2014 Corporate Philosophy To spread happiness across the globe by providing unforgettable experiences This philosophy represents our company’s mission and the beliefs for which we stand. Each of our customers has his or her own definition of happiness. The Square Enix Group provides high-quality content, services, and products to help those customers create their own wonderful, unforgettable experiences, thereby allowing them to discover a happiness all their own. Management Guidelines These guidelines reflect the foundation of principles upon which our corporate philosophy stands, and serve as a standard of value for the Group and its members. We shall strive to achieve our corporate goals while closely considering the following: 1. Professionalism We shall exhibit a high degree of professionalism, ensuring optimum results in the workplace. We shall display initiative, make continued efforts to further develop our expertise, and remain sincere and steadfast in the pursuit of our goals, while ultimately aspiring to forge a corporate culture disciplined by the pride we hold in our work. 2. Creativity and Innovation To attain and maintain new standards of value, there are questions we must ask ourselves: Is this creative? Is this innovative? Mediocre dedication can only result in mediocre achievements. Simply being content with the status quo can only lead to a collapse into oblivion. To prevent this from occurring and to avoid complacency, we must continue asking ourselves the aforementioned questions. 3. Harmony Everything in the world interacts to form a massive system. Nothing can stand alone. Everything functions with an inevitable accord to reason. It is vital to gain a proper understanding of the constantly changing tides, and to take advantage of these variations instead of struggling against them. We shall continue to work towards harmony and serve as an integral part of this ever-fluctuating system. In order to achieve ideal performance levels, we as individuals, shall aim for a mutual respect amongst our coworkers, remain conscious of the duties assigned us, and place an emphasis on teamwork. As a corporate organization, we shall work diligently to maintain an optimal balance culminating in the ultimate satisfaction of all our stakeholders, including customers, shareholders, counterparties, and employees. As a business entity, we shall contemplate what functions we are to perform within the realm of industry, while acting in a manner that ensures the mutual harmony and benefit of all parties within it. Finally, as a member of society, we shall comply with laws and regulations while fulfilling our civic obligations, including community involvement and environmental conservation. CONTENTS Disclaimer Regarding Forward-Looking Statements Statements in this annual report with respect to the current plans, estimates, strategy, 01 Financial Highlights and beliefs of SQUARE ENIX HOLDINGS CO., LTD., and consolidated subsidiaries [collectively ”SQUARE ENIX HOLDINGS”] include both historical facts and forward- 02 President’s Message looking statements concerning the future performance of SQUARE ENIX HOLDINGS. Such information is based on management’s assumptions and beliefs in light 10 Directors and Auditors of the information currently available and, therefore, involve risks and uncertainties. Actual results may differ materially from those anticipated in these statements due to 11 Message from the New Director the influence of a number of important factors. Such factors include but are not limited to: [1] general economic conditions in 12 Review of Operations Japan and foreign countries, in particular levels of consumer spending; [2] fluctuations in exchange rates, in particular the exchange rate of the Japanese yen in relation to 16 Creator’s Voice the U.S. dollar, the euro and others, which SQUARE ENIX HOLDINGS uses extensively in its overseas business; [3] the continuous introduction of new products and rapid 22 Corporate Governance technical innovation in the digital entertainment industry as well as SQUARE ENIX HOLDINGS’s ability to continue developing products and services accepted by 28 Financial Section consumers in the intensely competitive market, which is heavily influenced by subjective and quickly changing consumer preferences. 70 Corporate Data 71 Investor Information Financial Highlights SQUARE ENIX HOLDINGS CO., LTD. and Consolidated Subsidiaries Years ended March 31 Thousands of Millions of Yen U.S. Dollars 2014 2010 2011 2012 2013 2014 For the Year 1 ¥127,896 ¥147,981 ¥ 155,023 $1,506,254 Net sales ¥ 192,257 ¥125,27 5 10,713 (6,081) 10,543 102,441 Operating income (loss) 28,235 7,32 0 10,297 (4,378) 12,534 121,786 Recurring income (loss) 27,822 5,39 3) 6,060 (13,714) 6,598 64,112 Net income (loss) 9,509 (12,04 At Year-end 6 ¥213,981 ¥202,509 ¥ 216,617 $2,104,714 Total assets ¥ 270,529 ¥206,33 3 137,297 121,636 127,676 1,240,540 Total net assets 154,258 135,14 Yen U.S. Dollars Per Share of Common Stock 6) ¥ 52.66 ¥ (119.19) ¥ 57.28 $ 0.56 Net income (loss) ¥ 82.65 ¥ (104.6 6 1,177.87 1,043.62 1,095.78 10.65 Total net assets 1,326.82 1,160.6 % Key Ratios % 8.4% (4.1)% 6.8% Operating income margin 14.7% 5.8 8.0 (2.9) 8.1 Recurring income margin 14.5 4.3 4.5 (10.7) 5.4 Return on equity 6.3 (8.4) 63.3 59.3 58.3 Equity ratio 56.4 64.7 ated using the currency exchange rate at March 31, 2014 of ¥102.92=US$1. Note: For the convenience of readers, amounts in U.S. dollars have been transl on Equity (%) Operating Income Margin/Recurring Income Margin (%) Return 10 20 5 15 0 10 -5 5 -10 0 -15 -5 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Operating Income Margin Recurring Income Margin 01 ©2014 SQUARE ENIX CO., LTD. All Rights Reserved. President’s Message Yosuke Matsuda President and Representative Director Oct. 2001 Senior Vice President, SQUARE CO., LTD. (currently SQUARE ENIX HOLDINGS CO., LTD.) Apr. 2003 Senior Vice President and General Manager, Accounting and Finance Division Jun. 2004 Director, Accounting and Finance Mar. 2013 Senior Executive Managing Director and Representative Director Jun. 2013 President and Representative Director (incumbent) (Significant Positions Concurrently Held) President and Representative Director, SQUARE ENIX CO., LTD. President and Director, SQUARE ENIX OF AMERICA HOLDINGS, INC. (the Group’s intermediate holding company in the Americas) Director, SQUARE ENIX OF EUROPE HOLDINGS LTD. (the Group’s intermediate holding company in Europe and other regions) Deputy Chairman of the Board, SQUARE ENIX (China) CO., LTD. (the Group’s operating company in China) 02 Let me extend my sincere gratitude for your continued understanding and support for the management of the Square Enix Group. It’s been one year since I was appointed to the position of President and Representative Director last June. In addition to reporting on the recent progress, I would like to take this opportunity to report to our shareholders on the Group’s progress of our businesses during the period, and outline our future strategic directions. On a consolidated basis, net sales during the fiscal year recovery through our existing lineup. Sales of console game ended March 2014 totaled ¥155 billion, while operating titles, including “FINAL FANTASY X/X-2 HD Remaster,” income was ¥10.5 billion and net income amounted to ¥6.5 “Thief” (Europe and North America only) and “TOMB RAIDER: billion. In response to our inferior financial results in the DEFINITIVE EDITION,” were better than our original plan. fiscal year ended March 2013, the Group made concen- In the category of content for smart devices and PC trated efforts together for financial recovery to achieve these browser platforms, “SENGOKU IXA,” a browser game, figures as a result. This achievement is entirely owing to continued to contribute to earnings. Meanwhile, the your support. Again, I would like to express my thanks for smartphone game “Kaku-San-Sei Million Arthur” was your help. expanding across platforms and regions: the game became The Digital Entertainment segment, our Group’s core an instant hit in Korea, Taiwan and mainland China, and a business, is currently undergoing a business reform, which I PlayStation Vita edition of the game was released. will discuss in detail later on. For the fiscal year ended March “DRAGON QUEST MONSTERS SUPER LIGHT,” which was 2014, we actively reformed our development policy and launched domestically in January 2014, also made an organization system, focusing on our European and North encouraging start. American studios, and simultaneously worked on earnings “TOMB RAIDER: DEFINITIVE EDITION” TOMB RAIDER ©2014 SQUARE ENIX LTD. All Rights Reserved. “FINAL FANTASY X/X-2 HD Remaster” ©2001-2004, 2013 SQUARE ENIX CO., LTD. All Rights Reserved. CHARACTER DESIGN: TETSUYA NOMURA 03 President’s Message sales in the previous period. In addition, with regard to the development and sales of amusement equipment, we released brand-new machines such as “LORD of VERMILION III,” “GROOVE COASTER” (arcade version), “GUNSLINGER STRATOS 2” and others, which obtained favorable results. In this manner, the Amusement segment has begun to generate stable revenues, and we shall maintain that ongoing momentum. The Publication segment’s results for the fiscal year ended March 2014 were slightly down from the previous period, due in part to several popular manga titles having ended their runs. The fiscal year ending March 2015 will be a time for us to stock up on titles in preparation for our next leap, and we should begin to see results from that stock in the latter half of the fiscal year ending March 2015. The Merchandising segment is steadily generating sales Three major MMO titles—“FINAL FANTASY XIV: A and profit. While its sales are relatively small, this segment is REALM REBORN,” which began operation last August, considered important from the perspective of enhancing our “DRAGON QUEST X,” which was launched in August IP offerings, which include original pieces.