investments 116,578 116,578 Deferred Tax Assets 4,927 18,797 Securities and Deposits 30,680 30,347 Sum of Assets from Additional Investments 152,185 165,723 Sum of Fixed Assets 159,961 174,297 Total Assets 4,155,977 5,023,668 Debt Division Current Liabilities Accounts Payable 22,952 145,055 Arrears 60,235 58,923 Accrued Expenses 14,332 17,277 Unpaid Corporate Taxes 150,838 300,483 Unpaid Consumption Taxes 41,108 61,197 Advances Received 2 — Deposits 5,870 5,802 Reward Provisions 20,250 24,000 Sum of Current Liabilities 315,590 612,739 Total Debts 315,590 612,739 Net Worth Division Shareholder Equity Capital Stock 164,130 164,130 Capital Surplus Capital Reserve Fund 319,363 319,363 Sum of Capital Surplus 319,363 319,363 Profit Surplus Miscellaneous Profit Surplus Contingent Reserve 710,000 710,000 Transferred Profit Surplus 2,646,910 3,217,553 Sum of Profit Surplus 3,356,910 3,927,553 Treasury Stock ? 117 ? 117 Sum of Shareholder Equity 3,840,286 4,410,929 Total Net Worth 4,115,887 5,023,668

( 2 ) Profit and Loss Calculation Sheet

Prev. Year (2016) Current Year (2017) Sales Sales of Manufactured Goods 817,068 1,143,324 Royalty Income 647,113 913,059 Total Sales 1,464,182 2,056,383 Cost of Sales Cost of Sales for Manufactured Goods ?1 260,976 ?1 317,249 Cost of Sales for Royalty Income 1,500 3,000 Total Cost of Sales 262,476 320,249 Total of All Sales 1,201,706 1,736,134 Sales and Administrative Costs Shipping and Freight Costs 10,603 10,431 Advertising Expenses 91,014 53,921 Promotional Costs 15,643 29,338 Executive Salary 50,822 50,000 Employee Salary and Wages 24,251 25,766 Bonuses 2,900 2,870 Sums Transferred into Bonus Reserves 2,295 2,624 Legal Costs 12,315 12,255 Hiring Costs 12,643 11,721 Utility Costs 878 936 Payment Handling 33,323 35,599 Supply Expenses 1,415 1,381 Travel Expenses 1,628 1,575 Communication Expenses (Postage) 585 559 Depreciation Costs 1,508 1,596 Research and Development ?2 343,007 ?2 500,790 Miscellaneous 12,536 24,182 Sum of Sales and Administrative Costs 617,374 765,552 Operating Profit 584,331 970,581 Earnings from Outside the Business Interest Receipts 349 36 Dividend Receipts 572 1,155 Excluded Profits from Unpaid Dividends 702 1,046 Sum of Earnings from Outside the Business 1,623 2,238 Costs from Outside the Business Losses from Foreign Exchange 1,576 4,373 Sum of Costs from Outside the Business 1,576 4,373 Current Profits 584,378 968,446 Special Costs Costs from Eliminating Fixed Assets — 0 Sum of Special Costs — 0 Current Income Before Taxes 584,378 968,446 Corporation, Municipal, and Enterprise Taxes 194,777 329,270 Sum of Adjustments from Corporation Tax 2,693 ? 3,426 Sum of Taxes 197,471 325,844 Current Net Income 386,907 642,601

Detailed Statement on the Total Sale of Manufactured Goods

Detailed Statement on the Total Sale of Manufactured Goods

Operation Section Previous Year (2016) Current Year (2017) Section Amount Ratio (%) Amount Ratio (%) I. Material Cost 225,991 87.0 287,368 90.1 II. Outsourcing Cost 33,737 13.0 31,633 9.9 SUBTOTAL 259,789 100.0 319,001 100.0 III. Inventory Count of Goods

at Beginning of Term 2,487 1,301 SUM TOTAL 262,277 320,303 IV. Inventory Count of Goods

at End of Term 1,301 3,053 Difference in Costs

of Goods 260,976 317,249

( 3 ) Fluctuation Chart for Shareholder Equity

Previous Term: From Oct 1, 2015 ~ Sept 30, 2016

In thousand yen increments.

Shareholder Equity Sum of

Net Worth Capital

Stock Capital Surplus Profit Surplus Treasury

Stock Sum of

Capital

Stock Capital Reserve Misc. Profit Surplus Special Reserve Transferred Profit Surplus Current Term Balance 164,130 319,363 710,000 2,331,962 ? 117 3,525,338 3,525,338 Change of Sums in Current Term Surplus Shares ? 71,959 ? 71,959 ? 71,959 Current Net

Income 386,907 386,907 386,907 Sum of Fluctuations

For the Current

Period — — — 314,948 914,948 314,948 Balance at

the end of this

Period 164,130 319,363 710,000 2,646,910 ? 117 3,840,286 3,840,286

Current Term: From Oct 1, 2016 ~ Sept 30, 2017

In thousand yen increments.

Shareholder Equity Sum of

Net Worth Capital

Stock Capital Surplus Profit Surplus Treasury

Stock Sum of

Capital

Stock Capital Reserve Misc. Profit Surplus Special Reserve Transferred Profit Surplus Current Term Balance 164,130 319,363 710,000 2,646,910 ? 117 3,840,286 3,840,286 Change of Sums in Current Term Surplus Shares ? 71,959 ? 71,959 ? 71,959 Current Net

Income 642,601 642,601 642,601 Sum of Fluctuations

For the Current

Period — — — 570,642 570,642 570,642 Balance at

the end of this

Period 164,130 319,363 710,000 3,217,553 ? 117 4,410,929 4,410,929

( 4 ) Cash Flow Calculation Sheet

Prev. Year (2016) Current Year (2017) Cash Flow from Business Activities Current Net Income Before Taxes 584,378 968,446 Depreciation Costs 5,375 6,064 Reduction of Fluctuations of Reward Reserves

(? is decrease) — 3,750 Interest and Dividend Receipts ? 921 ? 1,191 Loss from Elimination of Fixed Assets — 0 Reduction of Fluctuations in Sales Credit

(? is increase) 448,993 ? 824,317 Reduction of Fluctuations in Inventory Assets

(? is increase) 2,999 ? 3,069 Fluctuation Amounts of Other Assets

(? is increase) 479 ? 1,367 Reduction of Fluctuations in Purchased Debts

(? is decrease) ? 84,378 112,102 Reduction of Fluctuations of Arrears

(? is decrease) ? 10,102 ? 847 Fluctuation Amounts of Unpaid Taxes

(? is decrease) 11,605 20,089 Fluctuation Amounts of Other Debts

(? is decrease) 1,618 10,141 Subtotal 960,048 299,800 Amounts Received via Interests and Dividends 921 1,191 Amount Paid for Corporation Tax ? 129,418 ? 187,936 Cash Flow from Business Activities 831,552 113,055 Cash Flow from Investment Activities Expenses from the Value of Tangible Assets — ? 6,862 Expenses from the Value of Intangible Assets ? 387 — Other 63 — Cash Flow from Investment Activities ? 324 ? 6,862 Increased Reduction in Cash and Cash Value Articles

(? is decrease) 759,738 34,815 Balance of Cash and Cash Value Articles at Start of Term 3,052,949 3,812,687 Balance of Cash and Cash Value Articles at End of Term 3,812,687 3,847,502

( 5 ) Annotations Related to Financial Statements

(Annotations Concerning Business Condition Continued)

No applicable information.

(Important Accounting Policies)

1. Appraisal Standards and Evaluation Policies for Marketable Securities

Other Marketable Securities

There are no market value items.

Moving average is calculated via cost price.

2. Appraisal Standards and Evaluation Policies for Inventory Assets

Manufactured goods and raw services.

Utilizing previously mentioned cost price ( calculations based on the declining book value of profitability) principles.

3. Depreciation Estimates Process for Fixed Assets

( 1 ) Tangible fixed assets

Using a fixed rate. (based on building installation value laws instated on 4/1/2016)

Below is the average service life.

Building Installations: 10 ? 15 years

Tools, Devices, and Furnishings: 4 ~ 8 years

( 2 ) Intangible fixed assets

Based on the in-house availability (5 years) of software used in the corporation.

4. Appropriation Standards for Reserves

( 1 ) Irrecoverable debt reserves

Prepared to have ready for losses caused by irrecoverable debt from credits. There is a considered ratio for irrecoverable debt to go along with the general credit, as such this is a sum of money to maintain for the times when it’s impossible to claim a debt.

( 2 ) Bonus reserves

Provisioned expenditures set aside to give to employees as a reward.

5. Scope Regarding Funds in the Cash Flow Statement

Cash on hand is made up of money that can be quickly withdrawn, and items that can be easily liquidated, moreover the company takes responsibility for small risks from value fluctuations that can be paid off anywhere between three days to three months.

6. Important Notes Involving the Standards for Drawing up Other Financial Statements

Accounting of consumption tax: based on formulas that include tax amounts.

( Changes to Account Objectives )

No applicable information.

( Additional Information )

(Concerning the application of potentially reclaimed DTA.)

This fiscal year’s process of “applying potentially reclaimed DTA” (Based on standard corporate indices from 3/28/2014)

( Concerning the Profit and Loss Statement )

? 1 Inventory that fell below the targeted sales goals.

Prev. Term

10/1/2015~9/30/2016 Current Term

10/1/2016~9/30/2017 Cost of Sales 3,422 thousand yen 1,500 thousand yen

???Sum of Research and Development Costs

Prev. Term

10/1/2015~9/30/2016 Current Term

10/1/2016~9/30/2017 Distribution and

Administrative Costs 343,007 thousand yen 500,790 thousand yen

( Concerning the Chart Showing Fluctuations to Shareholder Equity )

Prev. Fiscal Year (10/1/2015 ~ 9/30/2016)

1. Concerning the counts of both general and treasure stocks.

Stock at Beginning of this Year Stock Increase for this Year Stock Decrease for this Year Max Stock for this Year Issued Stock General Stock 10,280,000 — — 10,280,000 Treasury Stock General Stock 102 — — 102

2. Information Related to Dividends

( 1 ) Dividend Payouts

Decision Stock Category Dividend Total (1000 yen increments) Dividend Amount per Share Reference Date Effective Date 12/16/2015

Regular Shareholder Meeting General Stock 71,959 7 9/30/2015 12/17/2015

( 2 ) Stocks for the current term belonging under the reference date, and the effective date of stock for the next term.

Decision Stock Category Dividend Total (1000 yen increments) Dividend Amount per Share Dividend Capital Reference Date Effective Date 12/20/2016

Regular Shareholder Meeting General Stock 71,959 7 Profit Surplus 9/30/2016 12/21/2016

This Fiscal Year (10/1/2016 ~ 9/30/2017)

1. Concerning the counts of both general and treasure stocks.

Stock at Beginning of this Year Stock Increase for this Year Stock Decrease for this Year Max Stock for this Year Issued Stock General Stock 10,280,000 — — 10,280,000 Treasury Stock General Stock 102 — — 102

2. Information Related to Dividends

( 1 ) Dividend Payouts

Decision Stock Category Dividend Total (1000 yen increments) Dividend Amount per Share Reference Date Effective Date 12/20/2016

Regular Shareholder Meeting General Stock 71,959 7 9/30/2016 12/21/2016

( 2 ) Stocks for the current term belonging under the reference date, and the effective date of stock for the next term.

Decision Stock Category Dividend Total (1000 yen increments) Dividend Amount per Share Dividend Capital Reference Date Effective Date 12/20/2017

Regular Shareholder Meeting General Stock 82,239 8 Profit Surplus 9/30/2017 12/21/2017

( Concerning the Cash Flow Statement )

Concerning end of term balance of cash and cash equivalent goods, as well as topics documented on the balance sheet.

(In thousand yen increments)

Prev. Year

(10/1/2015 ~ 9/30/2016) This Year

(10/2/2016 ~ 9/20/2017) Cash on Hand 3,812,687 3,847,502 Cash and Cash Equivalent Items 3,812,687 3,847,502

( Concerning Financial Products )

As the document regarding the summary of accounts does not have a high monetary requirement, it is not displayed here.

( Concerning Tax Accounts )

1. Itemization of the main source of DTA generation

In Thousand Yen Increments

Prev. Year (9/30/2016) This Year (9/30/2017) (Deferred Tax Assets / DTA) 1. Current Assets Unfactored loss from unpaid corporate taxes 8,890 13,088 Unfactored loss from bonus reserves 6,249 7,406 Unfactored loss from inventory value 1,463 1,650 Miscellaneous 15,829 1,611 Total 36,598 26,154 2. Fixed Assets Depreciation Surplus 2,386 14,693 Miscellaneous 2,541 4,104 Total 4,927 18,797 Sum of DTA 41,526 44,952 Net Amount of DTA 41,526 44,952

2. Comparison of the taxation applied on primary items, to the tax rates as mandated by law .

Prev. Year (9/30/2016) This Year (9/30/2017) Legal Tax Rate —% 30.9% (Adjustments) Charged Taxes on Reserve Cash of Affiliated Corporations —% 5.2% Tax Credits of Trial Expenses —% 2.3% Miscellaneous —% ? 0.2% Corporation’s Share of Taxes after Applied Tax Results —% ? 33.6%

( Other Segment Information )

[Segment Information]

This company is only involved in game development and sales. Any other segments have been omitted.

[Relevant Information]

Prev. Fiscal Year (10/1/2015 ~ 9/30/2016)

1. Information on Manufactured Goods and Other Services

In thousand yen increments

Manufactured Goods Div. Licensed Goods Div. Total Total Sales of External Clients 817,068 647,113 1,464,182

2. Regional Information.

( 1 ) Total Sales

In thousand yen increments

Japan Asia North America / Europe Total 1,187,247 37,322 239,613 1,464,182

Note: The information is based on client sales, sorted by region.

( 2 ) Tangible Fixed Assets

As there are no tangible fixed assets outside of the region, there is no relevant information.

3. Major Client Information

In thousand yen increments

Major Client Name Total Sales Related Segment Name Konami Digital Entertainment 694,711 Game Development / Sales Sony Interactive Entertainment 282,677 Game Development / Sales Marvelous USA, INC. 156,151 Game Development / Sales

This fiscal year. (10/1/2016 ~ 9/30/2017)

1. Information on Manufactured Goods and Other Services

In thousand yen increments

Manufactured Goods Div. Licensed Goods Div. Total Total Sales of External Clients 1,143,324 913,059 2,056,383

2. Regional Information.

( 1 ) Total Sales

In thousand yen increments

Japan Asia North America / Europe Total 1,725,257 24,231 306,894 2,056,383

Note: The information is based on client sales, sorted by region.

( 2 ) Tangible Fixed Assets

As there are no tangible fixed assets outside of the region, there is no relevant information.

3. Major Client Information

In thousand yen increments

Major Client Name Total Sales Related Segment Name Konami Digital Entertainment 1,055,089 Game Development / Sales Sony Interactive Entertainment 490,547 Game Development / Sales

[Information based on losses from fixed assets in reported segments.]

No relevant information.

[Information on payments and unpaid balances for reported segments.]

No relevant information.

[Information on incidental gains for reported segments.]

No relevant information.

( Profit and Loss Regarding Corporate Equity Principles )

As there are no companies associated to this business, there is no relevant information.

( Information on Related Parties )

Transactions with Related Parties

Corporated filed financial statements and transactions with related parties.

Prev. Fiscal Year (10/1/2015 ~ 9/30/2016)

Category Company Name Location Stock or Capital

(1000 yen) Operational Industry Voting Access Percentage (%) Connection of Related Party Transaction Details Transaction Amount (1000 yen) Subject End of Term Balance (1000 yen) Corporation with Large Stock Numbers and/or Voting Rights KSK Saitama 10,000 Manufacturing None Executive Post Consigned goods for game development (Note #2) 17,450 Arrears 864

Notes:

1. The above transaction amounts include tax, and end-of-term balance also includes tax.

2. In this case, individual items are estimations based on quotes from other companies that were determined through negotiations.

This Fiscal Year (10/1/2016 ~ 9/30/2017)

Category Company Name Location Stock or Capital

(1000 yen) Operational Industry Voting Access Percentage (%) Connection of Related Party Transaction Details Transaction Amount (1000 yen) Subject End of Term Balance (1000 yen) Corporation with Large Stock Numbers and/or Voting Rights KSK Saitama 10,000 Manufacturing None Executive Post Consigned goods for game development (Note #2) 23,400 Arrears 1,512

Notes:

1. The above transaction amounts include tax, and end-of-term balance also includes tax.

2. In this case, individual items are estimations based on quotes from other companies that were determined through negotiations.

( Information on 1 Share Amounts )

Prev. Year (10/1/2015 ~ 9/30/2016) This Year (10/1/2016 ~ 9/30/2017) Net Worth per Share : 373.57 yen Net Worth per Share : 429.08 yen Net Income per Share : 37.64 yen Net Income per Share : 62.51 yen

Notes:

1. Potential stock adjustment is based on the cost of shares based on net income, however as there is no potential stock, there is no relevant information.

2. The basic calculations for net income per share can be found below.

Item Prev. Year (10/1/2015 ~ 9/30/2016) This Year (10/1/2016 ~ 9/30/2017) Net Income per Share Net Income (1000 yen) 386,907 642,601 Money Returned to General Shareholders (1000 yen) — Term’s Net Profit Affected by General Stock (1000 yen) 386,907 642,601 Average Stock Count During Term 10,279,898 10,279,898

( Essential Late-Starting Events )

No relevant information.

( 6 ) Miscellaneous

State of Production, Orders, and Sales

a. Production Results

The primary work of this company is in research and development. There are no production facilities in this company’s possession.

b. Order Results

As this company does not do made-to-order production there is no relevant information.

c. Sales Results

Details on this company’s sales results can be found below.

Business Division Prev. Year (10/1/2015 ~ 9/30/2016) This Year (10/1/2016 ~ 9/30/2017) Comparative Fluctuations Cash Amount (1000 yen) Cash Amount (1000 yen) Cash Amount (1000 yen) Change (%) Manufactured Goods 817,068 1,143,324 326,255 39.9 Licensing 647,113 913,059 265,945 41.1 Total 1,464,182 2,056,383 592,201 40.4

Notes:

1?The above-mentioned cash amounts do not include taxes.

2. The sales amounts and corresponding results related to the previous two fiscal years can be seen below.

Partner Prev. Year (10/1/2015 ~ 9/30/2016) This Year (10/1/2016 ~ 9/30/2017) Cash Amount (1000 yen) Ratio (%) Cash Amount (1000 yen) Ratio (%) Konami Digital Entertainment 694,711 47.4 1,055,089 51.3 Sony Interactive Entertainment 282,677 19.3 490,547 23.9

[ Falcom EOY 2017 Financial Report (PDF) ]

[ EOY Report Summary ]

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