Game Industry Characteristics

Characteristics of Each Market

PC Online Market Characteristics Current Conditions This is a 24.7 billion dollar market, forecast to grow to 26.6 billion dollars in 2019. The customer segment is primarily composed of core users who demonstrate the highest game loyalty. They have a fairly Future strong willingness to engage in ongoing purchases, and are unique Predictions for having the lowest sensitivity to price and economic conditions. PC Online In terms of profitability, PC Online is comparatively high among the three markets, typically generating stable earnings over the long term. Going forward, we do not anticipate any major changes and expect the market to remain stable.

Consumer Market Characteristics (Package + Digital download contents) Package and digital download contents are a 21.6 billion dollar market, forecast to grow to 25.6 billion dollars in 2019. The customer segment Consumer is composed mainly of core users with high game loyalty. They have a relatively high willingness to purchase sequels and a low sensitivity to price and economic conditions. This market is the lowest among the three in terms of margin, yet occupies a high position in the

Market Stability Japanese industry overall. Hereafter, we expect the digital sales ratio to increase, shrinking the gap between the other two markets’ profitability.

Mobile Market Characteristics Mobile This is a 22.5 billion dollar market, forecast to grow to 37.4 billion dollars in 2019. The customer segment is primarily composed of casual users, many of whom play games just to pass the time, thus they demonstrate the lowest game loyalty. They have a limited willingness to purchase games and have the highest sensitivity to price and economic conditions. Although this is the most profitable among the three markets, only a limited number of titles are able to generate stable earnings over the long term. Going forward, we expect rapid growth to make smartphones the most pervasive game device. Market Profitability

Five Competitive Factors in Each Business (Five Forces Analysis)

Consumer (Package + Digital download contents) Mobile Contents PC Online

High capital and Ongoing capital investment Threat of New Entrants Normal Extremely Few capital or differentiated Low differentiated high technology requirements and cutting-edge technology requirements technologies required

From standpoint of mobility, Threat of Substitute Users somewhat Users somewhat Normal Low low user outflow to other Normal Services and Products compartmentalized compartmentalized two markets

Many transactions with Buyer Power High major overseas retailers LowDirect sales to users Low Direct sales to users with strong purchase power

Supplier (Hardware Content is flexibly Content is flexibly Content is flexibly Manufacturer) Power Low compatible with Low compatible with Low compatible with all platforms all platforms all platforms

Appropriate environment Degree of Rivalry Normal at present, expected to High Many new entrants, Normal Appropriate environment soften somewhat in the tough environment at present future

1 CAPCOM INTEGRATED REPORT 2015 Messages from Business Activities and Corporate Capcom’s Value Creation Activities Our Strategy for Growth CSR Activities Corporate Governance Financial Section Data

Management Future Outlook Consumer Business Consumer % % % %

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8.3 billion billion billion dollars dollars dollars Make effective use of digital download contents and full-game downloads full-game and contents download digital of use effective Make 27.6 28.0 (Forecast) (Forecast) (Forecast) 33.3 29.6 72.9 (Time) 4.8 billion billion dollars dollars 2014 2019 2014 2019 2014 2019 billion dollars 21.6 20.7 Growth rate Growth rate Growth rate Market Scale 50 * MHFG: “Monster Hunter Frontier G” Frontier “Monster Hunter * MHFG: sales ratio Digital download s e s l e t s i i t t t

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a h n s download contents” business model AAvoid inventory risk IIncrease earnings opportunities throughdigital sales of catalogue titles t CCapture users with add-on contents s Merits of “Package software and digital o “Package software only” business model LLoss of additional earnings opportunities Sales through Use of DLC ©2014 Peanuts Worldwide LLC. Worldwide ©2014 Peanuts Increase Overall Consumer Business All game code©Beeline Interactive, Inc. Interactive, All game code©Beeline © Peyo – 2015 – Licensed through Lafig Belgium – www.smurf.com. All game code – www.smurf.com. Lafig Belgium through – 2015 – Licensed © Peyo Capcom brand native app enhancements brand native Capcom Spirits” Puzzle Fighter “Street Explore” “Monster Hunter Quest” Hunting “Monster Hunter Taiwan) and (China Battle Combination” Fighter “Street Taiwan) Hong Kong and South Korea, (China, (South Korea) IV Arena” Fighter “Street Beeline brand Strengthened and the Village “Smurfs Meadow”Magical Fighter” Puzzle “Ghostbusters Beeline brand Strengthened and the Magical Meadow”Village “Smurfs Fighter” Puzzle “Ghostbusters Mobile Contents Add-on contents sales of new titles Digital sales of past titles Digital Package SoftwarePackage Japan Market Asian Market North American and European Markets Emerging Markets (South America, MiddleAfrica, East, etc.) Market (Sales) CAPCOM INTEGRATED REPORT 2015 INTEGRATED CAPCOM Corporate Data Contents and Editorial Policy and Editorial Contents Consolidated Statements of Changes in Net Assets Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Independent Auditor’s Report 2015 2 96 78 94 76 77 (Corporate Social Responsibility) Consumer Business Expansion Online Business Expansion 1 2 Growth Strategy Growth Strategy Separate Volume The Latest Development Report The COO Discussion of Medium-Term Business Strategies The COO Discussion of Medium-Term Business Stock Data Educational Support as a Game Company Environment and Society Corporate Governance on Conversation: An External Director’s Perspective Capcom’s Governance Dialogue Between an External Director and Institutional Investors Corporate Governance Structure and Initiatives Principal Discussions at Board of Directors Meetings in Fiscal 2014 Internal Management Structure and Initiatives Risk Management Creating Relationships with Shareholders and Investors Directors and Corporate Auditors Game Industry Characteristics Game from Messages Management of Performance Summary The CEO’s Discussion Medium-Term Goals and Progress Towards Our Strategy for Growth Financial Strategy According to the CFO Financial Strategy According Financial Section 11–Year Summary of Consolidated Financial Indicators Financial Review Consolidated Balance Sheets Consolidated Statements of Income / Consolidated Statements of Comprehensive Income Capcom’s Value Creation Creation Value Capcom’s Activities Strategy Conversation: An Analyst’s Perspective on Capcom’s for Growth Digital Contents Arcade Operations Amusement Equipments Other Businesses To Our Stakeholders (From the CEO & COO) (From the CEO To Our Stakeholders Capcom History Capcom’s Business Model Highlights Main Financial and Non-Financial Business Segments Highlights Business Performance Indicators 11-Year Summary of Consolidated Business Activities and Business Activities and Future Outlook CSR Activities 1 3 5 7 95 45 47 49 51 53 57 59 61 63 65 17 29 31 35 39 41 43 67 10 13 15 33 69 73 75 27 26 Market Data Subject Index Period and Scope Editorial Policy Fiscal Year Ended March 31, 2015 Ended March Year Fiscal Game market 1, 27, 28, 29 Diagram Arcade facilities market 34, 35, 36 Diagram Amusement equipments market 37, 38 Diagram To find out about our development, see Report Development Latest The 2015 Separate volume: To find out about the game industry glossary, see website official Capcom’s http://www.capcom.co.jp/ir/english/glossary/ To find out about ESG information, see P12, PP23–25, PP45–48, PP49–66 To find out about our business segments, see PP13-14, PP27-28, PP35-44 To find out about stakeholder opinions, see PP33–34, P46, PP49–50, PP51–52, P64 To find out about our performance, see P10, PP13–14, PP15–16, PP17–19, PP35–44 To find out about our management and financial strategies, see P9, PP19–20, PP21–22, P26, PP28–34 To find out about our business model and capital, see capital details) a guide to PP7–12 (PP7–8 provides To find out about our management environment and To find out about our management environment and market trends, see P1, PP17–20, PP29–32, PP35–44 This report reviews the fiscal year ended March 31, 2015 (April 1, 2014–March 31, 2015). When necessary, it also includes references to fiscal periods before and after this timeframe. Unless otherwise indicated, the scope of data presented in this report is on a consolidated basis. From this fiscal year forward, Capcom will issue From this fiscal year forward, substantially more “Integrated Report” containing in the past to provide non-financial content than shareholders, investors and all our stakeholders with a deeper understanding of Group management policies, business strategies and medium- to long-term value creation. This report was created according to the “International Integrated Reporting Framework” announced by the International Integrated Reporting Council (IIRC). This report includes numerous images and diagrams aimed at maximizing the readers’ ability to visualize content in a sincere effort to facilitate understanding. In addition to a print version, this report is also available online.

INTEGRATED REPORT 2015