To Our Stakeholders (From the CEO & COO) ’s Value Message from Growth Strategy Business Activity ESG Information Financial and Creation Activities Management Achievements Corporate Data

Promoting Growth Strategies and Governance Reforms Aimed at Enhancing Corporate Value

Creating Entertaining Games that Continue to Excite People Around the World –––– This is the cornerstone of Capcom’s business activities and the source of our corporate value. Through our business activities, we bring the Company economic benefits while providing society with new value. We believe the value of a corporation stems from shared value creation. As the game market expands globally, in addition to pursuing short-term profit, Capcom is promoting growth strategies from a medium- to long-term perspective in order to continue enhancing corporate value into the future. Going forward, we will transform our fundamental revenue model from a one-time sale “transactional model” to an ongoing “recurring revenue model,” while at the same time thoroughly executing our Single Content Multiple Usage strategy and constructing a portfolio to achieve stable earnings. We will also engage in governance reforms to control risks that increase proportionally with the acceleration of our growth strategies, thoroughly implement management visualization and systemization and create a structure enabling rational management decisions based on an institutional design with external directors at its core. Furthermore, we will make an effort to strengthen non-financial capital not reflected in quantitative data. In addition to enhancing Capcom’s highly original content, the source of our competitive edge, and the development structure that creates it, we will build positive relationships with business partners, regional communities, employees and a variety of stakeholders among other important “capital” comprising Capcom corporate value. Through these various initiatives, we believe we can contribute to shareholder and investor profits by becoming a company of sustainable growth.

Corporate Value Enhancement

Increase Financial Capital Increase Non-Financial Capital • Achieve medium-term business goals • Enhance development structure • Increase ROE • Increase stock of IPs • Increase net cash • Build relationships with stakeholders

Promote Growth Strategy Promote Governance Reforms Kenzo Tsujimoto Haruhiro Tsujimoto Chairman and President and Chief Executive Officer (CEO) Chief Operating Officer (COO)

11 CAPCOM INTEGRATED REPORT 2016 CAPCOM INTEGRATED REPORT 2016 12 Capcom’s Business Model Capcom’s Value Message from Growth Strategy Business Activity ESG Information Financial and Creation Activities Management Achievements Corporate Data

Contributing to the Creation of a Rich Culture and Society through Game Development and Multiple Usage

The use of advanced development capabilities to create original contents for branding is the source of Capcom’s long-term earnings. Capcom pursues high added value through business activities making use of abundant capital (inputs) within and outside the Company, regularly developing and releasing products (outputs) for multiple game platforms and media. The value (outcome) generated from these activities is provided to society and reinvested for the future. Through these activities, we make an effort to respond to social issues while expanding corporate value.

Social Issues INPUT Business Activities OUTPUT/OUTCOME Impact on Society

Use games to invigorate Generational and Human Capital New Title Production Flow Company-wide communications going interregional World’s top game Planning Development Quality Assurance Sales and Promotion Increase intellectual beyond location and communication gaps development human property (technology & generation resources new series) New technological Expand global fan segment development structure Stable (VR, etc.) structure for series Contribute to VR and New industries development simulation technology created from new Projects are started after Necessary tasks are allocated, Checks are conducted from Online promotions and user 60-Month Title advances and technologies Intellectual Capital a two-step approval process. including the creation of the user’s perspective by events conducted to ensure Once concepts and plans are a proprietary development a team comprising several the game world is always top Development Plan industry creation Product brand power refined, the project is engine and arrangement of hundred people. This involves of mind. approved for trial by planners, designers, not only a bug check, but also 52-Week Map Cumulative total of 71 management before full programmers and sound verification of game quality development. creators. Efforts are made to and ease of game play. million-seller titles improve quality and ensure Digital Contents Overconcentration development efficiency. Expand new titles in large cities Export Japan game Production Capital Increase catalog sales Declining regional Growth Strategy culture globally 1 Increase digital populations Cutting-edge Popular Capcom content Consumer Business download ratio development environment Expansion Expand Mobile and PC Games Utilization of assets Please refer to pages 37–38 previously purchased Increase collaborations Game with companies in Asia Utilize characters to Contents industry from other companies multi-platform Growth Strategy 2 stimulate interest in promotion [Canada] Net sales as of March 31, 2016 CAPCOM GAME STUDIO development Overhaul the regional communities VANCOUVER, INC. New users increase as Home video Digital download PC Online Mobile BEELINE INTERACTIVE Online Business online content grows games contents Contents billion CANADA, INC. Please refer to pages 39–40 yen [Japan] 52.5 K2 CO., LTD. Utilize arcades Senior citizen Single Content as a place where social isolation Multimedia Social Capital development Multiple Usage seniors can meet Core fans of content Create a variety of content derived from a single hit title Overseas affiliate Multimedia deployment Movies Arcade game Publishing Arcade Operations Events Character accelerates as users increase Net sales as of March 31, 2016 publishers Hollywood movies, machines Strategy books, Shopping centers, Concerts, merchandising Shortage of human animated movies, Video games, illustrated compilations, large-scale facilities theatrical productions Figures, T-shirts, Domestic cooperating Increase the number of resources involved CG movies pachinko and pachislo comics Food, etc. companies billion young people who want to with intellectual yen become game creators property Single Content Multiple Usage 24.4

13 CAPCOM INTEGRATED REPORT 2016 CAPCOM INTEGRATED REPORT 2016 14 Capcom History Capcom’s Value Message from Growth Strategy Business Activity ESG Information Financial and Creation Activities Management Achievements Corporate Data

From Capcom of Japan 77,021 to Capcom of the World million yen

Capcom Sales Note: 1983–1988: Fiscal years ended December 31 1989–2016: Fiscal years ended March 31

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Genesis Big Hits Drive Business Expansion Going Global Multimedia

In 1983, Capcom Co., Ltd., was established in Osaka. The Nintendo In the 1990s, the arrival of Super NES prompted Capcom to formally In 2000, Capcom listed its shares on the First Section of the Tokyo Stock With the adoption of smartphones and tablets, the market for game Entertainment System (NES) came out that same year, but it was enter home video game development. Numerous hit titles were created Exchange. In the 2000s, Capcom created one hit title after another that apps not requiring consoles is growing rapidly. Capcom established difficult to create high-quality arcade-level content for, so Capcom that drew on Capcom’s arcade game development expertise. The Single gained popularity overseas. The Hollywood movie version of Resident Evil Beeline, a development company for smartphone game apps, which focused business development on the creation of arcade games using Content Multiple Usage strategy was launched in 1994 with the release earned 102 million dollars globally, part of a five title hit series that created hits including Smurfs’ Village. In recent years, Capcom has the proprietary high-spec circuit board “CP System.” of a Hollywood movie and TV animation series based on . continues to spread the Capcom brand throughout the world. focused efforts on PC online games and digital download contents.

1983 1992 2001 2010 Released our first originally Released Street Fighter II Released Onimusha for Distribution of app developed coin-op Little League. for Super NES. PlayStation 2. The first game for Smurfs’ Village for iOS began. PlayStation 2 that becomes It became the top download in a million-seller in Japan. approximately 100 countries around the world. 1984 1993 Released Devil May Cry for PlayStation 2. Released our first arcade Released Breath of Fire video game Vulgus. for Super NES. 2013 2005 Released Monster Hunter 4 for Released Sengoku BASARA for Nintendo 3DS. Return of the 1985 1996 PlayStation 2. “Monster Hunter Craze” selling Released our first home video Released Resident Evil for more than four million units. game 1942 for Nintendo PlayStation, a long selling title Released Dead Rising 3 the first Entertainment System (NES). which had record breaking sales, 2006 title in this series for One. and established the genre of More than one million units sold. survival horror. Released Dead Rising for . Became a million-seller, 1987 unprecedented for Released Mega Man for NES. a new title created for new game console.

Game Industry History 1983 1990 1994 2000 2005 2010 2012 2013 2013 The Nintendo Entertainment System (NES) was Next-generation Super NES PlayStation was launched. PlayStation 2 was launched. Microsoft Corporation Smartphone U was PlayStation 4 was was launched to massive success. was launched. 3D game popularity skyrockets. launched the Xbox 360. adoption increases, launched. launched. launched. game apps not requiring a game console became popular.

“Nintendo Entertainment System”, “Super NES”, logo and Wii U are registered trademarks of Nintendo Co., Ltd. , and “PlayStation” are registered trademarks of Computer Entertainment Inc. 15 CAPCOM INTEGRATED REPORT 2016 is a registered trademark of Sony Computer Entertainment Inc. “SONY” is a registered trademark of Sony Corporation. © Sony Computer Entertainment Inc. CAPCOM INTEGRATED REPORT 2016 16 Financial and Non-Financial Highlights Capcom’s Value Message from Growth Strategy Business Activity ESG Information Financial and Creation Activities Management Achievements Corporate Data

Financial Highlight

Please refer to “11-Year Summary of Consolidated Financial Indicators” on pages 77–78.

Operating Income/Operating Margins Net Income Attributable to Owners of the Parent (Millions of yen) Dividend per Share/Dividend Payout Ratio

Operating Income (Millions of yen) Operating Margins (%) Dividend per Share (Yen) Dividend Payout Ratio (%)

12,029million yen 15.6 % 7,745 million yen 40.0yen 29.0 % 13.7% UP 0.9point DOWN 17.1% UP ±0 5.0point DOWN

16.5 14,618 15.8 15.9 8,063 98.0 77.5 14,295 15.0 15.6 7,807 7,750 7,745 65.5 13,121 14.6 16.0 27.9 22.6 26.7 30.5 34.5 34.0 29.0 12,318 12,029 12.9 6,941 6,723 6,616 10,299 10,5822 5,852 9,602 10,151 10.8 10.1 40.00 40.00 40.00 40.00 40.00 40.00 9.4 8.4 35.00 35.00 30.00 30.00 6,580 3,444 5,587 2,973 20.00 2,167

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160 2012201120102009200820072006 2013 2014 2015 20160 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (Years ended Marcha 31) (Years ended Marcha 31) (Years endede March 31) (Years ended March 31)

In line with structural reforms conducted in the fiscal year ended Marchc 2004, operating income increased steadily until the fiscal year ended March 2009.0 In Performance was sluggish in the fiscal years ended in March 2010,2 2013 Capcom has its fundamental dividend policyo of providing a continued and the fiscal year ended March 2010, the postponed release of major titlesl and the failure of some titles to meet sales targets overseas resulted in a temporarypo and 2014, as (1) a complete overhaul to the Amusement Equipments’u stable dividend to the shareholders. In accordancecc with its policy, an annual decline in income. In the fiscal year ended March 2011, we promotedo profit structure reforms aimed at more efficient development investment.t We underperforming profit structure, (2) development structure revisionse in dividend of 20 yen per share was paid fromr the fiscal year ended March promoted streamlined development by transitioning to in-house productiond and strengthened our digital download strategy in response to rapid changesg in line with enhanced digital downloads in the Consumer businessi and 1998 to that ended March 2006. Cash ddividend per share for the fiscal the market beginning in the fiscal year ended March 2013. As a result,t operating income and operating margins underperformed until the fiscal year endede (3) strengthened Mobile Contents business management capabilitiesa in year ended March 2007 to 2008 was raiseda to 30 yen thanks to its stable March 2014 while these reforms were implemented. However, in the fiscal year ended March 2015, the operating margin improved substantially to 16.5%6 line with development organization integration resulted in the recognitionr revenue base brought by its structural reform.ef Moreover, we continued to due to the effect of improvements in the cost of sales ratio resultingg from these reforms. In the fiscal year ended March 2016, although the cost to sales of special losses on restructuring and business restructuring expenses. incrementally increase dividend payments in line with earnings based on ratio temporarily worsened in the Amusement Equipments business, Consumer business growth caused operating income to increase, resulting in operating From the fiscal year ended March 2015, income increased two years in a our policy of providing stable dividends aiming for a payout ratio of 30%; margins of 15.6%. row due to the benefits realized from development organization reforms. from the fiscal year ended March 2009, the annual dividend was increased to 35 yen and again up to 40 yen since the fiscal year ended March 2011.

Net Sales (Millions of yen) Capital Investments Costs (Millions of yen) R&D Investment Costs/Internal R&D Ratio Return on Equity (ROE) (%)

R&D Investment Costs (Millions of yen) Internal R&D Ratio (%) million 77,021million yen 5,937million yen 27,255 yen 69.9% 10.6 % 19.8% UP 6.7% UP 7.7% UP 0.1point DOWN 0.8point UP

102,200 5,937 64.1 70.0 69.9 19.3 97,716 94,075 5,564 54.8 55.2 91,878 47.7 47.9 15.8 83,097 82,065 14.3 74,542 77,021 13.8 13.8 70,253 30,648 30,9788 66,837 64,2777 3,804 11.5 26,086 26,691 27,255 10.6 3,166 3,077 25,301 9.8 19,744 19,126 2,240 2,252 18,458 2,061 5.4 1,600 1,636 1,725 12,288 13,068 3.8 4.9

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2012201120102009200820072006 2013 2014 2015 2016 (Years ended Marcha 31) (Years endedd March 31) (Yearse ended March 31) (Years endedd March 31)

For the four fiscal years beginning in the fiscal year ended March 2005,0 Capcom’s capital investment is mainly used to (1) purchase developmento At Capcom, we believe the generation of creative and originalg content Although net assets increased between the fiscal years ended MMarch net sales increased on the stability of popular titles in the Consumerm equipment, (2) expand business offices in Japan and overseas and (3(3) open is the source of corporate growth, thus 80% or more off our annual 2007 and March 2009, stable net income resulted in ROE of aroundr business. In the fiscal years ended March 2010 and March 2012, net new amusement arcades. From the fiscal year ended March 20077 to the development investments are allocated to the Digital ContentsC 14%. In the fiscal years ended in March 2010, 2013 and 2014,4, this sales declined due to the postponed release of titles. However, theh fiscal year ended March 2009 and again in the fiscal year endedd March business. Recently in the Consumer segment, developmentm costs figure declined due to decreases in net income from the recognitionn promotion of structural reforms in the Consumer business resultede in 2013, capital investment was high due to development environmentn have been trending higher in line with increasingly high-performance- of special losses on restructuring and business restructuring expenses.p Capcom achieving net sales of 100 billion yen in the fiscal year endedn improvements in line with the transition to next generation game coconsoles hardware, but we have been able to control these increases by From the fiscal year ended March 2015, ROE once again improved on March 2014 for the first time. Although net sales decreased significantlya in the Consumer area. In the fiscal years ended March 2015 and March promoting development efficiency through increased employee the elimination of special losses and improved profitability, as we in the fiscal year ended March 2015 due to a decline in pachisloo 2016, capital investments increased substantially in line with an increase utilization rates. Although costs have increased significantly since the remain on track to meet our March 2017 goal of a three-year average machine releases, net sales increased in the fiscal year ended March in development employees required to expand our title lineup and the fiscal year ended March 2008, we expect them to remain around 30 of 8–10%. 2016 on the release of major titles in the Consumer business. construction of two new development buildings. billion yen going forward.

17 CAPCOM INTEGRATED REPORT 2016 CAPCOM INTEGRATED REPORT 2016 18 Financial and Non-Financial Highlights Capcom’s Value Message from Growth Strategy Business Activity ESG Information Financial and Creation Activities Management Achievements Corporate Data

Non-Financial Highlights

Human Capital Production Capital Intellectual Capital Social Capital

Content Developers (People) Software Shipments by Hardware Manufacturer (Thousands of units) Cumulative Million-Seller Titles (Titles) Number of Company Visit Supported and On-Site Classes Conducted (Times) Sony Nintendo Microsoft

million million million 2,052people 3.8 units 4.2 units 0.65 units 71titles 55times million million million 150people UP 1.1units UP 0.3 units UP 0.55 units DOWN 6titles UP 4times UP

2,052 4,200 71 63 1,902 65 1,808 4,300 62 55 51 1,623 1,640 3,200 54 57 1,455 585 3,700 50 43 1,3399 2,800 1,700 3,100 2,950 44 45 39 42 35 1,047 1,132 36 39 3,250 5,470 3,150 3,950 650 29 809 1,200 25 705 728 2,600 2,000 Microsoft 4,200 5,050 18 12,700 4,200 Nintendo 9,530 8,000 9,250 8,300 7,800 3,900 6,800 5,700 4,400 2,700 3,800 Sony 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2012201120102009200820072006 2013 2014 2015 20166 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160 2008 2009 2010 2011 2012 2013 2014 2015 2016 (Years endedd March 31) (Years ended March 31) (Years ended Marcha 31) (Years ended March 31)

Developers engaged in the creation of content—the source off our In the Digital Contents business, Capcom has established a basic Capcom boasts world-leading development capabilities, as evidencedn Video games are a comparatively new cultural phenomenono about competitive advantage—account for 70% of all Capcom employees.p “multiplatform strategy” aimed at providing content for all game by our numerous intellectual properties. Our content is popular around which there is little academic research. Rather thann examining To promote our core Single Content Multiple Usage strategy,, we platforms (hardware), ensuring steady sales of software for all typess the world, and up to now, a total of over 70 titles have sold over one educational aspects, there is a strong focus on the detrimentalm effects of strive to retain talented developers through aggressive hiringg and of hardware. Since the fiscal year ended March 2005, hardware hass million units. In order to increase our brand value and profitability, we violent content. At the same time, game developer is a popular career training efforts, resulting in a nearly three-fold increase in developersve become increasingly diverse amid the accelerating spread of each leverage this in-house produced capital across a wide range of media, choice. Given these conditions, Capcom proactively conducts on-site in the past 10 years. Above all, switching to a structure focused on type of hardware in various regions. By providing titles based on hardware including PC Online and Mobile, pachislo machines, movies and toys classes and company visits for elementary and middle school students to internal production in the fiscal year ended March 2012 to strengthen prevalence and attributes, we maximize sales opportunities. in promoting our Single Content Multiple Usage strategy. teach them about working at a video game company and the healthy and streamline development has enabled us to add approximately relationship with video games. As of the fiscal year ended March 2016, 100 new developers each year. 9,095 children and students have participated in a total of 91 activities.

TOPICS TOPICS TOPICS TOPICS Construction of R&D Building #2 Completed Game Industry Group Participation in the in January 2016 Formulation of Voluntary Regulations and With a simple and functional design, R&D Building #2 contains the Awareness Activities latest equipment, including one of the largest motion capture In line with the recent rapid growth in games for smartphones, studios in Japan, and incorporates a seismic-absorbing structure there are increasing needs to further strengthen the establishment designed to guard against earthquakes and other natural disasters. of the game usage environment. Thus, as a member of the In addition, we continue to hire approximately 100 developers each Computer Entertainment Supplier's Association (CESA), Capcom year to expand our title lineup and promote growth strategies. participated in the formulation of guidelines for the management In conjunction with our existing R&D building, this new building of methods providing random items in networked games. We consolidates the development department and heightens proactively participate in promoting the understanding of voluntary development mobility and leadership, promoting enhanced regulations and engage in awareness activities to ensure games are development structure efficiency. played with safety and peace of mind.

Making the Workplace Comfortable Mega Hit Monster Hunter X (Cross) Sells for Women 3.3 Million Units Capcom is engaged in improving the employment environment for The Monster Hunter series features hunting action games in which women, promoting projects in which both women and men players face off against giant monsters in magnificent natural participate and the proactive hiring of non-Japanese employees. In settings, and is one of the most popular IPs in Japan. Monster particular, with respect to improving the employment environment Hunter X (Cross), released in the fiscal year under review, maintained for women, we have introduced systems that promote the the series’ world and game characteristics while offering a diverse utilization of paid leave before and after childbirth, childcare leave and free playing style that proved popular, resulting in sales of 3.3 and shortened working hours. In fiscal 2016, we promoted the million units. Once again, the series ongoing evolution continues to establishment of childcare facilities within the company. Although appeal to new users, increasing brand value over the long-term. the Japanese game industry is characterized as a “man’s world,” approximately 20% of our development staff are women, and women account for 10.3% of employees in management positions.

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