Financial Information as of March 31, 2010

Transcription

1 Financial Information as of March 31, 2010 (This is the English translation of the Yuukashouken-Houkokusho for the Year ended March 2010) UNIVERSAL ENTERTAINMENT CORPORATION Ariake Frontier Building Tower A, 7-26, Ariake 3-chome, Koto-ku, Tokyo

2 Table of Contents Page Cover Part 1 Company Information. 1 Section 1. Overview of the Company Transition of Significant Business Indicators, etc The Company s History Description of Businesses Affiliated Companies Employees Section 2. Business Overview of Operating Results, etc Production, Order Entry and Sales Issues to Deal With Businesses Risks Important Contracts, etc. in Operations Research and Development Activities Analyses of Financial Conditions and Operating Results Section 3. Facilities and Equipment Overview of Capital Investments Major Facilities and Equipment Plans for Construction and Retirement, etc. of Facilities Section 4. Situation of the Company Details of Stock, etc.. 20 (1) Total Number of Shares, etc (2) Subscription Rights to Shares (3) Exercise Status, etc. of Bonds, etc. with Subscription Rights to Shares with a Clause to Revise Exercise Price. 24 (4) Rights Plan 24 (5) Transition of Total Number of Issued Shares and Amount of Stated Capital.. 25 (6) Shareholders by Category (7) Major Shareholders (8) Voting Rights (9) Stock Options Acquisition, etc. of Own Stock Dividend Policy Transition of Share Price Directors and Officers Corporate Governance, etc Section 5. Accounting Consolidated Financial Statements, etc (1) Consolidated Financial Statements 41 (2) Others Unconsolidated Financial Statements, etc. 86 (1) Unconsolidated Financial Statements (2) Major Assets and Liabilities 110 (3) Others Section 6. Outline of Stock-Related Matters of the Company Section 7. Referential Information of the Company 115 Part 2 Information on Guarantee Companies, etc. for the Company 116

3 Cover Submitted Document: Securities Registration Report Statutory Basis Article 24, Paragraph 1 of the Financial Instruments and Exchange Act Agency Receiving Submission: Director-General of Kanto Local Finance Bureau Submission Date: June 30, 2010 Business Year: 37th period (From April 1, 2009 through March 31, 2010) Corporate Name: Kabushiki-gaisha Universal Entertainment (Former company name: Aruze Kabushiki-gaisha) Name in English: (Former English company name: Aruze Corp.) Note: Based on the resolution adopted at the special shareholders meeting held on October 30, 2009, the name of the company was changed to the one mentioned above, as of November 1, Name and Position of Representative: Mitsuhiro Kitabatake, Representative Director and Vice Chairman Location of Headquarters: Ariake Frontier Building Tower A, 7-26, Ariake 3-chome, Koto-ku, Tokyo (Note) Subsequent to the change in residence indication, the location of headquarters was also changed to the address shown above from Ariake , Koto-ku, Tokyo, as of November 1, Telephone Number: 03 (5530) 3055 Name of Contact Person: Toji Takeuchi, General Manager, Internal Control Promotion Team, General Internal Control Office Closest Contact Address: Ariake Frontier Building Tower A, 7-26, Ariake 3-chome, Koto-ku, Tokyo Telephone Number: 03 (5530) 3055 Name of Contact Person: Toji Takeuchi, General Manager, Internal Control Promotion Team, General Internal Control Office Place Available for Public Inspection: Osaka Securities Exchange Co., Ltd. (Kitahama , Chuo-ku, Osaka City, Osaka, Japan) - 1 -

4 Part I. Company Information Section 1. Overview of the Company (Introduction) Effective April 1, 1998, the company submitting this report (the former Universal Technos Co., Ltd., hereinafter referred to as the Company ) absorbed in a merger the former Universal Sales Co., Ltd. and changed its trade name to Aruze Corp. The purpose of the merger was to change the face value per share of the former Universal Sales Co., Ltd. from 500 to 50. In addition, the change of trade name represented the Company s prospects for further growth in anticipation of the future expansion of its businesses. Prior to the merger, the Company s sole business was the leasing of the real estate properties it owned to the former Universal Sales Co., Ltd. In addition, the size of the business of the Company prior to the merger was modest in comparison with that of the former Universal Sales Co., Ltd. As a result, the post-merger status of the Company was such that the former Universal Sales Co., Ltd. continued to operate its businesses in the same manner as prior to the merger. Therefore, unless otherwise noted, the following sections in this report discuss matters that relate to the actual surviving company. The following illustrates changes in the status of the Company since its establishment to date: Universal Lease Co., Ltd. Established on December 2, 1969 Universal Co., Ltd. Changed the trade name on October 1, 1971 (Dissolved company) Spun-off on December 10, 1979 (Registered surviving company) Universal Giken Co., Ltd. Spun-off on June 26, 1973 Universal Technos Co., Ltd. Universal Sales Co., Ltd. Changed the trade name on May 31, 1975 (Effective surviving company) Universal Sales Co., Ltd. Merged on April 1, 1993 Aruze Corp. Merged and changed the trade name on April 1, 1998 Universal Entertainment Corporation To date Changed the trade name on Nov. 1,

5 1. Transition of Significant Business Indicators, etc. (1) Consolidated Business Indicators, etc. Term 33rd Period 34th Period 35th Period 36th Period 37th Period Fiscal year ended March 2006 March 2007 March 2008 March 2009 March 2010 Net sales (Mil yen) 48,506 35,580 72,133 19,993 39,526 Ordinary income or loss (Mil yen) (8,578) (6,764) 23,311 (13,224) 1,151 Net profit or loss (Mil yen) (12,713) 9,169 38,086 (14,808) 18,626 Net assets (Mil yen) 108, , , , ,314 Total assets (Mil yen) 167, , , , ,616 Net assets per share (Yen) 1, , , , , Net profit or loss per share (Yen) (159.11) (185.26) Net profit per share after adjusting for latent shares (Yen) Equity ratio (%) Return on equity (%) (11.3) (11.6) 15.8 Price earning ratio (Multiples) Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash and cash equivalents at the end of fiscal year (Mil yen) (3,655) ,063 (16,070) 11,556 (Mil yen) (7,734) 15,534 23,999 (34,912) (2,523) (Mil yen) (5,937) (15,033) (22,946) 297 (16,269) (Mil yen) 37,439 39,149 56,004 14,177 5,877 Number of employees [Average number of additional temporary workers] (Persons) 1,212 [111] 1,193 [80] 1,325 [49] 1,167 [47] Notes: 1. Net sales do not include consumption taxes, etc. 2. For the 33rd and 36th periods, the value of Net profit per share after adjusting for latent shares is not presented since the net loss per share was reported and there were no latent shares with a dilution effect. For the 37th period, since there are no latent shares with a dilution effect, the values are not presented. 3. The value of Price earning ratio is not presented for the 33rd and 36th periods, because net loss per share was booked. 4. Effective the 34th period, the Company has adopted the Accounting Standards for Descriptions of Net Assets in Balance Sheet (Business Accounting Standard No. 5, December 9, 2005) and the Implementation Guidance for Accounting Standards for Descriptions of Net Assets in Balance Sheet (Implementation Guidance of Business Accounting Standards No. 8, December 9, 2005) for the calculation of Net Assets. 904 [83] - 2 -

6 (2) Non-Consolidated Business Indicators, etc. of the Company Term 33rd Period 34th Period 35th Period 36th Period 37th Period Fiscal year ended March 2006 March 2007 March 2008 March 2009 March 2010 Net sales (Mil yen) 29,165 32,033 58,903 9,904 32,354 Ordinary income or loss (Mil yen) (5,805) (4,635) 9,846 (6,168) 3,466 Net profit or loss (Mil yen) (13,891) (10,122) 9,350 (10,098) (5,763) Capital (Mil yen) 3,446 3,446 3,446 3,446 3,446 Total outstanding shares (shares) 80,195,000 80,195,000 80,195,000 80,195,000 80,195,000 Net assets (Mil yen) 118, , ,379 97,506 91,432 Total assets (Mil yen) 173, , , , ,429 Net assets per share (Yen) 1, , , , , Dividend per share [Interim dividend per share] (Yen) 20 [--] 50 [--] 60 [--] -- [--] --- [--] Net profit or loss per share (Yen) (173.86) (126.69) (126.33) (72.16) Net profit per share after adjusting for latent shares (Yen) Equity ratio (%) Return on equity (%) (11.0) (9.0) 8.5 (9.6) (6.1) Price earnings ratio (Multiples) Dividend payout ratio (%) Number of employees [Average number of additional temporary workers] (Person) 945 [92] Notes: 1. Net sales do not include consumption taxes, etc. 2. For the 33rd, 36th and 37th periods, the value of Net profit per share after adjusting for latent shares is not presented since the net loss per share was reported and there were no latent shares with a dilution effect. For the 34th period, since net loss per share was reported, the value is not presented. 3. The value of Price earning ratio is not presented for the 33rd, 34th 36th and 37th periods, because net loss per share was booked. 4. Effective from the 34th period, the Company has adopted the Accounting Standards for Descriptions of Net Assets in Balance Sheet (Business Accounting Standard No. 5, December 9, 2005) and the Implementation Guidance for Accounting Standards for Descriptions of Net Assets in Balance Sheet (Implementation Guidance of Business Accounting Standards No 8, December 9, 2005) for the calculation of Net Assets. 924 [80] 366 [37] 233 [15] 749 [25] - 3 -

7 2. The Company s History Month & Year December 1969 July 1970 October 1971 June 1972 June 1973 May 1975 Events Former company name: Aruze Corp. (Universal Sales Co., Ltd., and Universal Technos Co., Ltd.) Spun off Sales Division of Universal Co., Ltd. from the company and established Universal Giken Co., Ltd. as an independent company and began its operation. Relocated the head office of Universal Giken Co., Ltd. to , Ueno, Taito-ku, Tokyo and changed the trade name to Universal Sales Co., Ltd. Universal Co., Ltd. Established Universal Lease Co., Ltd. for the purpose of leasing juke-boxes at 2515, Mamada, Oyama, Tochigi Prefecture. Established a factory at the same place and started producing amusement machines. Changed trade name to Universal Co., Ltd. Purchased land adjacent to the factory and built a new factory. September 1975 Established Osaka Sales Office in Suita, Osaka. Built a new factory in Oyama, Tochigi Prefecture. Hereafter, this factory began full-scale production of various game machines as a base. November 1976 April 1978 December 1979 March 1980 January 1981 May 1982 February 1983 August 1983 June 1985 July 1985 October 1985 July 1986 April 1988 May 1988 September 1988 July 1990 September 1990 April 1992 Established Nagoya Sales Office in Naka-ku, Nagoya, Aichi Prefecture. Built Universal Building in Nihonbashi Horidome-cho, Chuo-ku, Tokyo and relocated the head office of Universal Sales Co., Ltd. Spun off Development Division of Universal Co., Ltd. from the company and established Universal Technos Co., Ltd. as an independent company and began its operation.. Established Fukuoka Sales Office in Hakata-ku, Fukuoka, Fukuoka Prefecture. Established Hokkaido Sales Office in Shiroishi-ku, Sapporo, Hokkaido Established Sendai and Kagoshima Sales Offices in Sendai, Miyagi Prefecture and Kagoshima, Kagoshima Prefecture. Established Niigata Sales Office in Niigata, Niigata Prefecture. Established Aomori, Shikoku and Kobe Sales Offices in Aomori, Aomori Prefecture, Takamatsu, Kagawa Prefecture and Chuo-ku, Kobe, Hyogo Prefecture. Established Hiroshima Sales Office in Naka-ku, Hiroshima, Hiroshima Prefecture and Okayama sub- Branch in Okayama, Okayama Prefecture. Established Kitakanto Sales Office in Utsunomiya, Tochigi Prefecture Procured and moved to Universal Technos Co., Ltd. head office building in Nihonbashi-hamacho, Chuo-ku, Tokyo Constructed Universal Sales, Co., Ltd. head office building in Takanawa, Minato-ku, Tokyo Established Shizuoka Sales Office in Shizuoka, Shizuoka Prefecture. Established Oita Sub-Branch in Oita, Oita Prefecture. Established Kanazawa Sub-Branch in Kanazawa, Ishikawa Prefecture. Established Koriyama Sub-Branch in Koriyama, Fukushima Prefecture. Established Kumamoto Sub-Branch in Kumamoto, Kumamoto Prefecture Constructed new factory located in the third industrial park in Oyama, Tochigi Prefecture (Oyama Second Factory) and moved there. Expanded from production of game machines into pachislot machines for the entertainment and amusement industry. Procured a factory in Yonago, Tottori Prefecture as a new manufacturing base, and started production of amusement machines

8 Month & Year July 1992 August 1992 April 1993 July 1993 April 1994 April 1998 September 1998 October 2000 October 2000 November 2000 February 2001 November 2001 June 2002 September 2002 November 2002 October 2003 June 2004 December 2004 December 2004 January 2005 February 2005 March 2005 July 2005 May 2006 May 2006 July 2006 October 2006 April 2008 September 2008 October 2008 January 2010 February 2010 Events Former company name: Aruze Corp. (Universal Sales Co., Ltd. and Universal Technos Co., Ltd.) Established Saitama, Kanagawa and Chiba Sales Offices in Omiya, Saitama Prefecture, Kohoku-ku, Yokohama, Kanagawa Prefecture and Chuo-ku, Chiba, Chiba Prefecture. Established Kyoto Sales Office in Shimogyo-ku, Kyoto, Kyoto-Prefecture Universal Sales, Co., Ltd. absorbed Universal Co., Ltd. in a merger. Universal Co., Ltd. Dissolved as a result of a merger with Universal Sales Co., Ltd. Moved the Head Office to Universal Co., Ltd. Head Office building in Takanawa, Minato-ku, Tokyo Established Mito Sales Office in Mito, Ibaraki Prefecture. Universal Technos Co., Ltd. absorbed Universal Sales Co., Ltd. in a merger and changed the trade name to Aruze Corp. Moved the Head Office to Ariake, Koto-ku, Tokyo Registered its shares on over-the-counter market of Japan Securities Dealers Association Acquired shares of Aruze USA, Inc. (currently a consolidated subsidiary) Aruze USA, Inc. invested in Valvino Lamore, LLC. Acquired shares of Japan Amusement Broadcasting Co., Ltd. (currently a consolidated subsidiary) Newly built Yotsukaido Techno Center in Yotsukaido, Chiba Prefecture Established Y's Tech. Co., Ltd. (currently a non-consolidated subsidiary) Acquired shares of P to PA, Inc. (currently a consolidated subsidiary) All capital holdings of Valvino Lamore, LLC were invested in kind to Wynn Resorts, Limited (currently an equity method affiliate) Acquired shares of Nautilus Inc. (trade name was changed to Aruze Global Trading Corporation.) Established Beijing Aruze Development Co., Ltd. (currently a non-consolidated subsidiary) Obtained a gaming machine manufacturer s license and an approval for stock acquisition of Universal Distributing of Nevada, Inc. in the State of Nevada.(currently Aruze Gaming America, Inc.) Cancelled over-the-counter registration with Japan Securities Dealers Association and listed the Company s shares on Jasdaq Securities Exchange, Inc. Obtained a gaming machine manufacturer s license and an approval for stock acquisition of Universal Distributing of Nevada, Inc. in the State of Mississippi. Acquired shares of Universal Distributing of Nevada, Inc. that had subsidiaries in Australia and South Africa, and made the three companies consolidated subsidiaries. Acquired the entire businesses of Y s Tech. Co., Ltd. (currently a non-consolidated subsidiary) Wynn Resorts, Limited and its subsidiary obtained a license for casino operations in the State of Nevada. Obtained a gaming license in the State of South Australia Obtained gaming licenses for all the 9 states of South Africa Established Aruze Preparatory Corporation Obtained a gaming machine manufacturer s license, which is renewable without limitation in the State of Nevada Established Patent Information Development Corporation (currently a non-consolidated subsidiary) Transferred gaming machine business for overseas casinos to Aruze Gaming America, Inc. Established Aruze Media Net Inc. (currently a consolidated subsidiary) for mobile website operation business through a company split Obtained a gaming license in the state of New South Wales, Australia Acquired the shares of Japan Rental Service, Ltd. (trade name was changed to Aruze Rental Service Corporation) Transferred the sales section of pachislot/pachinko business to Aruze Marketing Japan Corp. (formerly known as System Staff Co., Ltd.) and development section thereof to Seven Works Corp. (formerly know as Aruze Preparatory Corp.), through company splits Obtained a gaming license in the state of Oregon, U.S.A. Established Aruze Investment Co., Ltd. (currently a consolidated subsidiary) - 5 -

9 Month & Year June 2010 August 2010 February 2010 March 2010 June 2010 November 2009 March 2010 June 2010 Events Former company name: Aruze Corp. (Universal Sales Co., Ltd. and Universal Technos Co., Ltd.) Transitioned to a company with committees Acquired a provisional license to operate a casino resort in the Philippines Aruze Gaming America, Inc. implemented an allocation of new shares to a third party and the shares of Aruze Gaming America owned by the Company was partially transferred Aruze Global Trading Corporation, Aruze Rental Service Corporation and Seven Works Corporation were merged to Aruze Marketing Japan Corporation by an absorption-type merger with Aruze Marketing Japan to act as the surviving company Transitioned all the shares of Aruze Gaming America, Inc. owned by the Company The Company merged Aruze Marketing Japan Corporation in an absorption-type merger with the Company to act as the surviving company Changed the trade name to A casino project of the Company (Manila Bay Resorts) obtained the designation as a special economic zone and the foreign capital restrictions for casino businesses were removed in the Philippines. Transitioned to a company with board of auditors - 6 -

10 3. Description of Businesses The corporate group of the Company is composed of the Company, 20 subsidiaries, 1 affiliate, etc. The main businesses are development, manufacture and sales of pachislot and pachinko machines and other game machines and peripheral equipment thereof, as well as media business and broadcasting business, etc. Indicated below are the businesses of the Company s corporate group, the Company and each company s relative position of in the business and the relationship with the business segments. (As of March 31, 2010) Business Segment Main Business Company Name Pachislot and Pachinko Business Manufacture of completed products Development, sale and rental of pachislot and pachinko machines; development, manufacture and sale of peripheral equipments; procurement of units consisting of parts and materials The Company, Macy Sales Co., Ltd., Eleco Ltd., Mizuho Corp. The Company Control and management Aruze USA, Inc. Casino Resort Operation Business Operation and management of casino resorts Investment in land holding company Holding of land Wynn Resorts, Limited Eagle II Holdco, Inc. Eagle I Landholdings, Inc. Other Businesses Tourism-related business Aruze Investment Co., Ltd. Media business Broadcasting business Development business of human interface system Intellectual property research business Operation and management of online Shogi games Aruze Media Net Corp. Japan Amusement Broadcasting Co., Ltd. P to PA, Inc. Patent Information Development Corporation Nihon Shogi Network Co., Ltd. In addition to the companies listed above, there are 2 consolidated subsidiaries and 6 non-consolidated subsidiaries not accounted for by equity method

11 The business linkage of the above status is shown in the diagram below: Pachislot/Pachinko Business Macy Sales Co., Ltd., Eleco Ltd., Mizuho Corp. (Manufacture of pachislot/pachinko machines) Customers/users Entrustment of development, services, etc. Units consisting of parts and materials Entrustment of sales The Company (Development, manufacture and sale of pachislot and pachinko machines; development, manufacture and sale of peripheral devices; investment management and group finance; management guidance for group companies, etc.) Other businesses Aruze Media Net Corp. Japan Amusement Broadcasting Co., Ltd. P to PA, Inc. 2 other companies Nihon Shogi Network Co., Ltd. *1 Patent Information Development Corporation *1 6 other companies *1 Investment Casino resort business Aruze USA, Inc. (Control and management) Investment Wynn Resorts, Limited *2 (Operation and management of casino resorts) Eagle II Holdco, Inc. (Investment in a company of which purpose is to hold land) Investment Eagle I Landholdings, Inc. (Land holding) Aruze Investment Co., Ltd. (Tourism-related business) Notes: No symbol: Consolidated subsidiaries 12 *1: Non-consolidated subsidiaries not accounted for by equity method 8 *2: Affiliated company accounted for by equity method 1-8 -

12 4. Affiliated Companies Name of Company Location Capital (Consolidated subsidiary) Aruze USA, Inc. (Note 3) Nevada, USA [US$1,000] 260, other companies (Note 5) (Equity method affiliate) Wynn Resorts, Limited Nevada, USA [US$1,000] 4,240,858 (Note 4) Main Line of Business (Note 1) Other businesses Other businesses Ownership Ratio of Voting Rights (%) (Note 2) Relationship Positions are concurrently held by the same director (19.9) Positions are concurrently held by the same director. Notes: 1. In the column for the main lines of business, the name of the business segment by category is stated. 2. The figure in the parentheses in the column for the ownership ratio of voting rights represents percentage of indirectly holding votes. 3. These companies are specified subsidiaries. 4. The amount of capital is a sum of the common stock of US$1,361 thousands and an additional paid-in capital of US$4,239,497 thousands. 5. Japan Amusement Broadcasting Co., Ltd., Eagle I Landholdings, Inc., and Eagle II Holdco, Inc. which are included in the consolidated 11 other companies, are specified subsidiaries. 5. Employees (1) Employees on Consolidated Basis Name of Business Segment by Category Pachislot and pachinko business Number of Employees As of March 31, (61) Other businesses 113 (10) Corporate (unallocated) 166 (11) Total 904 (83) Notes: 1. The number of employees represents the number of full-time employees, and the average annual number of temporary workers is indicated in parentheses. 2. The number of employees in the Corporate (unallocated) segment represents those employees employed by the administrative division, which cannot be classified into a specific segment. 3. The number of employees decreased by 263 people during the 1 year ending the consolidated fiscal year in question mainly due to the exclusions of Aruze Gaming America, Inc., Aruze Gaming Africa (Pty) Ltd., and Aruze Gaming Australia Pty Ltd. from the scope of consolidation. (2) Employees of the Company Submitting this Report Number of Employees Average Age Average Number of Years Employed As of March 31, 2010 Average Annual Salary (Yen) 749 (25) 35 years and 11 months old 5 years and 7 months 6,419,612 Notes: 1. The number of employees represents the number of full-time employees, and the average annual number of temporary workers is indicated in parentheses. 2. The number of employees increased by 516 people during the 1 year ending the current fiscal year mainly due to absorption and merger of Aruze Marketing Japan Corporation. 3. Average annual salary is the disbursed amount of salary before taxes, and it includes surplus wages and bonuses. (3) Labor Union While a labor union has not been formed, the Company has maintained sound labor-management relations

13 Section 2. Business 1. Overview of Operating Results, etc. (1) Operating Results The global economy during the consolidated fiscal year showed the movements as indicated below. After the serious financial crisis triggered by the Lehman shock in September 2008, in the United States, European nations, Japan and other industrialized nations, each government implemented economic stimulus measures. However, circumstances surrounding employment and personal income were still bleak and consumer spending grew at a sluggish pace. On the other hand, in emerging countries particularly in China and India, the impact of the financial crisis was relatively limited and quick recovery of economic activities was observed. In this environment, the Company group successfully developed a series of popular pachislot machines in the first quarter through the third quarter, such as Midori-Don released in last May, Ginga Eiyu Densetsu that debuted in the market in September and Ao-Don: Hanabi No Kiwami, sales of which began in November. These models contributed to an increase in sales of the Company group. However, in the fourth quarter, Basilisk Koga Ninpocho and Ao-Don: Hanabi No Takumi were sold much less than initial projections, which resulted the full-year unit sales at a level less than the projection (180 thousand units) set at the beginning of the year. Still, the total unit sales for the year jumped significantly from 58 thousand units in the previous year (including 18 thousand units sold and installed and 40 thousand units replaced with new software) to 100 thousand units (including 80 thousand units sold and 20 thousand units replaced with new software). As a result, sales in the consolidated fiscal year in review roughly doubled from those for the previous year, reaching to 39,526 million yen (97.7% up compared to the previous year), although the figure fell short of the 58,000 million yen projection made at the beginning of the year. Operating income fell short of the initial projection of 12,000 million yen, due to the aforementioned lower-thanprojected sales and higher costs caused by stricter assessment standards of assets which were adopted in preparation for transition to the international accounting standards in the future. However, primarily due to a significant rise in sales compared to the previous year, profitability was regained by posting 5,343 million yen (compared to 11,605 million yen of operating loss for the previous year) as an operating income. Wynn Resorts, Limited (NASDAQ: WYNN), an equity method affiliate in which the Company group has a 19.9% stake as the largest shareholder, recorded net income of 39,107 thousand U.S. dollars (prior to the deduction of minority interests in income/loss) for the last fiscal year (ended December 31, 2009) backed by strong financial results in Macau, under the circumstances where other large casino operators reported losses. However, Wynn Resorts contribution to the earnings of the Company group fell short of the initial projection in consideration of amortization amount (approx. 3.2 billion yen annually) due to reevaluation of past transactions involving purchase of its own shares by Wynn Resorts, Limited. Based on the above, the Company group s ordinary income ended at 1,151 million yen, less than 12,000 million yen projection at the beginning of the year. Still, the figure is a significant improvement from the previous year (ordinary loss of 13,224 million yen for the previous year). In the meantime, Wynn Macau, Limited, a subsidiary of Wynn Resorts, Limited, listed its shares on the Hong Kong Stock Exchange on October 9, 2009 and conducted an initial public offering. Through this initial public offering, Wynn Macau, Limited successfully raised funds amounting to 150 billion yen resulted from investors strong demands. As this initial public offering increased the net assets of Wynn Resorts, Limited, the Company group posted a special income of 24,524 million yen according to the ratio of its equity in Wynn Resorts, Limited. As results of these, 18,626 million yen in net income for the year (compared to 14,808 million yen of net loss for the previous year) was posted. Backed up by abundant fund following the successful initial public offering of its subsidiary, Wynn Resorts, Limited passed a resolution to pay special cash dividend of 4 U.S. dollars per share, and the Company group received the special cash dividend amounting to 98,197,000 U.S. dollars on December 3 corresponding to 24,549,222 shares of Wynn Resorts, Limited. Discussed below are the results for each business segment. Segment figures represent amounts prior to adjustment for intra-segment sales or reallocations and unallocable amounts relating to operating expenses. 1) Pachislot and Pachinko Business In the pachinko machine market, new machines were promoted by extensive advertising campaigns through TV commercial messages, etc., and many units were introduced to the market in combination with parlors rabblerousing operation which would stimulate passion for gambling. However, since usage period of these machines is very short, a number of pachinko parlors are worried about effectiveness of investment in these new machines. Lower returns on investment in pachinko machine are shifting the market interest to machines with lower-priced ball rent operation utilizing used machines, etc., as pachinko parlors see the limits of rabble-rousing operation with new models. Accordingly, the pachinko machine market shows a shrinkage tendency. On the other hand, the pachislot machine market saw around 755 thousand units introduced during the entire year of Although this figure was a slight drop of 6.8% from the previous year, the market was clearly beginning to stabilize. Currently, lower-priced coin rent operation at pachislot parlor is noticeable in the pachislot market as in the pachinko market. However, the Company made proposals to introduce machines that would show their strength in

14 pachislot parlor s operation and could fully convey the fun of pachislot to players. In the fiscal year in review, we drove the market with Midori-Don that sold more than 40 thousand units after its debut in late May, and Ao-Don: Hanabi No Kiwami that was released in November and already sold 35 thousand units. These two models contributed to increase operation rates of the pachislot market as a whole. Other models such as Ginga Eiyu Densetsu were also highly acclaimed in the market. However, Basilisk Koga Ninpocho released in the fourth quarter with high expectations, failed to achieve the initially projected sales, partly due to an inappropriate sales policy. One reason for the failure is that we could not convince pachinko parlors of the unique pay-out performance of Basilisk Koga Ninpocho designed to create and grow repeat customers. Sales of subsequently introduced Ao-Don: Hanabi No Takumi also fell short of the plan. Consequently, full-year sales for the fiscal year ended March 31, 2010 amounted to 100 thousand units, mainly consisted of six pachislot machine titles, including 80 thousand units sold and 20 thousand units replaced with new software, resulted the Company s share in the market being approximately 14%. Unit sales rose notably compared to the previous year where 58 thousand units were placed (including 18 thousand units sold and installed and 40 thousand units replaced with new software). As a result of the above, net sales from pachislot/pachinko business amounted to 36,611 million yen (122.4% up from the previous year), with an operating income of 12,003 million yen (compared to an operating loss of 3,381 million yen in the previous year). 2) Other Businesses Aruze Media Net Corp., which is a media contents arm of the Company group, saw strong results accompanying a 40% increase in the number of paying membership of its main site Aruze Kingdom from the beginning of the year, due to offer of effective service programs working with sales of actual pachislot machines such as Midori-Don and Ginga Eiyu Densetsu. Aruze Media Net also conducted renewal of Super Real Mahjong site and actively collaborated with other companies. Japan Amusement Broadcasting Co., Ltd., another media business arm of the Company group, also contributed to sales through a steady increase in corporate customers and strong secondary distribution business from Pachi- Tele!, a full-time pachislot/pachinko channel on SKY PerfecTV!. Based on the above, sales from other businesses for the consolidated fiscal year in review became 3,451 million yen (80.3% up over the previous year), with an operating loss of 788 million yen (compared to an operating income of 248 million yen in the previous year). (2) Cash Flow As of the end of the consolidated fiscal year in question, the balance of cash and cash equivalents totaled 5,877 million yen. The statuses of each cash flow and the primary reasons for increases/decreases as of the end of the consolidated fiscal year in question are as follows: <Cash Flow from Operating Activities> Cash flow from operating activities amounted to 11,556 million yen in income (compared to 16,070 million yen in expenditure for the previous fiscal year), primarily due primarily to a decrease of accounts receivable in 1,287 million yen and an increase of inventories in 4,625 million yen. <Cash Flow from Investing Activities> Cash flow from investing activities amounted to 2,523 million yen in expenditure (compared to 34,912 million yen in expenditure for the previous fiscal year), mainly due mainly to 2,793 million yen spent on acquisition of tangible fixed assets. <Cash Flow from Financing Activities> Cash flow from financing activities amounted to 16,269 million yen in expenditure (compared to 297 million yen in income for the previous fiscal year), chiefly due to a decrease of short-term loans payable in 13,990 million yen and expenditures for redemption of bonds in 1,200 million yen

15 2. Production, Order Entry and Sales (1) Production Production performance in each business segment in the current consolidated fiscal year is as follows: Name of Business Segment by Category Current Consolidated Fiscal Year (From April 1, 2009 to March 31, 2010) Year-to-Year Comparison (%) Pachislot and Pachinko (Million yen) 39, Others Businesses (Million yen) 1, Total (Million yen) 41, Notes: 1. The amounts are based on sales price. 2. Consumption taxes, etc. are not included in the above amounts. (2) Orders received The status of orders received in each business segment by category in the current consolidated fiscal year is as follows: Name of Business Segment by Category Amount of Orders Received (Million yen) Year-to-Year Comparison (%) Balance of Orders Received (Million yen) Year-to-Year Comparison (%) Pachislot and Pachinko 34, Other Businesses 2, Total 37, Notes: 1. The amounts are based on sales price. 2. Consumption taxes, etc. are not included in the above amounts. (3) Sales Performance The sales performance in each business segment by category in the current consolidated fiscal year is as follows: Name of Business Segment by Category Current Consolidated Fiscal Year (From April 1, 2009 to March 31, 2010) Year-to-Year Comparison (%) Pachislot and Pachinko (Million yen) 36, Other Businesses (Million yen) 2, Total (Million yen) 39, Notes: 1. Transactions between segments are eliminated by setoff. 2. Consumption taxes, etc. are not included in the above amounts

16 3. Issues to Deal with Currently the pachislot and pachinko business is one of the Company group s core businesses. Size of pachislot market shrank significantly due to full transition from Type 4 machines to Type 5 machines in Also, due to weak domestic economy caused by the impact of the global financial crisis, the business results of pachinko parlors became worse. These increased competition more than ever. The issues to be addressed by the Company group based on such background are as follows: 1) Pachislot and Pachinko Business The market for pachislot machines that account for a majority of our sales continues to face a difficult situation. In this difficult environment, the Company group has been analyzing market information gathered through extensive information gathering efforts of our Sales Division and developing machines which reflect the needs of the market in an accurate and timely manner and which offer excellent mechanical performance. We will continue to offer good machines meeting the needs of the market. To this end, we must establish necessary sales bases, develop sales strategies and build organization for information gathering and analysis. 2) Patent Strategy The Company group has long been aware of the importance of creating and protecting intellectual property, and has worked towards the establishment of a system that enables us to acquire superior patent right through standardization of patent applications. Also, we have worked to improve quality of our patent applications and to increase ratio of numbers of patent registration to numbers of submitted applications, by establishing a system that put together inventions by technical category. The technologies which the Company has acquired or applied for patents are considerably more effective and commercially viable than those of its competitors. The Company intends to fully apply these technologies in the development of its products to improve the value of said products, thereby differentiating them from its competitors products in terms of technology. The Company believes this will enable it to achieve a competitive advantage. Also, in order to secure license income from its patents, the Company will move forward vigorously with strategies for both patent utilization and prosecution of its patent rights in case of patent infringement. 3) Casino Resort Business The Company group seeks growing opportunity in the area of Asia and is currently working on a casino hotel resort development project in the Philippines which promotes tourism nationwide. We have already acquired the land and obtained a provisional casino license. We also achieved that the project site has been designated as a special economic zone and that restriction on foreign capital investment has been removed. The Company group will continue to promote this project steadily and make it new income source of the Company group in the future. 4. Businesses Risks Of the Description of Business and Accounting stated in the Securities Registration Report, factors that might affect investor decisions are described below. The Company group recognizes the possibility that these risks might emerge, and will work to avoid such risks, or deal with them appropriately if they arise; provided, however, that the factors listed below do not cover all risks related to the business of the Company group. (1) Pachislot and Pachinko Business According to the Law Concerning Regulation and Proper Operation of Businesses Affecting Public Morals, pachislot and pachinko machines need to meet the technical standards defined in Item 4 of the National Public Safety Commission s rules (Regulations Concerning Authorization and Model Approval for Amusement Machines). Each type of machine must pass the model test conducted by the designated testing organization (Security Electronics and Communications Technology Association) and the model inspection conducted by the Public Safety Commission of the applicable prefecture. In the event that these laws or standards get eliminated or are amended, the Company group will analyze industry trends and the application status of other companies, and make new applications for new machines in a structured and strategic fashion. However, if major changes need to be made due to administrative direction or voluntary restriction by the industry, the business results of the Company group would be materially impacted. There is also a possibility that profitability would be affected by changing preferences in the industry, as well as economic trends in Japan that includes income levels. (2) Casino Resort Business For the purpose of a promotion of a casino hotel resort business in the Philippines, the Company group has acquired a casino license and land and, during the fiscal year in question, obtained an approval as special economic zone as well as a removal of restriction on foreign capital investment. Since this business is conducted overseas, country risks of the Philippines or changes in the local business environment may impact

17 the value of the Company group s facilities and /or business performances. (3) Foreign Exchange Risks In preparing consolidated financial statements, foreign currency-denominated gains/losses and assets/liabilities of each overseas subsidiary of the Company group are incorporated into the consolidated financial statements once they are converted into Japanese yen. As a result, business results of the Company may be adversely affected by fluctuations in exchange rates. (4) Litigations The Company group has several pending litigations, and the outcomes of the cases may have an impact on the business results of the Company group. Although the Company group continues to make every effort to eliminate litigation risk, there is always a possibility that third parties may file new cases against the Company group, with the rulings in these cases having the potential to affect future business results. The substance of the main litigations currently pending is stated in 3. Contingent liabilities, (1) Litigations under Notes to Consolidated Balance Sheet. 5. Important Contracts, etc. in Operations At the Board of Directors meeting held on April 27, 2009, the Company passed a resolution to merge Aruze Marketing Japan Corporation ( AMJ ), a consolidated subsidiary of the Company in an absorption-type merger, and concluded a merger agreement on the same day. (1) Purpose of the merger In order to strengthen the cooperation between the development and the sales in pachislot/pachinko business by integrating subsidiaries which had been engaging in such operations separately, the Company determined the absorption type merger of AMJ, Aruze Global Trading Corporation, Aruze Rental Service Corporation and Seven Works Corporation with AMJ acting as the surviving company at the Board of Directors meeting held on December 24, Thereafter, to further strengthen the management of the Company group and the framework of pachislot/pachinko business, the Company determined to merge AMJ, a consolidated subsidiary of the Company, with AMJ to be absorbed, at the Board of Directors meeting held on April 27, The Company was mainly engaged in the directions of the managements in the group companies as a holding company. However, due to the poor performance in pachislot/pachinko business in the previous business year, the Company determined to strengthen the administrative functions in pachislot/pachinko business, the main business of the Company group, and to directly operate pachislot/pachinko business not in the way of management direction, but in a united way in order to recover our business performance. (2) Method of the merger An absorption-type merger where Aruze Corp. is a surviving company and Aruze Marketing Japan is an absorbed company. (3) Shares issued at the merger and its allotment There is no change in the paid-up capital since no shares are newly issued for this merger. (4) Date of the merger June 1, 2009 (5) Condition of succeeded assets and liabilities (as of May 31, 2009) Total assets: 43,695 million yen Total liabilities: 36,620 million yen (6) Overview of the surviving company for the absorption-type merger (as of March 31, 2009) Trade name Aruze Corp. (Surviving company) Description of business Management of group companies, etc. Date of establishment June 26, 1973 Location of headquarter Ariake, Koto-ku, Tokyo Representative Hajime Tokuda, Representative Executive Officer and President Paid-up capital 3,446 million yen Number of issued shares 80,195,000 shares Net assets 97,506 million yen Total assets 130,141 million yen End of business year March 31 Major shareholders and holding ratios Kazuo Okada: 31.46% Tomohiro Okada: 29.45% Goldman Sachs and Company Regular Account: 9.06% Note: Aruze Corp. has changed its company name to on November 1, 2009 in accordance with the resolution at the Extraordinary General Shareholders Meeting held on October 30,

18 6. Research and Development Activities The amount spent for research and development of the whole group for the consolidated fiscal year in question totaled was 2,508 million yen. The status of the research and development activities of the Company group is as follows: 1 Pachislot and pachinko business In pachislot and pachinko business, the Company is striving to offer the machines with capability of joy of games and pay-outs performance which will be accepted in the market within the scope of current regulations and standards. With respect to pachinko machines, the Company works on streamlining research and development framework and is in process of development of the machines differentiated from those of leading manufacturers. We have already finished the There are some titles of which applications have been submitted to the designated testing organizations and the Company will conduct the development in further improvement of qualities for future releases. 2 Other businesses The Company promotes research and development of thermoelectric power generation, a technology effective for global warming prevention and energy saving, which obtains electric power from waste heat. Currently, in order to realize the practical use of the technology, we are conducting world s first demonstrative experimental proof test utilizing high heat over 1,000 degrees from an industrial waste incinerator. PtoPA, Inc. shifted their focus field to activities to put their research results on artificial intelligence into practical application, and provided certain services to customers after having conducted demonstrative experimental proof test and verifications thereof. Also, PtoPA displayed its CAIWA Robot, to which a natural language conversation interface is applied and which makes conversation, at Doraemon s Scientific Future Exhibition. 7. Analyses of Financial Conditions, Operating Results and Cash Flow The following analyses of financial conditions and operation results regarding the Company Group are based on the data presented in the consolidated financial statements in principle. The matters relating to the future contained in the following paragraphs have been judged by the Company Group as of the date of this report being submitted. (1) Significant Accounting Policies and Estimates The Company group s consolidated financial statements are prepared based on generally accepted accounting standards in Japan. Estimation that was considered as necessary in preparation of these consolidated financial statements has been conducted in accordance with reasonable standards. Details are as described in Section 5. Accounting, 1. Consolidated Financial Statements, etc., Significant Matters Serving as Basis for Preparation of Consolidated Financial Statements. (2) Analysis of Financial Conditions as of the End of the Current Consolidated Fiscal Year 1 Assets section The amount of total assets at the end of the consolidated fiscal year in question was 144,616 million yen, a decrease of 1,145 million yen over the end of the previous consolidated fiscal year. As to current assets, cash and deposits decreased by 9,982 million yen and notes and accounts receivable trade decreased by 2,691 million yen. As a result, total current assets became 38,375 million yen with a decrease of 13,930 million yen over the previous consolidated fiscal year to. For non-current assets, investment securities increased by 10,992 million yen, resulting in 106,241 million yen in total non-current assets with an increase of 12,785 million yen compared to the end of the previous consolidated fiscal year. 2 Liabilities section The amount of liabilities at the end of the consolidated fiscal year resulted in 17,302 million yen with a decrease of 15,621 million yen due to a 1,898 million yen increase in notes and accounts payable-trade and 17,292 million yen decrease in loans payable, etc. 3 Net Assets section The amount of net assets at the end of the consolidated fiscal year in question was 127,314 million yen with an increase of 14,476 million yen compared to the end of the previous consolidated fiscal year due to an increase of 17,917 million yen in retained earnings and a decrease of 3,799 million yen in minority interests, etc. The shareholders equity ratio increased by 13.2 points to 87.9% as compared to the previous fiscal year, and net assets per share increased by yen to 1, yen. (3) Analysis of Operating Results for the Current Consolidated Fiscal Year 1 Net Sales For the consolidated fiscal year in question, net sales for the pachislot/pachinko business, which is the main business of the Company, increased by 122.4% over the previous fiscal year to 36,611 million yen. The Company placed 6 pachislot titles on the market, resulting in installments of approximately 100 thousand units

19 (58 thousand units for the same period of the previous fiscal year), and total amount of net sales of 39,526 million yen, a 97.7% increase compared to the same period of the previous fiscal year. 2 Cost of sales Due to increase of the net sales, total amount of cost of sales increased by 60.4% over the previous fiscal year to 18,187 million yen, and the cost of sales ratio was 46.0%, decreased by 10.7 points over the previous fiscal year. 3 Selling, general and administrative expenses The total amount of selling, general and administrative expenses decreased by 21.1% over the previous fiscal year to 15,995 million yen. 4 Non-operating income and loss Non-operating income decreased by 2,435 million yen over the previous consolidated fiscal year to 617 million yen. Non-operating expenses increased by 138 million yen compared to the previous consolidated fiscal year to 4,809 million yen. These are primarily due to recording of equity in losses of affiliates of 3,896 million yen (equity in earnings of affiliates of 2,092 million yen for the same period of the previous fiscal year). 5 Net income Extraordinary income amounted to 24,920 million yen. This is primarily due to the reflection of an increase in net assets of Wynn Resorts, Limited caused by the listing of shares of Wynn Macau, Limited, a subsidiary of Wynn Resorts, Limited, at Hong Kong Stock Exchange on October 2009 and the capital increase through public offering. Extraordinary loss amounted to 4,017 million yen. This is primarily due to loss on review of share transfer value of 2,321 million yen, loss on prior period adjustment of 812 million yen, etc. As a result of the above, net income of 18,626 million yen (net loss of 14,808 million yen for the previous fiscal year), net income per share of yen (net loss per share of yen for the previous fiscal year) and return on equity of 15.8% (minus 11.6% for the previous fiscal year) were recorded. (4) Factors that May Give Material Impact to Operating Results As stated in 4 Risk of Businesses. (5) Current situation and outlook of business strategy 1 Pachislot/Pachinko Business In the pachislot/pachinko business, we will restructure our sales system, thoroughly implement a correct sales policy and increase the number of units sold, in consideration of the fourth quarter results of the previous year. We also recognize that the market s view on Type 5 pachislot machines has been changing since the last year s release of Midori-Don and pachinko parlors and customers alike are now beginning to share our belief that it is possible to produce good machines with enjoyable pay-out performance even in accordance with Type 5 standard. The release of our Midori-Don indeed marked the beginning of gradual change in how Type 5 machines are viewed. We will expand our market share by introduction of attractive machines that lead the industry by gathering, analyzing and utilizing market information. The first product we are planning to introduce this year is the pachislot machine Slot Tondemo Senshi Mutekingu, which utilizes the copyrights of the TV animation series Tondemo Senshi Mutekingu broadcasted back in This title has specifications well incorporating rendering features of pachinko into pachislot, which would allow both pachislot and pachinko players to enjoy the game. Following the release of this Slot Tondemo Senshi Mutekingu, we plan to introduce a total of 140 thousand units to the market for the full year by introducing one pachislot machine title every quarter. We will also drive the sales of VALID, peripherals for pachinko parlors, led by Doru Bako Vision which is the industry s first display equipped with a 15.1 full-color LCD and in which our original graphics processing technology is incorporated. 2 Other Businesses Aruze Media Net Corp. will actively develop their business to boost sales revenues as a media production company handling a wide range of contents, not limited to assets of the Company group. Also, Japan Amusement Broadcasting Corp. will drive forward their effort to build the foundation of a business enterprise not dependent on the broadcasting industry alone. Instead, Japan Amusement Broadcasting will actively invest in new business projects with the aim of providing various entertainment services relating to pachislot and pachinko. As for the casino hotel resort project in the Philippines, we have already obtained a provisional license needed to operate a casino and also acquired a site for the project. Recently there has been another progress in our project with the government s designation of the project site as a special economic zone (Tourism Eco Zone) and approval of a casino operated by 100% foreign capital. Now we can apply for tax incentives and have the option to operate the resort on our own or jointly with other foreign companies. Indeed, the flexibility of our future business there has increased significantly