CAPCOM IR

We are unable to disclose its breakdown. Please bear with us. The major sources of growth will be SNS games, content for smartphones, and expansion of the PC online game business into more regions.

We do not disclose figures for each half. We can say that we plan to start distributing new titles in the second half in the overseas SNS game sector, which is the primary component of the Mobile Contents business.

We believe that a drop in sales will be unavoidable following the strong sales of five big titles in the previous fiscal year. Furthermore, the packaged game software market is in a cyclical downturn. Sales are expected to be flat in anticipation of the upcoming introductions of titles for next-generation game consoles. In this environment, packaged game software prices are falling. On top of it, foreign exchange rates are negatively impacting overseas sales of major titles. So we had to plan on lower sales because of all these factors.

We are not disclosing about operating income and the margin. In the past, there have been large ups and downs in profitability. Particularly, online content is a business that requires up-front investments to some degree. So we think you can see that this is a business where the profit margin does not increase in a straight line.

We have no intention of postponing the launch at this time.

Because of the rapid changes taking place in our operating environment, we decided that aiming for 10% growth in each fiscal year would be very risky. This is why we created a plan that covers five years. We believe that the benefits of structural reforms that we started enacting in October 2009 will start producing benefits in the next fiscal year. So we are aiming for steady growth. At the very least, we believe that the performance we foresee in the current fiscal year will not hold us back with regard to our medium-term target.

At this time, the only upcoming major title that we can talk about is the title that we recently unveiled at Capcom Captivate 2011. Of course, we are working on a variety of other titles. But we are unable to say furthermore because of issues involving our marketing strategies.

We have a strong commitment to Android application as part of our focus on the smartphone market. But developing mobile content requires up-front expenses. Developing games for all mobile platforms at once would therefore bring down profitability. Furthermore, there are many systems for collecting payments for content used on Android devices. That means we have to supply this content while taking into consideration development expenses, the number of users and profitability.

We started concentrating on developing freemium games for North America several years ago. At the same time, we have been seeking opportunities in this category along with the rapid increase in popularity of the iPhone. We believe that our success is largely attributable to our ability to use these activities to establish a position as the trailblazer in the SNS game sector. Another reason for our success is the utilization of CRAM, our exclusive marketing tool, to thoroughly analyze the needs of users.

We are unable to disclose anything right now about titles or the timing of product introductions. Taking into consideration on our performance in the previous fiscal year, we will continue to develop and manufacture our own machines and provide products for other companies so that the P&S business efficiently contributes to earnings.

We are working on evening out our performance, but unfortunately this will not happen in the current fiscal year. We will reexamine our product lineup as part of our second stage of structural reforms. We hope to start making gradual progress toward reducing fluctuations in quarterly performance in the next fiscal year.

We will closely monitor upcoming events, but at this time we do not anticipate a significant effect on our results of operations.

With the billing system provided by Apple, the buyer needs to carefully confirm the desire to make a purchase for each item purchased. Furthermore, as a content provider, Capcom works hard on making users aware that a game includes elements that require payments. Therefore, we are not concerned at this time about restrictions and similar actions.

We had about 1,300 persons at the end of March 2011. Approximately 1,000 are involved in creating home video game software. In other businesses, we have about 150 online game developers and about 100 mobile content developers. The remaining developers are in the P&S business and arcade games business.

We will continue to pursue our multi-platform strategy as in the past. We are very happy when new hardware is introduced because it invigorates the entire game market. Capcom remains committed to developing games that are designed to allow users to enjoy all the capabilities of game consoles.

Sales and operating income were higher than planned in all business segments except Amusement Equipments business.

We are unable to provide a specific percentage, but we can say that the Online Games business is performing better than planned.

Shipments in Japan and Asia totaled 4.1 million units.

We have not disclosed our plan for third quarter sales. We can tell you that sales of this game were far above our initial plan.

Repeat sales of "Monster Hunter Freedom 3" are still strong. We are carefully examining market conditions, the outlook for orders and other factors to assess the sales volume for the fiscal year. We believe that cumulative sales can top 5 million units in the future.

Our current base of game users is not the only reason for the popularity of this series. "Monster Hunter" is also generating sales by targeting casual game players with measures like spin-off titles and collaboration with other companies. We therefore believe that the popularity of "Monster Hunter" is due to our success at attracting people from a broader range of user segments. We will continue aggressively utilizing this approach to further increase the value of this brand.

There is no change in our plan to sell 2 million units in the current fiscal year.

The main reason was a decline in sales of content (excluding smart phone content and social games) to communications carriers and cell phone users. Furthermore, we started distributing SNS games overseas in the third quarter but do not expect a meaningful contribution to earnings to begin until at least the fourth quarter.

The number of members is not increasing as quickly as when we introduced this service. But there is no significant change in the billing ratio and earnings are in line with our plans. Please note that we do not disclose the number of active users or the billing ratio.

We have not yet determined how to handle these expenses because expense items differ for each initiative.

Advertising and marketing expenses were about 5,000 million yen, capital expenditures and depreciation were both about 2,000 million yen and we invested about 18,000 million yen in development activities.

We expect SG&A expenses in the fourth quarter to be about the same as in each of the previous three quarters.

We are currently working on our outlook for sales of major new titles and repeat sales in the fourth quarter. We are also examining expenses associated with structural reforms. Therefore, we are unable to announce a forecast at this time because we can make a final decision only after completing this process. However, we believe that our performance will not fall below the current forecast.

There is no change in our policy of aiming for steady growth. However, there may be variations in our pace of growth in each fiscal year because of sudden shifts in market conditions and the status of progress with the structural reforms that are now under way.

In North America, we plan to hold our "Capivate" private game fest on April 6 and 7, 2011.

Our plan for the current fiscal year includes sales of "Super Street Fighter IV 3D Edition". We are unable to disclose our sales plans for individual titles.

We cannot provide any specific information at this time. We will move quickly in response to this development in line with our "multi-platform" strategy.

We have been thinking about radical reforms in our R&D operations in response to the rapid changes taking place in our markets. As we were under preparation for executing these structural reforms, Mr. Inafune stated that he wants to continue working as an independent creator. Capcom accepted this request, which led to the announcement of his resignation.

We have made no changes in particular in our existing incentive system. We pay incentive bonuses to developers based on our results of operations and their contributions to our operations.

Our cash flows have improved greatly in recent years due to a reexamination of our financial condition. Based on this improvement, we plan to consider ways to distribute more earnings to shareholders.

Our goal is to build an organization able to develop software that matches market needs even more closely. Consequently, as I announced earlier today, we will hold meetings to reach decisions concerning the direction of our development activities and other important items. These meetings will bring together people from our R&D, business operations, quality control and other key units of our organization so that we can use opinions from many viewpoints.

"Monster Hunter Freedom Unite", which is the previous version, was an enormous hit with more than 4 million players. We studied many ways to make this new version popular not only among users of the previous version. We also want users who enjoyed this game series for the first time with the "AIRU MURA" games to buy "Monster Hunter Freedom 3". We view the "AIRU MURA" games as an excellent example of how to successfully make inroads with new customer segments. We want to use relationships with these kinds of new user segments to make our brand even more powerful.

We create our sales plans by taking into account all applicable items: the development plan of R&D and business departments; the timing of the launch; market conditions; the concept for the game title; targeted user segments; and other items. Due to the nature of video games, we unfortunately do not know exactly how well a title will sell until after its introduction. For our recent major titles, I think that the overall weakness of overseas markets is having an effect on sales.

The multi-platform approach will remain Capcom's core strategy. We plan to use "MT Framework" research programs so that we can quickly provide compatibility with new hardware products. However, our goal is not to achieve compatibility with every new type of game console. We will select hardware for compatibility with the "MT Framework" after thoroughly examining the characteristics of games, specifications of the hardware and other items.

We want to be an organization that can create products that reflect our markets and users. When several people are responsible for a project, we tend to lose sight of the objectives and decision-making slows down. Switching to this unified organizational structure will allow us to move with greater speed. Furthermore, the top management of our R&D operations will fulfill their responsibility to determine major strategic objectives and other goals. We will entrust the development of individual products to the creativity of our game creators.

We want to "enlarge our development line". Doing this will involve increasing our own workforce as well as forming alliances with external game development companies. Blue Castle Games acquisition was part of this stance. At this point, we have no definite plans for any more acquisitions. But we may make more acquisitions if, while developing a game with an alliance partner, we decide that an acquisition would better enable Capcom and the partner to utilize their strengths and produce benefits for both companies.