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Introduction of Countermeasures

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(as of September 15, 2015)

At the shareholders meeting that was held in June 2015, shareholders approved "Introduction of Countermeasures (Takeover Defense) in response to a Large-Scale Purchase of Shares etc. of the Company" which is a takeover defense mechanism. These measures prescribe rules for procedures and other items concerning the provision of information by parties planning to make a large-scale purchase. Furthermore, these measures include responses that Capcom can take in the event that this purchaser does not comply with the rules or that the large-scale purchase would be harmful to the Capcom Group's corporate value and shareholder value. On this page, we will explain the purpose of these countermeasures, why they are necessary, and the contents of this defense mechanism.

I. Outline of the Plan

1. Particulars of Investigation of the Plan

The Company proposed to renew the countermeasures (takeover defense) in response to a large-scale purchase of shares etc. of the Company (the "Previous Plan") at the 35th Ordinary General Meeting of Shareholders of the Company held on June 16, 2014, but it was disapproved and then discontinued. Appreciating seriously the judgment of shareholders, the Company has investigated carefully the results and measures to be taken thereafter.

As a part of our aggressive stance toward corporate governance, the Company has actively promoted engagement with a lot of shareholders and investors including institutional investors as usual following the close of the last ordinary general meeting of shareholders of the Company. The Company appreciates all those opinions and advices gathered from such communication and further accumulated discussions with them.

As a result, the Board of Directors of the Company reached the conclusion that it is necessary to stipulate specified rules as against a large-scale purchaser on the assumption that the management of the Company is subject to a high level of ethics with a view to fully attaining a sustainable medium and long-term growth strategies and maximizing the corporate value of the Company. Taking into consideration of these conversations exchanged through the communications with shareholders and investors, the Company presented again a proposal entitled "Introduction of Countermeasures (Takeover Defense) in response to a Large-Scale Purchase of Shares etc. of the Company" (the "Plan") with such necessary amendments to the Previous Plan and will entrust to shareholders to approve the Plan.

2. Purpose of Introduction of the Plan

  • (1) Measures to be taken with a view to maximizing the corporate value of the Company in the medium and long-term periods.

    • 1) Single Content Multiple Usage Strategy as Fundamental Strategy

      The Company group places the fundamental strategy on "Single Content Multiple Usage Strategy" and contemplates to expand globally multiple developments in numerous businesses on the basis of development of contents full of originality, which is the resource creating the corporate value.

      • A. The Company holds a plenty of content assets, which were created by R&D creators of the Company group, including more than 60 titles in the aggregate each of which products was sold more than one million units.
        Game content consists of characters, images, storyline, worldview, music and interactive operational convenience, each of which element is highly creative media art product. For example, the Company created a lot of highly popular titles such as "Resident Evil" Series, "Monster Hunter" Series and "Street Fighter" Series so that the Company holds numerous valuable assets. The Company has been contemplating to develop package software business based on these content assets targeting at home video game consoles, the core business segment in markets in Japan, the North America and Europe.

        (Reference)

        Million-seller title total

      • B. The Company group promoted to the full extent the content assets business enriched by its package software business into the field other than home video game consoles business under the multiple usage strategy.
        The Company places emphasis on its development into PC online and mobile contents and in addition, further develops widely into a variety of fields, including Pachinko & Pachislo, amusement equipments, movies, animation, toys and foods and beverages so that the Company contemplates to further enhance the brand value and profitability.
        Furthermore, with a view to materializing many types of publishing business based on the strength of digital contents, the Company develops new business opportunities upon promoting business collaborations with local enterprises in the rapidly growing Asian market while maintaining the Company's advantages.

        (Reference)

        Single Content Multiple Usage Strategy

    • 2) Current Situation and Perspective of Growth Strategy

      For the purpose of materializing the aforementioned fundamental strategy, the Company took measures to revise the strategic development system and strengthen the corporate structure for sales and profit for the last three years.
      The Company exerts itself to visualize the goals gradually from the current fiscal year.

      • A. Selection and Concentration with respect to development investment

        Grasping the development investment tended to increase due to the recent enhancement of function of game consoles as the best business resources of the Company, the Company seeks for the superior competitive position utilizing the strategic map by which the medium-term content development is foreseeable with a view to controlling earnings to the full extent attributable to the selection and concentration.
        Specifically, from the view point of management, the Company streamlines to optimize development process of each title under the lineup strategy taking into consideration marketability and profitability.
        As a result, the number of unprofitable titles not fitting market needs decreased and the ratio of internally produced titles increased, while the volume of development businesses out-sourced continuously reduced. The Company will strive to stabilize the strong earnings structure.

      • B. Expansion and Arrangement of Development Environment

        With respect to expansion and arrangement of development environment for materializing effective development investment, first of all, with regards to personnel, the Company accomplishes to employ and train creators mainly from new graduates regularly and strengthens the allocation and management of development personnel and utilizes to strategic map visualizing the development processes and improves the work efficiency so that the Company intends to enhance the quality of products and accumulate expertise.
        Moreover, with regard to facilities, the Company has been progressing to expand and arrange for development environment including construction of new studio and makes efforts to restrain development costs attributable to expansion of the rate of products internally produced and reduce development period.

      • C. Expansion of DLC(Download Contents)

        Recently, in the home video game software market, due to development of network infrastructure and establishment of online premium model, markets and additional download contents have been steadily growing in particular in Europe and in the US where those markets were originated.
        The Company complies flexibly with diversified distribution manners and concentrates in expansion of DLC sales and strives to increase sales and profitability by promoting business consolidated with development, marketing and sales.

      • D. Strengthening PC Online Game Development

        In the PC online game market, in comparison with package software sales, since it is possible to sell additional items and contents upon watching reaction of the customers, there shall be a room to expand earnings from PC online products. The Company strives not only to enhance the competitiveness in the market by virtue of highly valued contents but also to secure continuously stabilized profit because of precise operation and accumulation of management expertise following the commencement of services.
        In the outstandingly growing Asian markets, in cooperation with local leading enterprises having local developing capability the Company will promote publishing business making use of the strength of its digital contents to the full extent.

      • E. Strengthening Mobile Content Business

        With respect to mobile content business the Company group will contemplate to revive in the market appealing its strength resulting from owning a plenty of famous contents from "Capcom brands". Regarding the "Beeline brand" of Los Angeles as its own brand, the Company will focus its original strength among woman's casual segments. With these excellent contents and the expansion of game management (precisely grasping users' movements and reflecting them on the contents provided and others), both of which were synergistically developed, the Company will do the best to strengthen mobile content business.

      • F. Promotion of Pachinko & Pachislo Equipment and other Related Amusement Equipment Business

        In the development of Pachinko & Pachislo equipment business, making use of the famous contents like "Monster Hunter" and "Sengoku BASARA", the Company intends to enhance the charm of equipments.
        Furthermore, due to strict regulations introduced by change in model certification method to examine equipments by the Security Communications Association from September 2014, the business environment looks not so clear. And with such cloudy situation the Company does its best efforts to develop and increase types of equipments qualified to meet the requirement of the examination as soon as possible. As a consequence, if the Company is able continuously to provide multiple types of its dedicated cabinets, the Company expects to return to the right track again and open a new perspective.
        On the other hand, in the amusement equipment business and arcade operation business, the Company is engaged in development of the equipment based on famous contents and holds various events at the arcade operation.

      • G. Development and Aggressive Promotion of Character Contents Business

        The Company group is engaged in aggressive development of copyright-related business of contents making use of famous and highly popular characters in the areas of television, animation, publishing, movies, dramas, toys, food and beverages and soliciting opportunities for further earnings. The Company group is one of the best global holders of contents such as million-seller titles including "Resident Evil" and "Street Fighter" both of which were made to movies in Hollywood have been popular in overseas.
        On and hereafter, the Company will do its best efforts to aggressively promote character content business so that all brand value of the Company will enhance, and earnings of the Company will increase.

  • (2) Strengthening and Enhancement of Corporate Governance System

    The Company fully recognizes the importance of Corporate Governance and "Aggressive Governance" shall be a necessary condition to enhance sustainable growth strategy. From this view point, the Company introduced two external directors in June 2001. The number of external directors was increased from two to three from June 2003. At the Board of Directors meetings, discipline was incorporated with the introduction of external directors and it was contemplated that discussion and deliberation are to become active.

    In addition, the articles of incorporation of the Company were amended at the ordinary general meeting of shareholders held in last year so that the term of office of director is shortened to one year from two years so as to make clear management responsibility. Accordingly, the Company is engaged continuously in strengthening and enhancement of the corporate governance system and deems it important with a view to accomplishing the growth strategy together with shareholders.

    (Reference)

    Corporate Governance Structure

  • (3) Key Performance Indicator (KPI) by virtue of the Plan

    The Company group aims the medium and long-term sustainable growth and enhancement of corporate value as a fiduciary responding expectation of shareholders.
    Specifically, The Company would like to set ROE figure as a KPI of capital efficiency. The moving average of ROE figures for three fiscal years ended March 31, 2015 was "6.7%", and the first goal of ROE is to increase the three-year moving average of ROE for the period ending March 2017, the last year of the effective period of the Plan to "8 – 10%".

    (Reference) ROE (Return on Equity)

    Item Prior to Introduction of Plan
    (Moving Average for Three Fiscal Years ended Mar 2015)
    Maturity of Plan
    (Moving Average for Three Fiscal Years ending Mar 2017)
    ROE 6.7% 8-10%
  • (4) Necessity of the Plan

    The Company group sets up a medium- and long-term strategy by which sustainable growth and enhancement of the shareholder value will be attained and for the purpose of doing the best management to respond to shareholders' expectation, the Plan is dispensable for accomplishing fully the aforementioned goal. At present, there is no fact that the Company received any notification or notice to the effect that any specified third party performs a large-scale purchase conduct. However, there exists always possibility that unforeseen event would occur so that the corporate value would be injured and common interest of shareholders would be infringed. Nobody can deny completely the possibility of such occurrence. Specifically, the Company is concerned with the following cases:

    • 1) The value of content assets developed by the Company is not accounted for in the balance sheet of the Company and accumulated brand value of popular titles is not necessarily and smoothly reflected on the due corporate value of the Company group in the Company's view. The Company might be subject to hostile purchase of certain large-scale purchaser who might focus solely on temporary deviation between the book value and the latent value and have no intention to enhance the corporate value in the medium and long-term periods.

    • 2) Moreover, content creating power of the Company heavily relies on environment in which personnel assets can work. Depending on development policy of large-scale purchaser, employees of the Company, including excellent development creators might be concerned with change in the corporate culture and development strategy, and have sense of insecurity and cautiousness so that they might protest and separate from the Company, which results in forcing the development system, the fundamental basis for management to collapse. The corporate value in the medium- and long-term periods might reduce because the development organization creating resourced content for "single content multiple usage strategy" is so collapsed.

    • 3) The Company thinks it possible to exchange constructive communication with large-scale purchaser over the subject of the enhancement of corporate value in the medium and long-term period so that securing opportunity and a plenty of time should be meaningful for the large-scale purchaser as well. For shareholders it is necessary to stipulate a certain rule against proposal of large-scale purchaser, to secure provision of sufficient information and a time for examination, for the Board of Directors to perform necessary negotiation and to constitute system by which fair judgment will be made for the purpose of enhancing common interest of shareholders. At present, the Financial Products and Exchange Act provides for regulation restricting certain abusive purchase. However, securing provision of information and time period before commencement of public takeover and restriction of purchase of shares in the market are not legally provided so that the law does not effectively protect the Company.

  • (5) Accordingly, with a view to targeting at medium- and long-term enhancement of the corporate value of the Company for the purpose of executing continuously the growing strategy it is necessary to stipulate the Plan, by which the development system of the Company will be protected from confusion or exhaustion caused by unforeseeable action and conduct, and the environment enabling to concentrate in the growing strategy without dispersing management resources of the Company will be arranged. It is not for the purpose of protecting the Board of Directors of the Company. Rather, the introduction of the Plan is to facilitate to maintain and enhance the corporate value and common interest of shareholders of the Company group to stipulate the Plan.

3. Main Flow of the Plan

  • (1) Large-scale purchaser who will affect the control of the Company's management will be requested to provide necessary information to shareholders and comply with the rule of the Plan until final determination of intention of shareholders of the Company at the general meeting of shareholders of the Company.

  • (2) Large-scale purchaser is requested to provide "Statement of Intention" to the Company prior to executing Large-scale purchase conduct and information necessitated to form opinion of shareholders of the Company. The Company stipulated that Large-scale purchaser should provide information within 30 day period.

  • (3) The Company will evaluate and examine information and announce the result, including the decision of whether or not to convene the general meeting of shareholders to confirm the intention of shareholders within 60 day period (or 90 day period other than in the case of cash-only tender offer).

    • 1) Independent Committee will evaluate and examine purchase conduct and make recommendation of whether or not Large-scale purchase countermeasures to be triggered, including whether or not to convene the general meeting of shareholders of the Company to confirm the intention of shareholders.

    • 2) The Board of Directors of the Company, upon paying attention to the recommendation given by Independent Committee to the full extent, will evaluate and examine the large-scale purchase and announce the result of whether or not to trigger Large-scale purchase countermeasures, including the decision of whether or not to convene the general meeting of shareholders to confirm the intention of shareholders.

    • 3) If and when the general meeting of shareholders is decided to be convened, shareholders will be requested to make judgment of whether or not Large-scale purchases countermeasures are triggered.

4. Circumstances in which the Company decided to propose the introduction of the Plan

The Previous Plan was approved at the 29th ordinary general meeting of shareholders of the Company held on June 19, 2008 and continued in effect after amended at the 31st ordinary general meeting of shareholders held on June 18, 2010 and further amended at 33rd ordinary general meeting of shareholders held on June 15, 2012. However, it discontinued upon disapproval at the 35th ordinary general meeting of shareholders held on June 16, 2014.

With respect to introduction of the Plan, upon conducting conversation and discussion through aforementioned communications, the Board of Directors held on May 12, 2015 determined to introduce the Plan on condition that it will be approved with a majority of voting rights for the Plan represented at 36th ordinary general meeting of shareholders of the Company to be held.

The Plan was determined unanimously at the Board of Directors and the Corporate Auditors present thereat stated their opinion to approve the Plan on condition that Plan will be appropriately executed.
Furthermore, the following comparison table showing changes from the Previous Plan is prepared to facilitate judgment of shareholders, to which shareholders are recommended to refer. The changes are purported to exclude possible misunderstanding of phrases, which otherwise might lead readers to misunderstand that the Plan had intended to protect the Board of Directors for personal purpose. The Plan was prepared to constitute rule by which necessary information should be provided to shareholders and shareholders are asked to confirm their intention.

(Reference) Major changes from the Previous Plan

1. Corporate Governance Structure

Item Previous Plan Plan
Term of Directors One Year
with Supplement Provision allowing current directors elected in June 2013 shall be in office until June 2015)
One Year
Number and Ratio of External Directors 3 out of 10 Board of Directors (30%) 3 out of 7 Board of Directors (42%)

2. Changes of the Plan

Item Previous Plan Plan
Key Performance Indicator(KPI) Not stated Clearly stating 3 fiscal year moving average of 8-10% ROE as a metrics to measure capital efficiency
Requirements to trigger the Countermeasures

1) Four types of inappropriate offers defined by the Tokyo High Court and coercive two-tiered tender offers

2) The conditions of the offers are materially insufficient and inappropriate

1) Four types of inappropriate offers defined by the Tokyo High Court and coercive two-tiered tender offers

2) Offers resulted in weakening of the developer teams which essentially cause decrease in corporate value

Organization empowered to decide to trigger the Countermeasures Resolution at the Board of Directors meeting with recommendation from the Independent Committee With the recommendation from the Independent Committee;
Resolution at the general meeting of shareholders. However, resolution at the Board of Directors meeting in the case of 1) stated in the above column
Members of the Independent Committee 2(two) External Directors of the Company and 1(one) outside expert 2 (two) External Directors and1(one) External Corporate Auditor of the Company
Term that Large Scale Purchase etc. shall submit required information to the Board of Directors of the Company No clause (i.e. no ceiling) Up to 30 days
Numbers of information items that Large Purchaser etc. shall submit to the Board of Directors of the Company 13 items 6 items
Abolition of the Plan Resolution of the Board of Directors

(1) With the resolution of the General Meeting of Shareholders

(2) Resolution of the Board of Directors

Please refer to III 3.(2)(ii)(a)to(d) regarding the details of "Four types of inappropriate offers defined by the Tokyo High Court" and III 3(2)(ii)(e) for "Coercive two-tiered tender offers"

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