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Annual Report 2016
for the fiscal year ended March 31, 2016
Nintendo Co., Ltd.

Table of contents

  • Page 1
    Annual Report 2016 for the fiscal year ended March 31, 2016 Nintendo Co., Ltd.

  • Page 2
    ...and cash flow ...6 2. Risk factors ...6 3. Research and development activities ...9 4. Analysis of financial position, operating results and cash flow ...10 III. Equipment and Facilities ...12 Overview of capital investments ...12 IV. Profile of the Company ...13 1. Members of the Board of Directors...

  • Page 3
    ... (%) Return on equity (ROE) (%) Price earnings ratio (PER) (Times) Net cash provided by (used in) operating activities (Millions of yen) (Millions of dollars) (94,955) (40,390) (23,114) 60,293 55,190 488 Net cash provided by (used in) investing activities (Millions of yen) (Millions of...

  • Page 4
    ... ¥113 to U.S.$1, the prevailing exchange rate on March 31, 2016. 2. Net sales do not include consumption taxes. 3. "Diluted net income per share" is not noted because the Company has not issued any dilutive shares. 4. "Return on equity" and "Price earnings ratio" for the 72nd and 74th fiscal years...

  • Page 5
    ...., Nintendo Software Technology Corporation, Retro Studios, Inc., Nintendo European Research and Development SAS, ND CUBE Co., Ltd., 1-UP Studio Inc., MONOLITH SOFTWARE INC., Mario Club Co., Ltd. - Manufacture Nintendo Co., Ltd. - Sale Nintendo Co., Ltd., Nintendo of America Inc., Nintendo of Canada...

  • Page 6
    ... Nintendo Co., Ltd. (the "Company") Concurrent positions held by directors Director Employee of the of the Company Company (number) (number) 1 - Loans Business transactions Leasing of fixed assets Name of company Location Capital stock or Investments in capital Description of principal business...

  • Page 7
    ...Concurrent positions held by directors Director Employee of the of the Company Company (number) (number) Loans Business transactions Leasing of fixed assets Nintendo Network Services Inc. Chiyoda-ku, Tokyo Millions of JPY 100 Other 100 - 4 Granted Entrusted management of network services of...

  • Page 8
    .... The figure-type and the card-type sold approximately 24.70 million units and approximately 28.90 million units, respectively. Furthermore, sales of additional download content for Nintendo 3DS and Wii U increased and total download sales reached ¥43.9 billion. Moreover, our first smart device app...

  • Page 9
    ... profitability. Furthermore, as the market for smart device gaming services is in the development stage, it is possible that Nintendo may face rapid structural changes or the imposition of new laws and regulations and, if unable to adapt to such changes, be affected in terms of its business...

  • Page 10
    ... on Nintendo's future operating results, share price and financial condition. (3) Risks around legal regulations and litigation • Product liability Nintendo manufactures its products in accordance with applicable quality control standards in locations of sale. However, large-scale product recalls...

  • Page 11
    ... examine the applicability of various technologies including interfaces such as touch panels and sensors, wireless communication, networks and security to the field of home entertainment. Nintendo is also devoted to the development of a gaming platform codenamed "NX" with a brand-new concept, which...

  • Page 12
    ... to engage in the development of new products for the future. 4. Analysis of financial position, operating results and cash flow All financial information contained below is based on the consolidated financial statements disclosed in the Annual Securities Report (Japanese only). Any forward...

  • Page 13
    ... ratio of total liabilities to cash and cash equivalents is 1.9 times. Major components of the working capital requirements include purchase expenses of materials and parts for manufacturing, advertising expenses and research and development expenses, and dividend and income tax payments. Moreover...

  • Page 14
    ...Overview of capital investments Nintendo develops, manufactures and distributes electronic entertainment products, and in the fiscal year ended March 31, 2016, it invested ¥10.414 billion (U.S.$92 million) which was mainly used for research and development facilities, and included intangible assets...

  • Page 15
    ... Manager, Entertainment 1963 Planning & Development Division (to present) Supervisor of Business Development Division, Development Administration & Support Division (to present) June 2016 Appointed as Managing Executive Officer (to present) April 1994 May 2012 July 2015 Joined the Company Outside...

  • Page 16
    ... Department No. 1, Osaka Regional Taxation Bureau August 2008 Registered as a certified tax accountant September 2008 Opened Yoshimi Mitamura Certified Tax Accountant Office June 2012 Appointed as Auditor of the Company June 2016 Appointed as Director as an Audit and Supervisory Committee Member...

  • Page 17
    ... Officer General Manager, Licensing Division Senior Executive Officer General Manager, Manufacturing Division Executive Officer General Manager, Platform Technology Development Division Executive Officer President, Nintendo of Europe GmbH Executive Officer President, Nintendo of America Inc. Name...

  • Page 18
    ... the resolution at the 76th Annual General Meeting of Shareholders held on June 29, 2016, for the purpose of strengthening the supervisory function of the Board of Directors, and thereby further promoting corporate governance. At the same time, the Company has introduced the Executive Officer System...

  • Page 19
    order to integrate objective viewpoints different from Directors appointed from within the company, and ensure appropriate audit and supervision over the execution of operations from an independent standpoint. Reference: Corporate Governance System - 17 -

  • Page 20
    ...of internal controls and financial reporting process of each division and department are appropriate and effective through internal audits, and proposes and suggests measures to make improvements, etc. The Company has a system to deal with antisocial forces that threaten social order and security at...

  • Page 21
    ... and provides them with timely reports regarding the matters designated by law. The Company's Internal Auditing Department provides the Audit and Supervisory Committee with internal audit reports in a timely manner and, furthermore, the Company's Directors and other employees report to the Audit and...

  • Page 22
    ... assets Cash and deposits Notes and accounts receivable - trade Securities Inventories Deferred tax assets Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings and structures, net Machinery, equipment and vehicles, net Tools, furniture...

  • Page 23
    ... benefit liability Other Total non-current liabilities Total liabilities Net assets Shareholders' equity Capital stock Capital surplus Retained earnings Treasury shares Total shareholders' equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign...

  • Page 24
    ... of securities Share of profit of entities accounted for using equity method Other Total non-operating income Non-operating expenses Sales discounts Foreign exchange losses Other Total non-operating expenses Ordinary income Extraordinary income Gain on sales of non-current assets Gain on sales of...

  • Page 25
    ...862 2,962 14,468 79 *1 Current fiscal year (From April 1, 2015 to March 31, 2016) (Millions of yen) 16,518 (4,663) (15,446) (97) *1 Profit Other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Share of other comprehensive income of...

  • Page 26
    ... fiscal year (from April 1, 2014 to March 31, 2015) (Millions of yen) Shareholders' equity Capital stock Balance at beginning of current period Cumulative effects of changes in accounting policies Restated balance Changes of items during period Dividends of surplus Profit attributable to owners of...

  • Page 27
    ... Valuation difference on available-for-sale securities Balance at beginning of current period Changes of items during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Net changes of items other than shareholders' equity Total...

  • Page 28
    ... Valuation difference on available-for-sale securities Balance at beginning of current period Changes of items during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Net changes of items other than shareholders' equity Total...

  • Page 29
    ...Consolidated statements of cash flows Previous fiscal year (From April 1, 2014 to March 31, 2015) (Millions of yen) Cash flows from operating activities Profit before income taxes Depreciation Increase (decrease) in allowance for doubtful accounts Increase (decrease) in net defined benefit liability...

  • Page 30
    ... or could be converted into U.S. dollars at this or any other rate of exchange. The accompanying consolidated financial statements are not intended to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally...

  • Page 31
    ...(straight-line method) is used. For other securities with market quotations, the market price method based on the market price, etc., on the account closing date is used (valuation difference is reported as a component of net assets and the cost of sales is calculated using the moving average method...

  • Page 32
    ... of net defined benefit liability and retirement benefit expenses. Assets in the Company' s defined benefit corporate pension plan are recorded as "Net defined benefit asset" under investments and other assets as the plan assets exceeded the retirement benefit obligations. (5) Standards of...

  • Page 33
    ...on hand, time deposit which can be withdrawn on demand and short-term investments, with little risk of fluctuation in value and maturity of three months or less of the acquisition date, which are promptly convertible to cash. Other important matters in preparing the consolidated financial statements...

  • Page 34
    ... is scheduled to be adopted from the beginning of the fiscal year ending March 31, 2017. 3. Impact of adopting the accounting standards and guidance The impact on its consolidated financial statements was under assessment as of the time the consolidated financial statements for the current fiscal...

  • Page 35
    ... "Share of profit of entities accounted for using equity method" which was included in "Other" under "Non-operating income" in the previous fiscal year, is separately listed from the fiscal year ended March 31, 2016, because of an increase in the amount' s materiality. The consolidated financial...

  • Page 36
    ... Current fiscal year (From April 1, 2014 (From April 1, 2015 to March 31, 2015) to March 31, 2016) Loss on retirement Loss on retirement Buildings and structures ¥ 323 million Buildings and structures ¥ 175 million Land 116 Software 164 Software Tools, furniture and 3 11 fixtures Tools, furniture...

  • Page 37
    ...1, 2014 to March 31, 2015) Restructuring loss for the year ended March 31, 2015 primarily consisted of impairment loss on non-current assets and extraordinary severance payment expenses associated with the restructuring of business in Europe. Current fiscal year (from April 1, 2015 to March 31, 2016...

  • Page 38
    ...31, 2015 23,297,005 (Summary of causes of changes) The increase is from acquisitions in line with buyback requests for shares less than one unit. 3. Matters concerning dividends (1) Amount of dividends paid Resolution Annual General Meeting of Shareholders held on June 27, 2014 Type of share Common...

  • Page 39
    ... 1, 2014 to March 31, 2015) Cash and deposits Time deposits with maturity of more than three months Short-term investments with maturity of three months or less Cash and cash equivalents ¥ 534,706 million (335,217) 82,050 ¥ 281,539 Current fiscal year (From April 1, 2015 to March 31, 2016) ¥ 570...

  • Page 40
    ... and market risk. Nintendo closely monitors the market price of such bonds and the financial position of the issuer and reviews their status on a regular basis. Stocks included in investment securities are mainly those of companies with which the Company has business relationships. These stocks are...

  • Page 41
    ...- - - Current fiscal year (As of March 31, 2016) Book value Cash and deposits Notes and accounts receivable - trade Short-term and long-term investment securities Held-to-maturity debt securities Other securities Total assets Notes and accounts payable - trade Income taxes payable Total liabilities...

  • Page 42
    ... deposits Corporate and government bonds Other Total Current fiscal year (As of March 31, 2016) (Millions of yen) Due within one year Cash and deposits Notes and accounts receivable - trade Short-term and long-term investment securities Held-to-maturity debt securities Certificate of deposits Money...

  • Page 43
    (Millions of dollars) Due within one year Cash and deposits Notes and accounts receivable - trade Short-term and long-term investment securities Held-to-maturity debt securities Certificate of deposits Money held in trust Corporate and government bonds Other securities with maturity Certificate of ...

  • Page 44
    ...180,838 (41) (0) (41) 23,347 Current fiscal year (As of March 31, 2016) Book value Securities whose book value on the consolidated balance sheets exceeds their acquisition cost Equity securities Debt securities Other Sub-total Securities whose book value on the consolidated balance sheets does not...

  • Page 45
    ... fiscal year (From April 1, 2014 to March 31, 2015) Amount sold Total gain 124 2 127 (Millions of yen) Total loss 16 - 16 Debt securities Other Total 192,626 78,469 271,096 Current fiscal year (From April 1, 2015 to March 31, 2016) Amount sold Debt securities Other Total 430,885 155,922 586,807...

  • Page 46
    ... year Fair value Unrealized gain (loss) Current fiscal year (As of March 31, 2016) (Millions of yen) Classification Type of transaction Exchange forward contracts Selling Canadian Dollar Selling British Pound Currency options Written call options U.S. Dollar [Premium] Transactions other than market...

  • Page 47
    ...fair value as of March 31, 2015 and 2016 is calculated based on price quoted by correspondent financial institutions. Amounts presented in square parentheses [ ] above are option premiums. Retirement benefits 1. Summary of retirement benefit plans adopted The Company has a defined benefit corporate...

  • Page 48
    ... 31, 2015) Current fiscal year (From April 1, 2015 to March 31, 2016) (Millions of yen) 251 65 (9) (19) (67) (0) 221 (Millions of dollars) 2 0 (0) (0) (0) (0) 1 Beginning balance of net defined benefit liability Retirement benefit expenses Retirement benefit payment Contribution into plan Other...

  • Page 49
    ... year (As of March 31, 2015) Stocks Bonds Other Total 40% 49 11 100 Current fiscal year (As of March 31, 2016) 37% 57 6 100 b. Method for establishing expected long-term return rate on plan assets In order to determine expected long-term return rate on plan assets, the present as well as expected...

  • Page 50
    ... Research and development expenses Operating loss carryforwards for tax purposes Net defined benefit liability Accounts payable - other and accrued expenses Revenue recognition for tax purposes Unrealized intra-group profit and write-downs on inventory Other Deferred tax assets subtotal Valuation...

  • Page 51
    ... information The main business of Nintendo is developing, manufacturing, and distributing handheld and home console hardware systems and related software. Development and manufacturing of products for worldwide use are primarily done by the Company. The Company distributes products in Japan while...

  • Page 52
    Current fiscal year (From April 1, 2015 to March 31, 2016) 1. Information about products and services (Millions of yen) Handheld Hardware Sales to third parties 113,239 Home Console Hardware 102,404 Handheld Software 109,179 Home Console Software 92,345 Other 87,290 Total 504,459 2. Information by ...

  • Page 53
    ... shareholders Profit attributable to owners of parent related to common shares Average number of shares (common shares) ¥ 41,843 million - ¥ 41,843 million 118,373 thousand shares Significant subsequent events Not applicable. (v) Supporting schedules to the consolidated financial statements...

  • Page 54
    ... the total of liabilities and net assets as of the beginning and end of the fiscal year ended March 31, 2016. (2) Others Quarterly information of the fiscal year ended March 31, 2016 (Cumulative period) Net sales Profit before income taxes Profit attributable to owners of parent Net income per share...

  • Page 55
    ... Shareholders The Annual General Meeting of Shareholders for the fiscal year ended March 31, 2016 was held on June 29, 2016 at Nintendo Co., Ltd. in Kyoto, Japan. Independent Auditor PricewaterhouseCoopers Kyoto Kyoto, Japan Contact Information Investor Relations Investor Relations Group Corporate...