Financial Results

Management Strategy

(as of June 24, 2021)

Here you can find an itemized listing of our directors’ fundamental management policies, which include our basic corporate philosophy, management performance metrics, dividend policy, mid- to long-term strategies and challenges faced by management.

1. Fundamental Management Policy

Capcom is a creator of entertainment culture who aims to develop software content that excites and stimulates the senses. Management’s criterion is mutual prosperity; Capcom works to build trust and improve satisfaction with its stakeholders.

2. Key Performance Indicators

At the Capcom Group, management’s objective is to increase corporate value through the sustainable growth of its businesses.

In addition to measuring performance with a medium-term management goal of 10% increased operating income per fiscal year, the Company strives to enhance corporate value from a capital efficiency perspective by improving return on equity (ROE), while at the same time focusing on cash flow management. Further, Capcom is working to maintain a consolidated dividend payout ratio of 30% as its basic policy while continuing to make stable dividend payouts, after giving due consideration to matters such as future expansion and changes in the business environment.

Mid-Term Plan

3. The Business Environment and Medium- to Long-Term Management Strategy

The business environment is undergoing great change: the transition to high-speed, high-capacity new mobile communication-standards, an increased number of distribution channels for content, diversification of devices and the expansion of game players on a global basis. Given this, Capcom believes that the establishment of a corporate structure that can secure profit on a regular basis regardless of changes in the business environment is a key management issue in pursuing growth scenarios.

The Company is working to achieve its medium-term management goal of 10% operating income growth per annum by growing its core Digital Contents business, working to increase the value of its brands globally and expanding its user base by proactively leveraging its IP.

Specifically, Capcom is working to bolster its development personnel, strengthen development capabilities and expand its pipeline of games by both utilizing major intellectual properties and creating new intellectual properties. In addition, the Company will focus on growing the total number of units shipped by steadily launching new titles and strengthening the digital sales of catalog titles.

4. Priority Business and Finance Issues

Capcom is working to address the following issues in order to pursue the strategies discussed in item 3 above.

(1) Business strategies for each Segment in the next fiscal year

While there are a number of difficulties in making forecasts for the next fiscal year stemming from the effects of the ongoing pandemic, the Company will focus on the following points.

1) Digital Contents business

In this business, the Company will work to maximize revenue with the launch of new titles, including the latest title in its flagship series Resident Evil Village (for PlayStation 5, PlayStation 4, Xbox Series X|S, Xbox One, PC) as well as Monster Hunter Stories 2: Wings of Ruin (for Nintendo Switch, PC). In addition, the Company will continue to promote sales of catalog titles, such as Monster Hunter Rise and Resident Evil 3, which were released in the previous fiscal year.

2) Arcade Operations business

In this business, the Company will remain flexible in its policy of “scrap and build,” pursuing efficiency in store openings and operations, while also continuing to expand into new store formats. The Company plans to open 3 stores and close 1 store during the fiscal year.

3) Amusement Equipments business

In this business, the Company will leverage its brands in the models it releases while adhering to changes in the voluntary regulations of the industry. During the fiscal year the Company plans to release 4 models and ship 28 thousand units.

4) Other businesses

The Company will work to maximize brand value in Other Businesses through collaborations with businesses in other industries such as creating film adaptations of its content. Additionally, in eSports it will pursue greater use of online tournaments and work to further grow the global scale of the business in order to expand the overall number of participants.

(2) Corporate governance initiatives

The Company recognizes that it is important to ensure diversity in its Board of Directors for the purpose of sustained growth. Having selected candidates based on their respective personal qualities and acumen regardless of gender, nationality, age, etc., its Board of Directors consists of members with diverse viewpoints, extensive experience and a high level of diversified and specialized skills.

In addition, the Company’s strength lies in its robust management foundation under the leadership of its founder, as well as its unique development structure and business model. Furthermore, the Company endeavors to enhance its corporate governance through endeavors such as reinforcing the oversight function of its Board of Directors by proactively utilizing external directors, including in its voluntary committees.

Based on such efforts, the Company evaluated the effectiveness of its Board of Directors during the previous fiscal year, with the aim of further enhancing its function. The evaluation was performed using methods making it easier to seek the individual opinions of all the Directors, such as individual questionnaire surveys and interviews, and opinions were exchanged based on the findings of the analysis.

Moreover, the results of the latest evaluation showed the effectiveness of the Company’s Board of Directors but also indicated new issues for the enhancement of the management oversight function as described below. Going forward, the Company will continue to leverage the strengths of its Board of Directors and make efforts to further enhance its function by deepening its understanding of the issues.

Main Issues	Improvement Measures and Policies Going Forward
Further refinement toward enhancement of corporate governance function	Further expand opportunities for governance-themed discussions and exchange of opinions
Maintaining and improving communication qualitatively and quantitatively	Check and review of the criteria and rules for agenda items to be brought up for discussion at meetings of the Board of Directors Efficient provision of materials to help invigorate deliberations at meetings of the Board of Directors

(3) Initiatives for reinforcement of information security

Measures against various cyber risks both in Japan and overseas, including the prevention of information leaks and compliance with the E.U.’s General Data Protection Regulation (GDPR), have become crucial in light of the importance of personal information management systems, etc., in recent years. As a part of these measures, the Company is striving to reinforce its information security system by such means as securing and developing human resources with expert knowledge, conducting thorough in-house training and performing regular checks, in order to prevent malfunction and disruption of information systems caused by cyberattacks from outside the organization, such as from computer viruses and unauthorized access.

However, despite these efforts, a cyber-attack against the Company involving unauthorized access was detected in November 2020 and it was revealed that personal and corporate information had been compromised. In response to this situation, the Company has conducted an investigation on the unauthorized access and information leak with the cooperation of external specialist companies, established an advisory body consisting of outside experts, the Information Technology Security Oversight Committee, and with its guidance and advice has taken various measures to enhance security aimed at preventing the recurrence of any such incident.

Going forward, the Company will continue to make efforts to further enhance its operation and oversight functions and information security on an ongoing basis with the cooperation of the Committee.

(4) HR strategy initiatives

The Company is carrying out the hiring, evaluation, etc., of personnel regardless of gender, nationality, age, etc., to leverage diverse human resources in response to changes in its business environment, with its efforts being focused on scouting forward-thinking, creative personnel. The Company will continue to improve rank-based training programs aimed at developing and securing competent human resources while implementing personnel systems that address changes in the environment and put the right person in the right position.

(5) Basic policy for strategic holdings of publicly listed shares

Regarding strategic holdings of publicly listed shares, the Company eliminates habitual cross-holding, personal favoritism, etc., and by comprehensively taking into consideration the relevant advantages and disadvantages from medium- to long-term perspectives, including whether the shareholdings contribute to future business relationships and sustainable enhancement of corporate value, the Company keeps its strategic holdings to a minimum and holds only three securities. As of the end of the previous fiscal year, the amount of its strategic holdings of such publicly listed shares accounted for less than 0.5% of its net assets.

As a benchmark for these holdings, if it is deemed that there is little economic rationality in continuing to hold such shares, such as when their book value has fallen by 50% or more, or the corporate value of the issuer has been significantly impaired, the Company takes into account factors including the economic situation and, after holding talks with the issuer, reduces or sells such shares at an appropriate time.

Security Name	Purpose of Holding	Capcom Shareholder
Mitsubishi UFJ Financial Group, Inc.	Maintaining favorable business relationship with issuer	Yes
Mizuho Financial Group, Inc.	Maintaining favorable business relationship with issuer	Yes
AEONMALL Corporation	Maintaining favorable business relationship with issuer	No

(6) ESG and SDGs initiatives

Guided by the corporate philosophy of being a “creator of entertainment that stimulates your senses,” the Company has aimed to reduce its environmental footprint with decreased disc production in the course of pursuing sales of its content digitally. Going forward, the Company will proactively work to address the issues facing society, such as that of climate change, which is currently a topic of much scrutiny. With this perspective in mind, the Company will pursue the following Environmental, Social and Corporate Governance (ESG) initiatives in consideration of the goal of developing a sustainable society advocated by the Sustainable Development Goals (SDGs) and pursue long-term sustained growth while building a relationship based on trust with its stakeholders.

E (Environmental)	The Capcom Group has been minimizing the negative impact of its businesses on climate change (e.g., CO2 and other greenhouse gas (GHG) emissions), and with respect to pollution, use of resources, etc., it has been striving to reduce the consumption of resources by adopting LEDs in lighting and promoting the digitization of software made available for sale. The Capcom Group will continue to promote these initiatives.
S (Social)	The Capcom Group will respect human rights, prohibit discrimination based on race, religion, gender, age, sexual orientation, disability, nationality, etc., thoroughly eliminate inequality by protecting the vulnerable, create a pleasant working environment for employees, and promote the securing and developing of human resources. In addition, the Capcom Group will promote initiatives to build a healthy relationship with local communities and customers, such as engaging in activities to assist children suffering from poverty in the hope of their healthy growth and development.
G (Governance)	The Capcom Group has been enhancing management transparency and soundness, endeavoring to build a structure that is capable of adapting to changes in the environment and striving to boost its corporate value by enhancing its corporate governance function, including utilizing voluntary committees. Going forward, the Capcom Group will continue to further initiatives to meet the expectations of its stakeholders, including shareholders, customers and employees.