SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

OR

For the fiscal year ended March 31, 20122013

OR

OR

Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .

For the transition period from                      to                     

Commission file number: 1-31452

Konami Kabushiki Kaisha

(Exact name of registrant as specified in its charter)

KONAMI CORPORATION

(Translation of registrant’s name into English)

Junichi Motobayashi, +81-3-5770-0573, +81-3-5412-3300,

7-2, Akasaka 9-chome, Minato-ku, Tokyo 107-8323, Japan

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of March 31, 2012, 138,620,1522013, 138,618,060 shares of common stock were outstanding, including 443,015428,861 shares represented by 443,015428,861 American Depositary Shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer    x                Accelerated filer    ¨                Non-accelerated filer    ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  x        International Financial Reporting Standards as issued by the International Accounting Standards Board  ¨        Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  ¨    Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).    Yes  ¨    No  x

TABLE OF CONTENTS

As used in this annual report, references to “the Company” are to KONAMI CORPORATION and references to “KONAMI,” “we,” “our” and “us” are to KONAMI CORPORATION and its subsidiaries, unless the context otherwise requires.

As used in this annual report, “fiscal 2012”2013” refers to our fiscal year ended March 31, 2012,2013, and other fiscal years are referred to in a corresponding manner.

As used in this annual report, “U.S. dollar” or “$” means the lawful currency of the United States of America, “€” or “Euro” means the lawful currency of the member states of the European Union and “yen” or “¥” means the lawful currency of Japan.

As used in this annual report, “U.S. GAAP” means accounting principles generally accepted in the United States, and “Japanese GAAP” means accounting principles generally accepted in Japan.

As used in this annual report, “ADS” means an American Depositary Share, and “ADR” means an American Depositary Receipt.

PART I

Not applicable.

Not applicable.

A.    Selected Financial Data.

The following tables include selected historical financial data as of and for the fiscal years ended March 31, 20082009 through 2012,2013, derived from our audited consolidated financial statements prepared in accordance with U.S. GAAP. You should read the selected financial data below in conjunction with Item 5 of this annual report and our audited consolidated financial statements and information prepared in accordance with U.S. GAAP which are included in this annual report.

Selected Financial Data Prepared in Accordance with U.S. GAAP

Exchange Rate Data

Fluctuations in exchange rates between the Japanese yen and U.S. dollar and other currencies will affect the U.S. dollar and other currency equivalent of the yen price of our shares and ADSs and the U.S. dollar amounts received on conversion of cash dividends. We have translated some Japanese yen amounts presented in this annual report into U.S. dollars solely for your reference information. Unless otherwise noted, the exchange rate used for the translations was ¥82.19 per $1.00 which was the mid price for telegraphic transfer of U.S. dollars for yen quoted by The Bank of Tokyo-Mitsubishi UFJ, Ltd. as of March 31, 2012, the last business day on or prior to the date of our most recent annual consolidated financial statements. The translation should not be construed as a representation that the yen amounts have been, could have been, or could in the future be converted into U.S. dollars at the above or any other rate.

The following table presents the noon buying rates for Japanese yen per $1.00 in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York for and as of the end of each period indicated.

As of July 6, 2012,August 23, 2013, the noon buying rate was ¥79.61¥98.57 per $1.00.

B.    Capitalization and Indebtedness.

Not applicable.

C.    Reasons for the Offer and Use of Proceeds.

Not applicable.

D.    Risk Factors.

Special Note Regarding Forward-looking Statements.

This annual report contains forward-looking statements about our industry, our business, our plans and objectives, our financial condition and our results of operations that are based on our current expectations, assumptions, estimates and projections. These forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “anticipate”, “estimate”, “plan” or similar words. These statements discuss future expectations, identify strategies, discuss market trends, contain projections of results of operations or of financial condition, or state other forward-looking information. Known and unknown risks, uncertainties and other factors could cause our actual results to differ materially from and worse than those contained in or suggested by any forward-looking statement. We cannot promise that our expectations, projections, anticipated estimates or other information expressed in or underlying these forward-looking statements will be realized. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Important risk factors that could cause our actual results to be materially different from as described in the forward-looking statements are set forth in this Item 3.D or elsewhere in this annual report and include, without limitation:

Risks Relating to Our Overall Business

Our future success is dependent on our ability to release “hit” products.

The market for video game software, amusement arcade games, token-operated games, card games and online service products that belong to our Digital Entertainment segment, gaming machines that belong to our Gaming & Systems segment, and pachinko liquid crystal display and pachinko slot machines that belong to our Pachinko & Pachinko Slot Machines segment are “hit” driven. “Hit” products account for a substantial portion of our net revenues and of the revenues in each of these markets. For example, the fast growth of our card game products in

recent years resulted from the sales of ourYu-Gi-Oh! Trading Card GameTRADING CARD GAME, and revenues for our Social Contentcontent for social networks business are heavily dependent on the sales of our rapidly growing titles such asDragon CollectionDRAGON COLLECTION, SENGOKU COLLECTION, CROWS X WORST—Saikyou Densetsu,Sengoku Collection—andProfessional Baseball Dream Nine. Similarly, hit home video game software titles such as theWORLD SOCCER Winning Elevenseries and theMETAL GEAR SOLIDseries, as well as oure-AMUSEMENT products for our amusement facilities, have contributed significantly to our recent results. If we do not develop, publish and distribute “hit” products in the future, our financial condition, results of operations and profitability in these segments could be negatively affected. The most important factor in developing hit products is to respond quickly to public tastes and preferences that change rapidly and are hard to predict. Therefore, if we fail to accurately anticipate and promptly respond to changing tastes and preferences, our business, revenues and profits in these segments could be harmed.

Our revenues are dependent on timely introduction of popular new products to the market.

Our success depends on generating revenue from the timely introduction and shipment of new products. The majority of sales of new video game software generally occurs in the first thirty to one hundred and twenty days after release. The sales occurrence for amusement arcade games, token-operated games and card game products that belong to our Digital Entertainment segment, gaming machines that belong to our Gaming & Systems segment and pachinko slot machines that belong to our Pachinko & Pachinko Slot Machines segment also tends to be limited. We are constantly required to introduce new products in order to generate revenues and/or to replace declining revenues from older products. Also, because revenues earned during the early life of a product generally constitute a relatively high percentage of the total revenues earned from a product, a significant delay in the introduction of one or more new products, or the inability to ship in sufficient quantities to meet demand, could negatively affect sales and have a negative impact on our financial condition and results of operations. Unanticipated delays could also cause us to miss an important selling season such as the year-end holiday buying season or summer vacation. Moreover, our products may not achieve and sustain market acceptance during the short life cycle sufficient to generate revenue to recover our investment in developing the products and to cover our other costs.

The timely shipment of a new product depends on various factors, including the development process, approval by third-party licensors, production capacity and other factors such as debugging and approval by hardware licensors, in the case of video game software. It is possible that some of our products will not be released or shipped in a timely fashion in accordance with our plans.

Competition for market acceptance and pricing competition affect our revenue and profitability.

The markets for content for social games,networks, video game software, amusement arcade games, token-operated games, card game products, gaming machines and most of our other products are intensely competitive and new products and platforms are regularly introduced. Only a small percentage of products introduced in the market achieve any degree of sustained market acceptance. In the case of video game software for handheld systems and home game consoles, amusement arcade games, token-operated games, gaming machines and pachinko and pachinko slot machines, significant price competition and reduced profit margins may result as the hardware product cycle matures. In addition, competition from new technologies such as video game software for play over the Internet or mobile phones may reduce demand in markets in which we have traditionally competed. As a result of prolonged price competition and reduced demand due to competing technologies, our operations in the past have been, and in the future could continue to be, negatively impacted.

Our competitors vary in size from small companies to very large corporations, some of which have significantly greater financial, marketing and product development resources than we have. Due to these greater resources, certain of our competitors can undertake more extensive marketing campaigns, adopt more aggressive pricing policies, pay higher fees to licensors of desirable motion picture, television, music, sports and character properties and pay more to third party software developers than we can. It is also possible that some of our competitors will form alliances or enter into exclusive business arrangements with key creators, distributors or retailers overseas which could hinder our ability to expand into international markets.

A decline in consumer spending due to unfavorable economic conditions could hinder sales of our products.

Our product sales are affected by customer’s ability and desire to spend disposable income on the purchase of our products. Any significant downturn in general economic conditions which results in a reduction in consumers’ discretionary spending could reduce demand especially for entertainment and health-oriented products and services like ours and may harm our business. For example, economic weakness in Europe and lingering uncertainty surrounding the sovereign debt of several European economies have negatively affected consumer spending trends in Europe and in the global economy generally and may continue to have an adverse impact on economic conditions, including in Japan. Economic downturns have been, and may continue to be, characterized by diminished product and service demand and subsequent erosion of average selling prices.

Our performance may be vulnerable to rapidly changing consumer preferences.

Sales of our products depend substantially on how consumers decide to spend their money. Many of our markets are characterized by rapidly changing trends and fads, and frequent innovations and improvements are necessary to maintain consumer interest. We compete with other forms of entertainment and leisure activities. For example, we believe that the overall growth in the use of the internet and online services by consumers may pose a competitive threat if customers and potential customers spend less of their available time using video game software, amusement arcade games, token-operated games, card game products, gaming machines and pachinko and pachinko slot machines, and more time using the Internet or otherwise choose to engage in other forms of entertainment and leisure activities. Our financial performance may be harmed if we are unable to successfully adapt our products and services to these changing trends and fads.

Fluctuations in our quarterly operating results make our quarterly revenues and income difficult to predict.

The timing of release of new products can cause material quarterly revenue and earnings fluctuations. A significant portion of revenues in any quarter is often derived from sales of new products introduced in that quarter or in the immediately preceding quarter. If we are unable to begin volume shipments of a significant new product during the scheduled quarter, our revenues and earnings will be negatively affected in that period. In addition, because a majority of the unit sales for many of our products typically occur in the first thirty to one hundred and twenty days following their introduction, revenues and earnings may increase significantly in a period in which a major product is introduced and may decline in the following period or in periods in which there are no major product introductions.

Our quarterly operating results also may be materially impacted by other factors, including the operating condition of our content for social games,networks, the level of market acceptance or demand for video game software, the timing of hardware platform introductions, the level of development and/or promotion expenses for a video game title. Also, many of our products are in the greatest demand from November to January, particularly in November and December and at the end and beginning of the year. The reason for this trend is that these months correspond to the periods of children’s school holidays. In Japan, it is customary to give presents to girlfriends, boyfriends, and family members during the Christmas and New Year season and buy toys as Christmas and New Year presents in December and January. In addition, in the U.S. demand is highest from November, starting with Thanksgiving and through the Christmas season. Moreover, in a platform transition period, sales of video game software products can be significantly affected by the timeliness of introduction of video game systems by the manufacturers of those platforms, such as Sony Corporation (“Sony”), Nintendo Co., Ltd. (“Nintendo”) and Microsoft Corporation (“Microsoft”).

Inability to procure commercially valuable intellectual property licenses may prevent product releases or result in reduced product sales.

We focus our development and publishing activities principally on products that are, or have the potential to become, franchise brand properties. Many of our products are based on intellectual property and other character or story rights acquired or licensed from third parties. For example, our products often embody trademarks, trade

names, logos, or copyrights licensed by third parties, such as Major League Baseball Properties, Inc., and Major League Baseball Players Association. We have also acquired content licenses from sports organizations such as FIFPro Commercial Enterprises BV, the UEFA Champions League, the Japan Professional Baseball League, the Japan Professional Soccer League, or J-League, and the Japan Football Association. In addition, we have obtained content licenses from various companies, including NIHON AD SYSTEMS Inc., Kodansha Ltd., and Shogakukan-Shueisha Productions Co., Ltd.

These license and distribution agreements are limited in scope and time, and we may not be able to acquire new licenses, renew licenses or include new products in existing licenses. The agreements are terminable upon the occurrence of a number of factors, including our material breach of the agreement, delay in payment of amounts due to the licensor in a timely manner, or a bankruptcy or insolvency. The loss of a significant number of our intellectual property licenses or of our relationships with licensors could have a material adverse effect on our ability to develop new products and therefore on our business and financial results.

Inadequate intellectual property protections could prevent us from enforcing or defending our proprietary technology.

We regard our products as proprietary and rely on a combination of patent, copyright, trademark and trade secret laws, employee and third party nondisclosure agreements and other methods to protect our proprietary rights. We own or license various patents, copyrights and trademarks. We are aware that some unauthorized copying occurs within the video game software, trading card game and arcade machine industries. For example, unauthorized copies of theYu-Gi-Oh! Trading Card GameTRADING CARD GAME have been found all over the world. If a significant volume of unauthorized copying of our trading card games and other products were to occur, it could cause material harm to our business and financial results.

Policing all the unauthorized use of our products is difficult and can be a persistent problem, especially in some international markets. Further, the laws of some countries where our products are or may be distributed either do not protect our products and intellectual property rights to the same extent as the laws of Japan and the United States, or are poorly enforced. Legal protection of our rights may be ineffective in such countries, and we may be unable to protect our intellectual property rights, particularly as we pursue new and emerging technologies. We cannot assure you that existing intellectual property laws will provide adequate protection for our products in connection with these emerging technologies.

Infringement of intellectual property rights could lead to costly litigation and/or the need to enter into license agreements, which may result in increased operating expenses.

Existing or future infringement claims against us may result in costly litigation or require us to obtain a license for the proprietary rights of third parties, which could have a negative impact on our results of operations. As the number of our products increases there is an increased possibility of the contents and features of these products overlapping with the products of other companies, and we become subject to an increasing possibility of infringement claims. Although we are making efforts to ensure that our products do not violate the intellectual property rights of others, it is possible that third parties still may claim infringement.

From time to time, third parties have asserted that some of our products infringed their proprietary rights. These infringement claims have sometimes resulted in litigation against us. For example, in video game software featuring sports such as baseball and soccer, we use individual names and images of professional players, team names, logos and uniforms. Although we have obtained licenses to use them from organizations and agents

which manage the rights of the professional players and the teams, in the event agreements change or any disputes arise among the professional players, the teams and organizations or agents which manage their rights, it is possible that such professional players, teams, organizations or agents might bring a lawsuit against us to suspend manufacturing and sales of the relevant video game software. Such a lawsuit may be time consuming and expensive to defend.

Intellectual property litigation or claims could force us to do one or more of the following:

Any of these actions may cause material harm to our business and financial results.

If our products contain defects, our business could be harmed significantly.

Our video game software products, amusement arcade games, token-operated games, exercise equipments,equipment, gaming machines, pachinko liquid crystal displays (“LCDs”) and pachinko slot machines are complex and may contain undetected errors when first introduced or when new versions are released. We cannot assure you that, despite extensive testing prior to release, errors will not be found in new products or releases after shipment, resulting in loss of or delay in market acceptance. This loss or delay could significantly harm our business and financial results.

We may face limitations on our ability to find suitable acquisition opportunities and integrate acquired businesses.

In order to develop and market our products and services competitively, we are seeking opportunities in and outside Japan to make acquisitions of controlling or significant stakes in other businesses that will grow our current businesses. Some of these transactions could be material in size and scope. Our acquisitions strategy requires that we effectively coordinate and integrate our activities with those of the companies in which we invest or which we acquire. In the event we make such acquisitions or investments, we will face additional financial and operational risks, including:

While we will continually be searching for additional acquisition opportunities, we may not be successful in identifying suitable acquisitions. As the video game software, amusement arcade machine, fitness club, gaming machine and pachinko and pachinko slot industries continue to consolidate, we face significant competition in

seeking and consummating acquisition opportunities. We may not be able to consummate potential acquisitions or investments on terms acceptable to us or such an acquisition or investment may not enhance our business or may decrease rather than increase our earnings. Our shareholders may not have the opportunity to review, vote on or evaluate future acquisitions.

Our business and financial results could be negatively impacted if we are unable to attract additional qualified employees or retain the services of key employees, the loss of whom could have a material adverse effect on our business.

Our continued growth and success depend to a significant extent on the continued service of our senior management and other key employees and the hiring of new qualified employees. The software industry in particular is characterized by a high level of employee mobility and aggressive recruiting among competitors for personnel with technical, marketing, sales, product development and management skills. We may not be able to attract and retain skilled personnel or may incur significant costs in order to do so that may not be offset through either improved productivity or higher prices.

Factors specific to international trade may result in reduced revenues and/or increased costs.

Approximately 80% of our net revenues during fiscal 20122013 were derived from sales in Japan. Although we expect that domestic sales will continue to account for a significant portion of our revenues in future periods, we continue to expand our international operations, particularly with respect to content for social games,networks, video game software, gaming machines and card game products, including through alliances or investments. Sales in foreign countries may involve expenses incurred to customize products to comply with local laws, especially in the case of gaming machines. In addition, products that are successful in the domestic Japanese market may not be successful in foreign markets due to different consumer preferences. In addition, our costs will increase as a result of the need to conduct market research to discover local preferences and tastes and to develop foreign language versions or make product modifications in order to tailor our products to various local markets. In the case of video game software, we may have to grant price concessions to or accept returns from major retailers that control market access to consumers. International trade is also subject to general country risks, including suspension of currency exchange by governments, increases in tariffs, and forfeiture of property through expropriation by governments. International trade is also exposed to fluctuating exchange rates. We may become exposed to increased litigation risks or unexpected bankruptcy risks through product liabilities, facility liabilities, product defect or labor issues in the course of further expanding our business, enhancing our international network and increasing our vendors and customers. These and other factors specific to international trade may result in increased costs or reduced revenues.

Demographic trends may have an adverse effect on our target market and our ability to increase revenues.

The Japanese population of people in their teens, twenties and thirties, the traditional target market for our products and services including content for social games,networks, computer and video games products and amusement arcade games, is expected to decline. Accordingly, we may not be able to increase or maintain revenues if we are unable to expand our customer base and product offerings to overseas markets. Life expectancy in Japan is among the highest of the developed countries. However, as a result of a decline in fertility rates, Japan’s population is expected to begin declining and its demographic makeup is already aging considerably. According to government estimates, as of October 2011, 23.3%2012, 24.1% of Japan’s population was aged 65 or over, and this percentage, which was released in April 2008, as of calendar year 2006, this percentageJanuary 2012 and calculated for the 2010 national census, is expected to reach 25.2%31.6% by 20132030 and 40.5%39.4% by 2055.

Unexpected network interruptions or security breaches, including hackings, may cause delays, interruptions of service or leak of personal information, resulting in a material adverse effect on our business, financial condition and results of operations and damage to our reputation and brands.

HackingsHacking may cause delays or other service interruptions or leak of confidential information, such as personal information and could result in significant damage to our hardware, software systems and databases,

disruptions to our service and business activities, such as to our website, e-mail and other communication systems. If we experience frequent or persistent service disruptions, whether caused by hackings or failures of our own systems or those of third-party service providers, our customers’ experience with us may be negatively affected, which in turn, may have a material and adverse effect on our reputation and brands and our business, financial condition and results of operations.

Wars, terrorism, pandemic, natural disasters and other incidents which may cause political, economic or social instability may disrupt our operations or otherwise result in a material adverse effect on our financial performance.

Incidents such as terrorism, riots, wars, pandemic and natural disasters may adversely affect the world economy. Resulting social and political instability may cause further economic and political uncertainty in each of the regions we conduct our operations. As a result, our and our suppliers’ operations and financial performance as well as our customers’ investment and consumption patterns may be adversely affected. For instance, on March 11, 2011, a large earthquake and subsequent tsunami and aftershock hit northeastern Japan, causing material losses and damage to life, infrastructure and distribution routes. Aroutes, as well as supply instability in certain regions caused by damage to a nuclear power plant complex in Fukushima Prefecture was also damaged, resulting in power supply instability in the regions within the jurisdiction of Tokyo Electric Power Company. As of the date of this annual report, the incident at the affected nuclear power plant remains unresolved, and it is unclear if and when the affected nuclear power plant will be brought under control or whether the situation will further deteriorate. As of March 31, 2011, we have recorded ¥4,455 million as earthquake related impairment charges and expenses.Prefecture.

Risks Relating to Our Digital Entertainment Segment

Transitions in game consoles and technological change have a material impact on the market for video game software and may adversely affect our revenues and profitability.

The life cycle of existing game consoles and the market acceptance and popularity of new game consoles significantly affect the success of our products. The introduction of new technologies could render our current products or products in development obsolete or unmarketable. In addition, we cannot guarantee that we will be successful in developing and publishing video game software for new game consoles on a timely basis. Further, the release dates of new game platforms or the number of units that will be shipped upon such release are beyond the scope of our control.

Also, when new game consoles are announced or introduced into the market, consumers typically reduce their purchases of video game software products for current consoles in anticipation of new platforms becoming available. During these periods, sales of our video game software products can be expected to slow down or even decline until new platforms have been introduced and have achieved wide consumer acceptance. For example, sales of some of our products for the previous PlayStation 2 and Nintendo GameCube platforms were negatively affected by the platform transition to Sony PlayStation 3, Nintendo Wii and Microsoft Xbox360.Xbox 360. Also, if fewer than expected units of a new game platform are manufactured or shipped, or the introduction of a new platform is significantly delayed, we may experience lower-than-expected sales.

We must make significant expenditures to develop products for new platforms which may not be successful or released when anticipated.

The cyclical nature of the industry requires us to anticipate and assess the emergence and market acceptance of new game consoles and develop new software well in advance of the time the platform is introduced to consumers. If the platforms for which we develop new software products do not attain significant market penetration or our new products fail to gain market acceptance, we may not be able to recover in revenues our development expenses, which could be significant, and our business and financial results could be significantly harmed. We anticipate that our profitability will continue to be impacted by the levels of research and development expenses relative to revenues, and by fluctuations relating to the timing of development in anticipation of future platforms.

If we are unable to obtain or renew licenses from hardware manufacturers, we will not be able to release video game software for popular video game systems and our revenue and profitability may be negatively impacted.

Almost all of our revenues from the Consumer Gamesgame software business have historically been derived from sales of video game software for use on proprietary game platforms developed and manufactured by other companies. We may only publish our games for play on their game platforms if we receive a platform license from them, which is generally for an initial term of several years and may be extended for additional one-year terms. If we cannot obtain licenses to develop video game software from manufacturers of popular game consoles or if any of

our existing license agreements are terminated, we will not be able to release video game software for those systems, which may have a negative impact on our results of operations and profitability. Although we cannot assure shareholders that we will be able to obtain extensions or that we will be successful in negotiating definitive license agreements with developers of new systems when the term of existing license agreements end, to date we have always obtained extensions or new agreements with the hardware companies. We also depend on hardware manufacturers for the following additional reasons:

In addition, we depend on Sony and Nintendo for the manufacture of products that we develop for their hardware platforms. Games for Microsoft’s hardware platforms must be manufactured by an authorized replicator. Our hardware platform licenses with these hardware manufacturers provide that the manufacturer may change licenses’ costs. These licenses include other provisions such as approval rights of all products and related promotional materials that could have an effect on our costs and the timing of release of new titles.

Since major manufacturers such as Sony and Nintendo are also publishers of games for their own hardware platforms and manufacture products for all of their other licensees, such manufacturers may give priority to their own products or those of our competitors in the event of insufficient manufacturing capacity. Our business and financial results could be materially harmed by unanticipated delays in the manufacturing and delivery of our products by Sony or Nintendo, which has occurred in the past. In addition, our business and financial results could be materially harmed if Sony or Nintendo used their rights under these agreements to delay the manufacture or delivery of our products, limit the costs recoverable by us to manufacture video game software for their consoles, or elect to manufacture video game software themselves or use developers other than us.

Our video game software for both game consoles and amusement arcade games may be subject to governmental restrictions, rating restrictions or to legal claims regarding content.

Legislation introduced at the local, state and federal levels in the United States and in other countries has established rating systems to inform consumers of software products that contain graphic violence and/or sexually explicit material. In 2005, legislation was also introduced in Japan to establish a system for local authorities to restrict the provision of products containing graphic violence. In addition, many countries have laws that permit governmental entities to censor the content and advertising of software. Although there are no mandatory government regulations in Japan, North America, Europe and Asian countries that are significant markets or potential markets for our products, an exception is China, where governmental approval is required

for software sales in that country. Similar requirements for governmental approval may be adopted elsewhere. We may be required to modify our products or alter our marketing strategies to comply with new regulations, which could delay the release of our products in those countries. Moreover, uncertainties regarding the rating systems may give rise to confusion in the marketplace, and we are unable to predict what effect, if any, such rating systems would have on our business.

In the past several years, at least one lawsuit has been filed in the United States against video game companies by the families of persons shot and killed by teenage gunmen. This lawsuit, which did not name us as

a defendant, alleged that the video game companies manufactured and/or supplied these teenagers with violent video games, teaching them how to use a gun and causing them to act out in a violent manner. While the plaintiffs’ claims were dismissed, similar lawsuits may be filed in the future which, if decided against us and our insurance carrier does not cover the amounts we are liable for, could have a material adverse effect on our business and financial results. Also payment of significant claims by insurance carriers may make such insurance coverage materially more expensive or unavailable in the future, thereby exposing our business to additional risk.

Although neither the terrorist attacks in the United States of America in September 2001, the late 2001 bio-terrorist attacks on various organizations nor the terrorist attacks relating to the Iraq war commenced in March 2003 have had a material adverse effect on our business, operations or financial condition, we cannot assure you that future terrorist attacks or the response of governments to any future terrorist actions, would not negatively affect our business by requiring us to modify the content of our video game software, which could result in expensive product recalls, reprogramming or delays in the release of future games.

Our results of operations may suffer if amusement arcade revenues and sales of arcade games and token-operated game machines continue to decline.

Amusement arcades are the primary venue for video game machines and token-operated game machines in Japan. Amusement arcade revenues and sales of arcade games have recently been affected by the shrinking market for such games. In addition, due to the development of full-scale home video game systems that can rival amusement arcade games in play quality and the introduction of advanced mobile telephones equipped with network and game functions, consumers now have increasing leisure alternatives outside of amusement arcades. As customer preferences diversify, fewer people may visit frequently the amusement arcades on which we depend for sales of our amusement arcade game software, amusement arcade games and token-operated game machines and this could have a negative impact on our results of operations if amusement arcade operators reduce purchases of our products as a result.

If our games are not accepted in the competitive domestic market for video game machines and token-operated game machines for amusement arcades, our results of operations will suffer.

Our success as a manufacturer of video game machines and token-operated game machines is dependent upon numerous factors, including our ability to design, manufacture, market and service video game machines and token-operated game machines that achieve player acceptance while maintaining product quality and acceptable margins. In addition, we must compete against other large and well-established game manufacturers such as SEGA SAMMY HOLDINGS INC. (“Sega Sammy”) and NAMCO BANDAI Holdings Inc. (“Namco Bandai”). If any of these game manufacturers, or another competitor, develops popular video game machines or token-operated game machines for amusement arcades and installed these game machines in the same arcade floor space as our video games and token-operated game machines, our sales from the amusement arcade game and domestic token-operated game machine markets may decrease significantly.

Our business could be harmed if there is any substantial decline in the popularity of interactive Internet-based games or if our Internet-based games are not received favorably in the market.

In recent years, the rapid growth of the Internet has resulted in the development of interactive software games for play over networks and on mobile phones. Although we are marketing mobile phone-based games as

well as games which can be downloadable or which allows multiple players to play against each other using Wii, Nintendo DS, Nintendo 3DS, PlayStation 3,2, PlayStation 2,3, PlayStation Portable, PlayStation Vita, Xbox 360 or personal computers, games have diversified over recent years and consumers now have expanded choices. If there is any substantial decline in the popularity of our network-based games, our business, revenues and profits could be harmed.

In addition, the development and operation of Internet-based games require a long period for development and a substantial amount of initial investment, including for example numerous test operations of facilities such

as servers. If our Internet-based games are not received favorably in the market, we may be unable to recoup our initial investment or operating expenses, and may have to recognize an impairment charge with respect to the servers and software assets associated with such games.

Information processing failures in the operation of our Internet-based games may adversely affect our revenues and income.

As our Internet-based games require servers that process a heavy volume of information, the computers we use as servers must be equipped with high processing capacity. Although we attempt to prevent troubles by performing maintenance for our servers, we may be unable to operate our Internet-based games if the information processing capacity of a server becomes suddenly overloaded or is unexpectedly attacked by external computer viruses. If the recovery of processing capacity requires a long period of time, thus driving customers away, or if such technical errors and interruptions occur repeatedly and cause our customers to lose confidence in our services, our net revenues and operating income may decrease.

Abuses of network-based credit card billing authorization may adversely affect our revenues and profits.

We collect charges for our network-based games based on consumers’ credit card information, through a credit card authorization agent. Although our credit card authorization agent takes all possible measures to ensure the privacy of customer information during billing transactions, if the credit card information of our customers is obtained by unauthorized third parties and used for unauthorized transactions, we may be required to make repayments of the unauthorized amounts out of the sales we made to such customers. In addition, if numerous abuses occur, a credit card authorization agent might cancel agency payment services with us, and our net revenues and operating income may be adversely affected.

Any development adversely affecting our operation of social content for social networks may have a negative impact on our profitability and growth.

Our ability to achieve wide acceptance of our social content for social networks by users depends in part on whether we can provide attractive content in a timely manner and efficiently operate our games. Even if our content for social networks achieves wide acceptance, we may be unable to generate adequate revenue from such content for social networks, as most of the games in this category are free to play and generate revenue only from sales of virtual items to players. In addition, the success of our social content for social networks may be affected by the expansion of the industry related to social content for social networks as well as other factors which are beyond our control. Such factors include:

If we are not able to provide competitive content, or if these political, economic, legal and other factors adversely affect the operation of our social content for social networks our financial conditions and results of operation may be negatively impacted.

If the agreements entered into with the distributors of our social content for social networks are terminated, the continued provision of the services we are currently providing will become difficult, which may adversely affect our revenues and profitability.

We currently provide social content for social networks almost entirely on the social networking sites operated by other companies. Our provision of social content for social networks is based on agreements entered into with the

distributors which operate the social networking sites. In addition, with respect to our social content for social networks, the proportion accounted for the use of specific distributors has increased. Therefore, if the agreements with the distributors are terminated, it will become difficult for us to continue providing services of socialour content on those social networking sites, and our businesses and financial performance may be damaged.

Our revenues and profits may be adversely affected by major natural disasters such as the Great East Japan Earthquake.

Natural disaster such as the Great East Japan Earthquake may cause postponement of the release of our products, delays in shipment due to the disruption of distribution network, delays in delivery of parts procured from the suppliers located in the disaster-stricken areas, related revisions to our production system and increases in procurement costs for parts and cancellation in procurement caused by increased scarcity of parts and inventory supply shortages in the market, as well as the suspension of distribution services for online games due to damaged telecommunications infrastructure. As a result, our revenues and profits may be adversely affected.

Risks Relating to Our Health & Fitness Segment

Our Health & Fitness segment may not grow as we expect if we are not able to efficiently operate club locations upon opening such loctations.locations.

Our operating results depend in part on our ability to efficiently operate club loctationslocations upon opening such loctations.locations. The successful development of clubs will depend on various factors, including our ability to:

If we are not able to adequately implement the factors outlined above, the growth of our Health & Fitness segment may be limited. We cannot assure you that we will be able to open new clubs in a timely and cost-efficient basis or operate our clubs profitably. Upon opening a new fitness club, we often experience an initial period of operating losses with respect to that club for the first year. However, this period can vary depending on the individual club, and may be substantially longer than a year. If we are unable to enhance the performance of our fitness clubs, our operating income may be adversely affected. In fiscal 2009, we recorded ¥11,121 million as restructuring and impairment charges that include impairment losses of long-lived assets. In fiscal 2010, we recorded ¥2,339 million as restructuring and impairment charges that include impairment losses of long-lived assets and expenses related to closure of facilities. We may still incur future impairment charges against goodwill, other identifiable intangible assets, or property and equipment.

A decline in membership levels of our fitness clubs could have a negative effect on our business.

The performance of our fitness clubs is dependent on our ability to attract, acquire and retain members. We cannot assure you that we will be successful in these efforts, or that the membership levels at one or more of our clubs will not decline. Our members can cancel their club membership at the end of any month provided that they

give advance notice by the tenth day of that month. Because members periodically cancel their membership, our total number of members will decline unless we are able to attract new members each month. There are numerous factors that could lead to a decline in membership levels at established clubs or that could prevent us from increasing our membership at newer clubs, including our reputation, our ability to deliver quality service at a competitive cost, the presence of direct and indirect competition in the areas in which the clubs are located, general interest in sports and fitness clubs and general economic conditions. As a result of these factors, we cannot assure you that our membership levels will be adequate to maintain or permit the expansion of our operations. In addition, a decline in membership levels may have a material adverse effect on our performance, financial condition and results of operations.

Failure to compete effectively in the fitness club industry will have an adverse effect on our results of operations.

The fitness club industry is highly competitive. We compete with other fitness clubs, physical fitness and recreational facilities established by local governments, hospitals and businesses for their employees, amenity and condominium clubs and, to a certain extent, with tennis clubs and other sports clubs, golf clubs, weight reducing salons and the home-use fitness equipment industry. We also compete with other entertainment and retail businesses for the discretionary income of our target markets. We cannot assure you that we will be able to compete effectively in the future in the markets in which we operate. In addition, we may face new competitors in the market that may be larger and have greater resources than us. These competitive conditions may limit our ability to increase dues without a material loss in membership, attract new members and attract and retain qualified personnel. Additionally, consolidation in the fitness club industry could result in increased competition among participants, particularly as large multi-facility operators are better able to compete for attractive acquisition candidates, thereby increasing costs associated with expansion through acquisitions, as well as negotiation of leases and the availability of real estate.

We could be subject to future claims related to health risks at our clubs.

Use of our fitness clubs and equipment may pose some potential health risks to members or guests through exertion from use of our services and facilities including exercise equipment. As a result, we may be subject to claims against us for death or injury suffered by members while exercising at our fitness clubs, and we may not be able to successfully defend any such claims. We currently maintain general liability insurance coverage but there can be no assurance that we will be able to maintain such liability insurance on acceptable terms in the future or that such insurance will provide adequate coverage against potential claims. Any liability claim in excess of our insurance coverage may adversely affect our results of operations as well as damage our brand image.

We are subject to various governmental regulations, any non-compliance with which could result in temporary closings and negative publicity, causing damage to our corporate image.

Our operations are subject to national, local and municipal government regulation in the various jurisdictions in which our clubs are located. These regulations include, but are not limited to, health, sanitation and safety regulations with respect to the sale of food and beverages and the operation of swimming pools and baths. Any failure to comply with these regulations could result in the temporary suspension or loss of licenses necessary for food service and other operations at our clubs. In addition, any resulting negative publicity could have an adverse effect on our reputation, resulting in deterioration of our brand image and ability to attract, acquire, and retain club members.

We may be unable to get refunds of deposits and guarantee money relating to leases of land and buildings for the use of our fitness club facilities.

In many cases, we rent land and buildings when we open new fitness clubs. Under the lease agreements that we enter into with landowners, we are often required to make deposits and to provide guarantee money in case

we default in payment of rent or neglect to restore the property to its original state upon termination of the lease agreement. Under such lease agreements, if we pay our rent and restore the property as stipulated, we are entitled to obtain refund of such deposits and guarantee money. However, if the owner of the property faces financial difficulty or is otherwise unable or unwilling to return these funds, we may not be able to obtain full refunds of such deposits and guarantee money. As of March 31, 2012,2013, such deposits and guarantee money accounted for over 8% of our total assets.

Inability to procure licenses for fitness programs from third parties or changes in the conditions of such licenses may adversely affect our revenues.

We act as a licensing agency in Japan, acquiring licenses for programs that have worldwide popularity, and supply the programs to not only our own facilities but also to other fitness clubs. In the event that it becomes difficult to renew licenses or if any changes are made to the conditions of such licenses, there may be a material adverse effect on our ability to supply programs to each facility and on our business results.

The need to suspend our business operations due to unexpected epidemic diseases may adversely affect our revenues.

Due to the H1N1 influenza pandemic during fiscal 2010, the business operations of fitness clubs in some areas of Japan were suspended at the discretion of the government. If an unexpected epidemic of an unknown or known disease in the future results in the suspension of business operations of our fitness clubs at the instruction of the government or at our own discretion, our business results could be affected.

Abrupt changes in consumer tastes may adversely affect our business results.

Revenues due to usage of our facilities are highly dependent upon how consumers chose to spend their money, which makes it imperative that we unremittingly provide high quality services in line with customer needs. For example, our business results could be negatively affected if fitness trends which don’t require the spending of money catch on, such as home fitness, running or walking.

We may be adversely affected by natural disasters such as the Great East Japan Earthquake during fiscal 2011.

Due to natural disasters as typified by the Great East Japan Earthquake during fiscal 2011, our directly-owned fitness clubs may be damaged and the sports facilities outsourced to us may become evacuation centers in some regions, which could result in the suspension of operations at some of our fitness clubs. In the future, similar earthquake disasters and other natural disasters may occur again and the operations of some of our fitness clubs may be suspended, which could adversely affect the financial performance of our Health & Fitness segment.

Rolling blackouts due to the shortage of power supply may adversely affect our business results.

Natural disasters such as the Great East Japan Earthquake during fiscal 2011 may damage power plants, which could result in a shortage of power supply. If power demand exceeds the available power supply in the future, rolling blackouts may be further implemented and operations at some of our fitness clubs and the manufacturing of products may be suspended, which could adversely affect our business results.

Risks Relating to Our Gaming & Systems Segment

If our gaming products are not accepted in the competitive market for gaming machines, we may be unable to compete in the gaming machine market.

Our success as a gaming machine manufacturer and supplier in overseas markets is dependent upon numerous factors, including our ability to design, manufacture, market and service gaming machines and casino

management systems that achieve player and casino acceptance while maintaining product quality and acceptable margins and to obtain approvals for our products from gaming authorities. In addition, we must compete against gaming equipment and system companies such as International Game Technology, Bally Technologies, Inc., Aristocrat Leisure Limited and WMS Industries Inc., which are among the largest and most-established suppliers of gaming machines in the world. Some of our competitors have greater financial resources, name recognition, established service networks and customer relationships than we do, and are licensed in more jurisdictions than we are.

In order to diversify and expand sales, we have obtained licenses in every state in Australia, the main states in the United States, and some provinces in Canada, and are marketing and selling gaming products in those markets. If our games and our system products fail to be accepted by the market, and we are otherwise unable to develop products that offer technological advantages or unique entertainment features, we will be unable to generate the revenues necessary to compete effectively in the competitive gaming product market. Consequently, the results of our operations could suffer.

If our technologies for gaming products are subject to claims they infringe on competitors’ patents, trademark rights and design rights, we may be unable to market our products as planned, thus adversely affecting our profits.

As technological capabilities and an ability to develop effective business plans are constantly becoming more crucial for success in the gaming business, it has become a critical business strategy for companies, especially in the United States, to ensure an advantage over competitors by filing and acquiring their own intellectual property rights such as patents, trademark rights and design rights in advance of their competitors. In this competitive business environment, we strive to commercialize our products only after carefully examining the intellectual property rights status of the products. However, if the contents of our new products and services are deemed to infringe on the intellectual property rights of competitors, we may be unable to bring such products or services to market or be forced to cease selling such products or services.

An adverse change affecting the gaming and systems industries, including a change in the economy, in gaming regulations or in the expansion and popularity of casino gaming, will negatively impact our profitability and our potential for growth.

Our ability to grow our business and operate profitably is substantially dependent upon the expansion of the gaming industry and factors that are beyond our control. These factors include, among others:

An adverse change in any of these political, legal and other factors may negatively impact our results of operations.

Our failure to obtain or retain required licenses for our Gaming & Systems segment could prevent us from expanding our market and prohibit us from generating revenue in certain jurisdictions.

In North America, the manufacture and distribution of gaming products is subject to numerous federal, state, provincial, tribal, international and local regulations. In particular, we are subject to extensive regulation in the following states such as inof Arizona, California, Colorado, Connecticut, Florida, Idaho, Illinois, Indiana, Iowa,

Kansas, Louisiana, Michigan, Minnesota, Mississippi, Nevada, New Jersey, New Mexico, New York, North Dakota, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, West Virginia, Wisconsin, and the Provinces of Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec and Saskatchewan in Canada due to our gaming product business in those jurisdictions. In addition, we may also be subject to regulation as a gaming operator if we keep on developing leasefor participation agreements under which we share in the revenues generated by gaming machines. These regulations are constantly changing and evolving, and may curtail gaming in various jurisdictions in the future, which would decrease the number of jurisdictions from which we can generate revenues.

Together with our key personnel, we undergo extensive investigation before each jurisdictional license is issued. Our gaming products are subjected to independent testing and evaluation prior to approval from each

jurisdiction in which we do business. Generally, legal authorities have broad discretion when granting, renewing or revoking these game approvals and licenses. Our failure to obtain or retain a required license or approval in one jurisdiction could negatively impact our ability to obtain or retain required licenses and approvals in other jurisdictions. The failure to obtain or retain a required license or approval in any jurisdiction would decrease the geographic areas where we may operate and generate revenues, decrease our share in the gaming marketplace and put us at a disadvantage compared with our competitors. Consequently, the market price of our common stock may suffer.

Legal authorities may require shareholders to submit to background investigations and respond to questions from regulatory authorities, and may deny a license or revoke our licenses based upon their findings. These licensing procedures and background investigations may inhibit potential investors from becoming significant shareholders.

The future revenue growth of our Gaming & Systems segment depends on our ability to strengthen our research and development departments and improve the effectiveness of our sales organizations and service departments.

In order to increase market awareness and sales of our gaming products, it is important for us to develop hit products that are received favorably in our markets and for us to maintain technology that allows for future innovation and adaptations to changes in customer preferences. If we fail to assess market needs or be technologically innovative, our net revenues and operating income may be adversely affected.

In addition, it is important for us to improve the effectiveness of our sales operations and service departments internationally. Our gaming business is expanding from sales of slot machines to sales of casino management systems, which connect gaming machines under a single accounting, marketing and customer management system and reinforcement of security. Casino management systems provide for relatively stable revenues, as proceeds from the initial sale are supplemented by subsequent connection fees. However, the sales of gaming products require sophisticated sales efforts targeted at selected people within the gaming industry and quality post-sale servicing. Competition for qualified sales personnel is intense, and we might not be able to hire the kind and number of sales personnel we are targeting. In addition, we will need to effectively train and educate our sales force and strengthen our service departments to ensure trust in our products if we are to be successful in selling into the gaming machine market.

If our manufacturing plant in the United States has operational difficulties, and we have problems with manufacturing capacity and quality control, our business growth may be adversely affected.

In June 2005, we started operation of a manufacturing plant in Las Vegas to strengthen production capacity and customer service and expand development and sales in the U.S. market. We depend on our manufacturing capacity for substantially all of our sales in the U.S. market. If operational troubles occur in this plant, we may be unable to maintain sufficient manufacturing capacity to meet increases in orders, and our financial performance may be adversely affected.

Natural disasters such as the damage caused by the record rainfall in northeastern Australia in January 2011 and the surrounding areas of the Mississippi River in May 2011 could have material adverse effects on our Gaming & Systems segment.

The record rainfall in the Australian northeastern region in January 2011 and in the surrounding areas of the Mississippi River in the U.S. in May 2011 raised concerns about a delay in transporting equipment to the casino markets where we ship our products. Similar natural disasters could adversely affect the future business results of our Gaming & Systems segment.

Risks Relating to Our Pachinko & Pachinko Slot Machines Segment

Our pachinko slot machines may not pass the testing of the Security Association due to circumstances beyond our control, and as a result, there may be delays in the date of release. Further, due to the tightening of regulations on the pachinko business and establishment of a period of voluntary ban on replacement by the National Police Agency or the bankruptcy of our suppliers, pachinko slot machines which had passed the Security Association testing, and released or were scheduled for release, may not be able to be sold.

Upon receipt of commission by a prefectural public safety commission, the Security Association conducts a regulatory check as to whether pachinko and pachinko slot machines fulfill prescribed conditions on the basis of documents submitted by the pachinko and pachinko slot makers, as well as the practical exam, as described below:

The date of release for a product may be delayed if reapplication becomes necessary in the process of the above procedures due to failure to gain an application lot, changes to the test standards or are tightening of regulations on the industry by the National Police Agency or other similar considerations.

Our pachinko slot machines may be adversely affected because of groups attempting to make money through illicit methods (commonly referred to as goto-shi) in the pachinko and pachinko slot industry.

Our pachinko slot machines may be adversely affected because of groups attempting to make money through illicit methods (commonly referred to asgoto-shi) in the pachinko and pachinko slot industries. In the event of such manipulation bygoto-shi, there may be a decline in sales volume due to the tarnishing of our brand image, and delays in the dates of release due to measures to preventgoto-shi manipulation of our other products.

We may be adversely affected by natural disasters such as the Great East Japan Earthquake during fiscal 2011.

Natural disaster such as the Great East Japan Earthquake may cause postponement of the release of our products, delays in shipment due to the disruption of distribution network, decreases in or cancellation of orders from facilities located in disaster-stricken areas, delays in delivery of parts procured from suppliers in the disaster-stricken areas and related revisions to our production system, as well as increases in procurement costs for parts and delays in procurement caused by increased scarcity of parts and inventory supply shortages in the market. Any of these factors could have an adverse affecteffect on our business.

Risks Relating to the Shares and the ADSs

Our shareholders of record on a record date may not receive the dividend they anticipate

The customary dividend payout practice of publicly listed companies in Japan may significantly differ from the practice widely followed in foreign markets. Our dividend payout practice is no exception. Pursuant to our Articles of Incorporation, our board of directors can determine the matters regarding dividends. While we may announce a dividend forecast prior to the record date of March 31, September 30, or such other date as we may set pursuant to our Articles of Incorporation, our board of directors is not legally bound by such forecast. Instead,

our board of directors ultimately determines the actual dividend payment amount to our shareholders of record on a record date, including whether we will make any dividend payment to such shareholders at all, after the expiry of such record date. Therefore, our shareholders of record on the March 31 record date may not receive the dividend they anticipate.

Our share price is volatile and shareholders may not be able to recoup their investment.

Disclosures of our operating results (particularly if below the estimates of securities industry analysts), announcements of various events by us or by our competitors or other industry participants or the development and marketing of new products, as well as other factors, may cause the market price of our common stock to change significantly over short periods of time. The price of our common stock has been and is likely to continue to be highly volatile, and shareholders may not be able to recoup their investment. For example, the highs and lows of price per share of our common stock ranged from ¥1,460¥1,535 to ¥2,906¥2,423 during fiscal 2012.2013.

A substantial number of our shares of common stock are eligible for future sale, and the sale of these shares may cause the price of our common stock to decline even if our business is performing well.

As of March 31, 2012,2013, there were 138,620,152138,618,060 shares of our common stock outstanding including 38,686,50338,694,426 shares, representing 27.91% of our outstanding shares, beneficially owned by Kagemasa Kozuki, our founder, Representative Director, Chairman and his Kozuki Foundation for Sports and Education, Kozuki Holding and Kozuki Capital Corporation. These shares and, generally, the shares owned by other shareholders, can be disposed of on the Tokyo Stock Exchange or otherwise in Japan without any legal restriction. Additionally, under our Articles of Incorporation, our board of directors is authorized to issue 306,500,000 additional shares of common stock generally without any shareholder approval. In addition, as of March 31, 2012,2013, we held 4,879,8484,881,940 shares of treasury stock which our board of directors may sell without any shareholder approval.

Additional sales of a substantial amount of our common stock in the public market, or the perception that such sales may occur, could cause the market price of our common stock to decline. This could also impair our ability to raise additional capital through the sale of our securities. Also, in the future, we may issue common stock to raise cash for additional capital expenditures, working capital, research and development or acquisitions, and we may also pay for additional interests in subsidiaries or affiliated companies by using cash, common stock or both. We may also issue securities convertible into our common stock. Any of these events may dilute your ownership interest in us and have an adverse impact on the price of our common stock.

Investors holding less than a unit of shares will have limited rights as shareholders.

Pursuant to the Corporate Law of Japan relating to joint stock corporations and other related legislation, our Articles of Incorporation provide that 100 shares of common stock constitute one “unit”. The Corporate Law imposes significant restrictions and limitations on holdings of shares that do not constitute whole units. In general, holders of shares constituting less than one unit do not have the right to vote or to examine our books and records (other than our articles of incorporation and shareholders register). For a more complete description of the unit share system and its effect on the rights of holders of our shares, see Item 10.B “Unit Share System” below.

There are restrictions on your ability to withdraw shares from the depositary receipt facility.

Each ADS represents the right to receive one share of common stock. Each ADR will bear a legend to that effect. Holders of ADSs will be unable to withdraw fractions of shares from the depositary or receive any cash settlement in lieu of withdrawal of fractions of shares. Therefore, pursuant to the terms of the deposit agreement with our depositary, JPMorgan Chase Bank in order to withdraw any shares, a holder of ADSs must surrender for cancellation and withdrawal of shares, ADRs evidencing 100 ADSs or any integral multiple thereof. In addition, although the ADSs themselves may be transferred in any lots pursuant to the deposit agreement, the ability to trade the underlying shares may be limited.

Holders of ADRs have fewer rights than shareholders and must act through the depositary to exercise those rights.

Holders of ADRs do not have the same rights as shareholders and accordingly cannot exercise rights of shareholders against us. JPMorgan Chase Bank, as depositary, through its custodian agent, is the registered shareholder of the deposited shares underlying the ADSs, and therefore only it can exercise the rights of shareholders in connection with the deposited shares. In certain cases, we may not ask JPMorgan Chase Bank to ask holders of ADSs for instructions as to how they wish their shares voted. Even if we ask JPMorgan Chase Bank to ask holders of ADSs for such instructions, it may not be possible for JPMorgan Chase Bank to obtain these instructions from ADS holders in time for JPMorgan Chase Bank to vote in accordance with such instructions. JPMorgan Chase Bank is only obliged to try, as far as practical, and subject to Japanese law and our Articles of Incorporation, to vote or have its agents vote the deposited shares as holders of ADSs instruct. In your capacity as an ADS holder, you will not be able to bring a derivative action, examine the accounting books and records of the company, or exercise appraisal rights.

Rights of shareholders under Japanese law may be more limited than under the laws of other jurisdictions.

Our Articles of Incorporation, our board of directors’ Regulations and the Corporate Law of Japan govern our corporate affairs. Legal principles relating to such matters as the validity of corporate procedures, directors’ fiduciary duties and liabilities, and shareholders’ rights may be different from those that would apply to a non-Japanese company. Shareholders’ rights under Japanese law may not be as extensive as shareholders’ rights under the laws of other countries or jurisdictions within the United States. You may have more difficulty in asserting your rights as a shareholder than you would as a shareholder of a corporation organized in another jurisdiction.

Because of daily price range limitations under Japanese stock exchange rules, you may not be able to sell your shares of our common stock at a particular price on any particular trading day, or at all.

Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between bids and offers. These exchanges are order-driven markets without specialists or market makers to guide price formation. To prevent excessive volatility, these exchanges set daily upward and downward price fluctuation limits for each stock, based on the previous day’s closing price. Although transactions may continue at the upward or downward limit price if the limit price is reached on a particular trading day, no transactions may take place outside these limits. Consequently, an investor wishing to sell at a price above or below the relevant daily limit may not be able to sell his or her shares at such price on a particular trading day, or at all.

U.S. investors may have difficulty in serving process or enforcing a judgment against us or our directors, corporate officers or corporate auditors.

We are a limited liability, joint-stock corporation incorporated under the laws of Japan. Most of our directors, corporate officers and corporate auditors reside in Japan. All or substantially all of our assets and the assets of these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to effect service of process within the United States upon us or these persons or to

enforce against us or these persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States. There is a concern as to the enforceability in Japan, in original actions or in actions for enforcement of judgment of U.S. courts, of liabilities predicated solely upon the federal securities laws of the United States.

Foreign exchange fluctuations may affect the dollar value of our ADSs and dividends payable to holders of our ADSs.

Market prices for our ADSs may fall if the value of the yen declines against the U.S. dollar. In addition, the U.S. dollar amount of cash dividends and other cash payments made to holders of our ADSs would be reduced if the value of the yen declines against the U.S. dollar.

A.    History and Development of the Company.

Our business was founded by our current Representative Director, Chairman, Kagemasa Kozuki, in Osaka on March 21, 1969. KONAMI was incorporated as a joint stock corporation under the laws of Japan on March 19, 1973 under the name Konami Industries Co., Ltd.

We originally were established to produce amusement arcade games and since that time have expanded the range of our products. We began to produce and market microcomputer-equipped video game machines in 1978, video game software for personal computers in 1982, game software for a home video game system in 1985 and software for LCDs for pachinko machines in 1992. We began our toy and hobby business in 1996. We obtained a license to manufacture and sell gaming machines in Nevada, and entered the gaming business in the United States in 2000. We entered the fitness club and equipment business through our acquisition of PEOPLE CO., LTD., which was renamed Konami Sports Corporation, in February 2001.

We initiated overseas operations by exporting amusement arcade games in 1979. We established our U.S. sales and manufacturing subsidiary, Konami of America, Inc. (the predecessor of Konami Digital Entertainment, Inc.) in 1982. Later, we established sales and manufacturing subsidiaries in a number of foreign countries.

We listed our shares on the Osaka Securities Exchange in 1984 (subsequently delisted in December 2002), on the Tokyo Stock Exchange in 1988, on the Singapore Exchange in 1997 (subsequently delisted in October 2009), on the London Stock Exchange in 1999 and on the New York Stock Exchange in September 2002.

In 1991, we changed our name to Konami Co., Ltd. and subsequently changed our name to KONAMI CORPORATION in 2000.

In 2006, we made Konami Sports Corporation (the predecessor of Konami Sports & Life Co., Ltd.) a wholly-owned subsidiary by issuing Konami shares to the minority shareholders of Konami Sports after Konami Sports Corporation merged with Konami Sports Life Corporation. In addition, we newly established Konami Digital Entertainment Co., Ltd. through a company separation to succeed to our digital entertainment business and we changed our group structure so that we act as a holding company.

In April 2007, we moved our principal head office to 7-2, Akasaka 9-chome, Minato-ku, Tokyo 107-8323, Japan. Our telephone number is 81-3-5770-0573.

For a discussion of recent and current capital expenditures, please see “Capital Expenditures” at the end of Item 5.A. We have had no recent significant divestitures nor are any significant divestitures currently being made.

B.    Business Overview.

Overview

We develop, publish, market and distribute video game software products globally for stationary consoles such as Sony PlayStation 2, PlayStation 3, Nintendo Wii, and Microsoft Xbox 360, and for portable consoles such as Sony PlayStation Portable, PlayStation Vita, Nintendo DS and Nintendo 3DS, as well as for use on personal computers. In addition, we plan, produce, operate and distribute social content for social networks and entertainment content for mobile phone online games.

We produce gaming machines for casinos in the United States, Australia and other overseas jurisdictions, in addition to video games and token-operated games installed in amusement arcades and other entertainment venues in Japan. We also produce card games, character goods, toys and hobbies, CDs and DVDs and other merchandize products, many of which use popular characters seen in movies, television, comic books, video games, advertising or other media. In addition, we produce pachinko slot machines. Until fiscal 2012, we had also produced software and hardware for LCDs for pachinko machines.

In addition, we believe that we are the leading operator of fitness clubs in Japan, in terms of revenues and members. As of March 31, 2012,2013, we had a nationwide network of 205203 directly operated health and fitness club facilities and 161172 sports facilities whose operations are outsourced to us and which cater to all age groups, from children through senior citizens. Moreover, Konami Sports Corporation merged with Konami Sports Life Corporation to establish Konami Sports & Life Co., Ltd. as of February 28, 2006, and COMBI WELLNESS Corporation became its wholly-owned subsidiary as of May 31, 2006 following our acquisition of all of its outstanding shares.2006. We also have enhanced the value of each facility of former Sportsplex Japan Co., Ltd., which was merged into Konami Sports & Life Co., Ltd. as of June 30, 2008, by promoting the expansion of high quality and wide-ranging services. We aimAs part of our plan to create new markets and provide various health-related services through the operation of fitness club facilities and the development and manufacturing of health-related equipment and supplements.supplements, we acquired our consolidated subsidiary, COMBI WELLNESS Corporation, merging into Konami Sports & Life Co., Ltd. on June 1, 2012, in order to rationalize our business and concentrate our corporate resources.

Because our sales are affected by changes in how consumers, particularly children and young adults, spend their leisure time, we seek to meet consumers’ needs and preferences by developing products that can be used in a number of environments, including home video games, games for amusement arcades and card games, casinos and pachinko parlors. We also recognize that borders that separate product categories such as games, movies, music, toys, books and television programs are blurring. We seek to capitalize on this trend by projecting successful concepts across different types of leisure environments and product categories.

Many of our successful products have resulted from diversified use of strong contents. For example:

GUNS OF THE PATRIOTin 2008 and has been sold worldwide in combination with various secondary titles, and received high reviews from the market. Total sales volume for the series has exceeded 3235 million units.

for social gamenetworks market and have started distributing a wide range of game contents for these titles since 2011, such asProfessional Baseball Dream Nine,J League Dream ElevenWorld Soccer Collection,CROWS X WORST—Saikyou DensetsuDensetsu—,andSTAR WARSCOLLECTION on GREE andSENGOKU COLLECTION on Mobage. As a result, we have increased the number of paying users for these titles.domestic platforms, including GREE and Mobage, and overseas platforms, including KAKAO and T-store.

We have used our expertise in video game software and hardware for the development of our gaming machine and fitness equipment products.

We have built a company with a strategic portfolio of products and services that spans a range of categories and target markets. We have created, licensed and acquired a group of recognizable brands that we market to a growing variety of consumer demographics.

For the fiscal year ended March 31, 2012,2013, we had consolidated net revenues and net income attributable to our shareholders of ¥225,995 million and ¥13,174 million, respectively, compared with net revenues and net income attributable to our shareholders of ¥265,758 million and ¥23,012 million, respectively, compared with net revenues and net income attributable to our shareholders of ¥257,988 million and ¥12,934 million, respectively, for the fiscal year ended March 31, 2011.2012.

Products and Services

We classify our businesses into four segments: Digital Entertainment, Health & Fitness, Gaming & Systems and Pachinko & Pachinko Slot Machines, each of which is operated on a separate basis. The net revenue figures for each business segment described below are before elimination of intersegment revenues.

Digital Entertainment Segment

Operating in a business environment with lowering barriers to entry in the digital entertainment industry, we decided to reposition our existing major business segments—Social Content, Consumer Games, e-Amusementproducts and Card Games—services, including content for social networks, video game software, amusement arcade games, and card games, into one Digital Entertainment segment from April 2005March 2011 to create a business structure where we can achieve maximum synergies. During fiscal 2012,2013, this segment had net revenues of ¥140,400¥116,366 million, which accounted for 52.8%51.5% of our consolidated net revenues, before elimination of intersegment revenues. Our Digital Entertainment Segment consists of the five businessestypes of products and services as follows:

•

Consumer Games business:Video game software:    We produce, manufacture and sell video game software, purchase and distribute video game software for home use.

Health & Fitness Segment

We are the leading health and fitness club operator and health-related business enterprise in Japan. During fiscal 2012,2013, this segment had net revenues of ¥82,555¥79,896 million, which accounted for 31.1%35.4% of our consolidated net revenues, before elimination of intersegment revenues.

Gaming & Systems Segment

This segment is involved in development and sales of content, hardware and casino management systems for gaming machines for casinos outside of Japan. During fiscal 2012,2013, our net revenues from this segment were ¥25,212¥24,984 million, which accounted for 9.5%11.1% of our consolidated net revenues, before elimination of intersegment revenues.

Pachinko & Pachinko Slot Machines Segment

This segment is involved in production, manufacturing and sales of pachinko slot machines and LCDs for pachinko machines. During fiscal 2012,2013, our net revenues from this segment were ¥18,430¥5,398 million, which accounted for 6.9%2.4% of our consolidated net revenues, before elimination of intersegment revenues.

The following table presents net revenues in each of our historical business segments, before elimination of intersegment revenues, for each of the three years ended March 31, 2012.2013.

Segment Revenues

Notes:

“Eliminations” primarily consists of eliminations of intercompany sales and of intercompany profits on inventories.

Digital Entertainment Segment

Consolidated net revenues generated by our Digital Entertainment Segment, before elimination of intersegment revenues, amounted to ¥133,124 million in fiscal 2011 and ¥140,400 million in fiscal 2012 an increaseand ¥116,366 million in fiscal 2013, a decrease of ¥7,276¥24,034 million.

Content for Social Content BusinessNetworks

Social Content BusinessIndustry Overview

Growth of broadband, online games and mobile phones as a platform

At the end of March 2012,2013, the number of mobile phone handset subscriptions worldwide has grown by 8.2%7.5% to 1.4 billion6,410 million compared to the previous year, and is expected to further increase, especially in emerging countries. Particularly

Further, the shift in Japan, social content using social networks, or social platforms for mobile phones are popular, leading this recent rapid growth.

On the other hand, the market of the mobile phone handset has shiftedmarket from the existingtraditional feature phone handset to the smart phone handset equipped with iPhone and Android OS has continued and the number of smart phone subscribers rapidly increasedis estimated to exceed 50% in the global market by 71.2% to 470 million compared to the previous year.fiscal year 2015. Additionally, the usage of the smart phones on social platforms has been increasing. WhileAs users of content for social gamesnetworks in feature phones have shifted to the use of smart phones, there is still a smallthe number of content for social gamesnetworks for smart phones that contents providers provide has increased and there spreads a large business opportunity.the market for these games has rapidly expanded.

In recent years, in North America, content for social gamesnetworks on PC platforms have become mainstream, and free service without basic fee or pay-per-item has led the market and continues to expand. Furthermore, although the applications market in the smart phones has also flourished, there is a severe competition due to low entry barriers.

In China, the pricing plans offered by communication carriers are not fully developed, and as a result, the market is still poised for growth. In South Korea, the pricing plans offered by communication carriers have expanded and smart phones have become prevalent, increasing the number of users of game contents.

Our Content for Social Content BusinessNetworks

We develop, publish, distribute and sell software for home video game systems, personal computers, mobile phones and online networks. We plan to be actively enterinvolved in the mobile phone and social networking products and services business in light of the recent growth of the online and mobile phone game markets and we believe that there may be new opportunities foris a opportunity to increase our profits withby leveraging our software titles.

In October 2001, we established Konami Mobile Online, Inc., which developed games for mobile phones, and after changing its trade name and merging it with our operations, since March 31, 2006 we have developed our online business through Konami Digital Entertainment Co., Ltd. for the purpose of realizing synergies between our Games Softwarevideo games software and Card Games businesses.card game products and services. As a result, this business hasthese products and services have expanded to include the development and distribution of game content not only for mobile phones but also for various multi-function devices such as smartphones and hashave grown to be an important income generating businessproducts and services for us. In addition, as a distribution service of game content, in recent years this business hasthese products and services have expanded rapidly through growth in content for social networking sites. Since many of our content for social gamesnetworks can be played free of charge, the number of users registered on social networking sites has increased, and accordingly revenues from purchases of items granting players in-game advantages have increased. Based on this business model,DRAGON COLLECTION, for which the online distribution was launched on GREE in September 2010, has enjoyed high popularity among players, including achieving the top game ranking of GREE for 50 consecutive weeks, and we have steadily increased the number of users and achieved favorable results for this title. Furthermore, the online distribution ofPAWAFURU YAKYU CLUB, a baseball social game in which players aim to become the best baseball club, andProfessional Baseball DramDream Nine, a baseball content for social gamenetworks officially licensed from Nippon Professional Baseball, werewas launched on GREE, and the online distribution ofSENGOKU COLLECTION, a content for social gamenetworks in which players aim to become a shogun ruler, was launched on Mobage. We also have reinforced the content roll-out for the content for social gamesnetworks market. Through the introduction of these titles, we have been strengthening our content development for the content for social gamenetworks market.

On April 1, 2011, we acquired 100% ownership in HUDSON SOFT CO., LTD. (“HUDSON”), a leader of the mobile industry, and completed a merger with HUDSON into Konami Digital Entertainment Co., Ltd. on March 1, 2012. While growth in the smart phones business is expected, we willaim to establish a business structure that can properly respond to the rapidly changing content for social gamenetworks market by integrating the know-how of the Konami group with its high staging and producing ability for games with the strengths of HUDSON, with its outstanding planning ability and flexibility.

Consumer Games businessVideo Game Software

Industry Overview

The video game industry is comprised of video game hardware manufacturers and video game software publishers. Game hardware systems, frequently referred to as platforms, include home game consoles, handheld platformsgame consoles and personal computers.

A new generation of more technologically advanced game consoles has been introduced every several years. The first platform was Nintendo Entertainment System introduced by Nintendo in 1983 with its central processing unit, or CPU, using 8-bit 1.78 MHz technology. The CPU is a chip on which the software operates,

with a “bite” indicating capacity to process data and clock frequency (MHz) indicating the processing speed. Subsequent advances in technology have resulted in continuous increases in the processing power of the chips that power both the consoles and PCs. With the advancement of hardware technology, software has also advanced, with faster and more complex images, more lifelike animation and sound effects and more intricate scenarios.

Each new generation, or cycle, of hardware has resulted in larger numbers of consoles being purchased. The beginning of each cycle is the period of rapid growth during which the games for the consoles of the new generation are prepared, and during that period, as platform manufacturers or buyers prepare video games for their new consoles, the video game software industry has experienced rapid periods of expansion. Shortly before and after the release of a new generation of game consoles, sales of the current generation of platforms and games generally diminish, as consumers defer purchases in anticipation of the new platforms and games.

Platform manufacturers license publishers to publish games for their platforms and retain a degree of control over the quality and manufacturing of these games. The publishers, subject to the approval of the platform manufacturers, determine the types of games they will create. Software publishers either create their games in-house, through their own development teams, or outsource this function to independent developers.

The following table illustrates the evolution of the principal platforms of both video game system and handheld system.

Handheld systems such as Nintendo DS and Sony PlayStation Portable have achieved global popularity since their introduction due to the inexpensive price of the hardware compared to a console systems and the popularization of casual games. In February 2011, Nintendo 3DS with the 3D function was launched as a successor device, and Sony PlayStation Vita was also launched starting in Japan in December 2011.

As for stationary systems, starting with Microsoft Xbox 360 released in December 2005 in Japan and November 2005 in North America, Sony PlayStation 3 was launched in November 2006 in Japan and March 2007 in Europe, as well as Nintendo Wii in December 2006 in Japan and November 2006 in North America. These next-generation game consoles have become more highly sophisticated in their ability to show expressiveness when playing games. Furthermore, next-generation game consoles are being introduced with the launch of the Nintendo Wii U in December 2012 and the scheduled launch of the Sony PlayStation 4 and Xbox One, from the end of 2013 to the beginning of 2014.

Internet technology for high speed broadband enableshas enabled customers to have a more enhancedinteractive and interactiveenhanced online experience. Going forward, we expect theThe spread of broadband services and continued competition among broadband providers to leadhas led to further growth in the market for online games. With the rapid spread of broadband infrastructure, many game console manufacturers and video game software publishers have entered the online game business. For example, Sony Computer Entertainment started a broadband online service for PlayStation 2 in the beginning of 2002 through which users can play games online and download software as well as enjoy broadband contents such as movies and music at home. In the middle of 2002, Sony Computer Entertainment America Inc. started selling online adaptors and software for PlayStation 2 in the U.S., and in late 2006, started a download service through its network in conjunction with the release of PlayStation 3. In late 2002, Nintendo started an online service for GameCube in Japan and the U.S., and in conjunction with the release of Wii at the end of 2006, started a “virtual console” service in which users can download and play previously released game software for old models, and in March 2008, launched the “WiiWare” service, in which users can download new

game software not available in stores. Microsoft started an online service for Xbox called “Xbox Live” in November 2002 in the U.S. and in January 2003 in Japan, and the service has continued with Xbox 360, which was released in 2005. Currently, all portable game consoles and stationary game consoles have built-in network functions. Consequently, we are expanding further our range of online services. In addition, online distribution of additional content for packaged software has brought about a change in the old business model, under which a sale was concluded upon the delivery of the product to a retailer, to a new business model under which we can expect continued revenues from selling additional content to players. These services are expected to become a new source of income in part because risks unique to a retail business such as inventory, price protection and returned goods do not exist.

Our Consumer Games BusinessVideo Game Software

Our Consumer Games business develops, publishes, distributesAs for our video game software, we develop, publish, distribute and marketsmarket software for video game systems and, to a lesser extent, personal computers. Most of our software consists of video games designed for use with video game platforms, including PlayStation 2, PlayStation 3, PlayStation Portable, PlayStation Vita, Nintendo DS, Nintendo 3DS and Wii and Microsoft Xbox 360, and PCs.

By developing video game software for each of the leading home and handheld video game platforms, we are able to limit our dependence on individual platforms, capitalize on the popularity of successful platforms from time to time, and sell to a more diverse group of consumers since the target age group for each major platform differs. Along with the diversification of consumers’ preferences, Nintendo DS and Wii attract a wide range of users across different age and gender groups.

The market for video game software is substantially affected by sales of the various video game platforms. Our sales of video game software are inevitably affected to a substantial degree by the cyclical nature of the industry generally as platforms change, but through diversification we seek to limit this effect.

Software Titles

Although we haveonce published more than 100 new titles of video game software each year, insince fiscal 2010, we have streamlined the number of new titles to 61 titles under the theme of “Selection and Concentration” andto 54 titles in fiscal 2011, to 5446 titles and in fiscal 2012 to 46 titles.and 10 titles in fiscal 2013. Almost all of these titles are designed for use with leading home and portable game platforms. We publish software titles in a variety of genres, including sports, action, role playing and music simulation.communication.

The following two tables indicate the major software titles that we have either published, or anticipate publishing, during fiscal years 20122013 and 20132014 in each geographic market indicating for each title (i) the category of the game, (ii) the platform on which the game can be played, (iii) the date of release or anticipated release, and (iv) the market in which the product is sold. We cannot assure you that each of the titles anticipated for release in fiscal 20132014 will be released when scheduled, if ever.

Titles Released in Fiscal 20122013

The primary home video game software products on which we rely as revenue sources have been our hit titles, which include the following:

SNAKE EATER,, launched in 2004, sold more than four million units. Products derived fromMETAL GEAR SOLID,such asMETAL GEAR SOLID PORTABLE OPS, have also been launched, andMETAL

GEAR SOLID 4 GUNS OF THE PATRIOT, launched in 2008, sold more than 5 million units in total,total.METAL GEAR RISING REVENGEANCE was also launched during the fiscal year ended March 31, 2013, increasing our total series sales to over 3235 million units as of March 31, 2012.2013.

The following table illustrates the number of units that we have sold by platform for the periods indicated on a consolidated basis. This table indicates where we have concentrated our development efforts as well as changes in the relative significance of individual platforms.

Software Development

We seek to produce video game software that is fun and exciting, and which provide sufficient challenges at various levels of proficiency to encourage repeated play.

Because the popularity of successful titles fades quickly, we are constantly working to develop new titles and sequels to existing titles. The life span for video game software titles depends on the type of title. Sports titles, which are updated frequently, may last indefinitely. Other titles usually have short life spans, generally six months to one year.

Further, the consumervideo game software market is recently experiencing a polarizing trend whereby so-called “high-end AAA titles” designed with leading-edge programming technology to optimize the specifications of a game machine have increased in sales volume while many other titles remain stagnant. As these “high-end AAA titles” usually have a long two to three year development period and require commitment of management resources for research and development of technology, it is necessary to establish a strategic product development structure and perform allocation of management resources.

On March 31, 2006, we founded Konami Digital Entertainment Co., Ltd. through a transfer of our digital entertainment operations including our video game software business, in the form of corporate separation and, as

a result, we shifted to a holding company structure. We presently provide substantial discretion to our subsidiaries to achieve timely decision-making processes while the parent company develops group strategies and distributes management resources among group companies.

Hiring and retaining talented creative staff is keycrucial to developingdevelop successful content. We believe that our compensation structure that rewards creators for the success of their games and our policy of providing creators substantial independence and flexibility, enables us to attract and retain game creators that are among the best in the industry.

Through our long experience in developing software, we have developed significant in-house expertise and many proprietary development tools that streamline the development process, allowing members of our development teams to focus their efforts on the play and simulation aspects of the product under development. We believe our accumulated know-how and proprietary development tools enable our software designers to develop compelling, graphically sophisticated games quickly and efficiently, which may give us an advantage over competitors.

Manufacturing

Our video game software is manufactured upon acceptance by Sony, Nintendo and Microsoft as required by the applicable platform license. We believe that this is the most desirable arrangement for both parties because we avoid the costs associated with the construction and maintenance of manufacturing facilities while the hardware manufacturers collect per unit royalties for each game they manufacture. The manufacturing process begins with our placing a purchase order with a manufacturer. Hardware manufacturers or their authorized vendors typically ship the first order to us within two to six weeks and additional orders for the same title within three days to four weeks.

We maintain both the proprietary rights and risks associated with each game title. In addition, at the time our product unit orders are filled by the manufacturer, we become responsible for the costs of manufacturing and/or the applicable per unit royalty on such units, even if the units do not ultimately sell. We provide a standard defective product warranty on all of the products sold. We are responsible in most cases for resolving, at our expense, any applicable warranty or repair claim. To date, we have not experienced any material costs from warranty or repair claims.

Platform Licenses

Our Consumer Gamesvideo game software business is dependent on our license agreements with the manufacturers of hardware platforms. All of these licenses are non-exclusive with fixed terms although these contracts are usually extended for additional terms. Each license grants us the right to develop, publish and distribute titles for use on the manufacturer’s platforms. Manufacturers typically have the right to approve the titles to be released and embodied in products that are manufactured solely by the manufacturer or its authorized vendor.

The following table sets forth information with respect to our material platform licenses. In some instances, we have more than one platform license for a particular platform. All of the platform licenses shown below are automatically renewed on an annual basis.

Nintendo charges us an amount for each Nintendo DS cartridge manufactured. This amount varies based, in part, on the memory capacity of the cartridges. Nintendo Wii, Sony and Microsoft contracts include a charge for every disc manufactured. The amounts charged by the manufacturers include a royalty for the use of the manufacturer’s name, proprietary information and technology, and are subject to adjustment by the manufacturers at their discretion. The manufacturers have the right to review, evaluate and approve a demo-disc of each title and the title’s packaging.

Marketing, Sales and Distribution

We believe that we benefit from a strong positive perception in Japan of the KONAMI brand name. We are focusing on further enhancing the KONAMI brand name by aggressively advertising and promoting ourselves and our products and services. To continue to increase our brand name recognition, we advertise on television, the radio and through various magazines and newspapers.

In October 2005, we merged with Konami Marketing Japan, Inc., a wholly-owned subsidiary for our marketing, sales and distribution businesses. As a result, we believe we are able to operate our digital entertainment business in a more consistent manner, from planning and production to advertisement and sales, and operate more efficiently. In addition, we newly established Konami Digital Entertainment Co., Ltd. through a company separation to succeed to our digital entertainment business in March 2006.

Our video game software products are sold in Japan primarily through our sales distribution network, which we coordinate, and offices throughout Japan. Each of these sales offices focuses its efforts on a specific area within Japan. We bear inventory risk until the product is sold to the retailer. However, once products are sold to a retailer, they cannot be returned unless they are defective. We believe that our distribution network is a major asset of our business. In addition, we also conduct online sales through a directly operated website, and online sales have accounted for a greater percentage of our sales each year since the year ended March 31, 2008 due to the strengthening of our website through sales of limited editions of our video game software products on our website.

In July 2010, as a new project, we opened our first antenna shop called “KONAMI STYLE Tokyo Midtown” which offers information and original limited-edition products available only at the store, and provides a place to gain a better understanding of KONAMI by offering the chance to customers to experience products yet to be released as well as implementing various events.

As for overseas marketing, we sell our products through sales representatives at our subsidiaries, principally those in the United States, Germany and Hong Kong. Due to different commercial environments, there are some risks for price protection or returned goods. In the European markets, soccer game software has made solid sales, whereas in the North American market, music game software is popular.

e-Amusement BusinessAmusement Arcade Games

Our e-Amusement business producesAs for our amusement arcade games, we produce and sellssell video game machines and token-operated game machines for amusement arcades.

e-Amusement Arcade Games—Industry Overview

According to an industry statistical report, the amusement industry in Japan recorded total revenues of ¥673.6¥672.2 billion in fiscal 2011.2012. The breakdown by category is shown in the following table.

Amusement Industry-Revenues in Japan