Konami (KNM) 6-K Current report (foreign)

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of November 2012

Commission File Number: 1-31452

KONAMI CORPORATION

(Translation of registrant’s name into English)

7-2, Akasaka 9-chome

Minato-ku, Tokyo 107-8323

Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  x             Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

Information furnished in this form:

1. English translation of the Quarterly Securities Report (Shihanki Hokokusho) for the six-month period ended September  30, 2012 pursuant to the Financial Instruments and Exchange Law of Japan

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	KONAMI CORPORATION
Date: November 13, 2012	By:	/s/ Takuya Kozuki
	Name:	Takuya Kozuki
	Title:	Representative Director, President

KONAMI CORPORATION filed its Quarterly Securities Report for the six-month period ended September 30, 2012 with the Director of the Kanto Local Finance Bureau of the Ministry of Finance of Japan on November 12, 2012. The following is the summary of the Quarterly Securities Report.

I Corporate Information

A. Corporate Overview

1. Selected Financial Data

2. Overview of Business

B. Business

1. Risks Relating to Our Business

2. Significant Contracts

3. Results of Operations and Financial position

C. Information on Reporting Company

1. Share Information

a. Total Number of Shares

b. Stock Acquisition Rights

c. Convertible Bonds Exercise

d. Rights Plan

e. Common Stock and Additional Paid-in Capital

f. Major Shareholders

g. Voting Rights

2. Directors and Corporate Auditors

D. Financial Statements

1. Quarterly Consolidated Financial Statements

2. Others

II Information on Guarantors

1. Consolidated Financial Statements

(1) Consolidated Balance Sheets (Unaudited)

	Millions of Yen
	March 31, 2012		September 30, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	¥	76,451	¥	61,574
Trade notes and accounts receivable, net of allowance for doubtful accounts of ¥380 million at March 31, 2012 and ¥210 million at September 30, 2012		33,647		26,339
Inventories		22,121		26,586
Deferred income taxes, net		20,503		19,438
Prepaid expenses and other current assets		9,243		13,849
Total current assets		161,965		147,786
PROPERTY AND EQUIPMENT, net		62,251		62,791
INVESTMENTS AND OTHER ASSETS:
Investments in marketable securities		429		365
Investments in affiliate		2,184		2,183
Identifiable intangible assets		41,283		42,228
Goodwill		21,875		21,852
Lease deposits		26,827		26,954
Deferred income taxes, net		976		967
Other assets		10,216		10,163
Total investments and other assets		103,790		104,712
TOTAL ASSETS	¥	328,006	¥	315,289

See accompanying notes to consolidated financial statements.

– 1 –

	Millions of Yen
	March 31, 2012			September 30, 2012
LIABILITIES
CURRENT LIABILITIES:
Short-term borrowings	¥	2,300		¥	3,452
Current portion of long-term debt		5,000			5,000
Current portion of capital lease and financing obligations		2,458			2,301
Trade notes and accounts payable		16,290			14,174
Accrued income taxes		10,449			5,778
Accrued expenses		19,993			16,172
Deferred revenue		5,595			6,392
Other current liabilities		5,805			5,980
Total current liabilities		67,890			59,249
LONG-TERM LIABILITIES:
Long-term debt, less current portion		5,000			—
Capital lease and financing obligations, less current portion		24,803			23,703
Accrued pension and severance costs		1,641			1,617
Deferred income taxes, net		4,024			4,237
Other long-term liabilities		8,928			8,708
Total long-term liabilities		44,396			38,265
TOTAL LIABILITIES		112,286			97,514
COMMITMENTS AND CONTINGENCIES (Note 12)
EQUITY
KONAMI CORPORATION stockholders’ equity:
Common stock, no par value- Authorized 450,000,000 shares; issued 143,500,000 shares at March 31, 2012 and September 30, 2012; outstanding 138,620,152 shares at March 31, 2012 and 138,619,273 shares at September 30, 2012		47,399			47,399
Additional paid-in capital		74,175			74,175
Legal reserve		284			284
Retained earnings		107,565			111,054
Accumulated other comprehensive loss		(2,719	)		(4,232	)
Treasury stock, at cost- 4,879,848 shares at March 31, 2012 and 4,880,727 shares at September 30, 2012		(11,246	)		(11,248	)
Total KONAMI CORPORATION stockholders’ equity		215,458			217,432
Noncontrolling interest		262			343
TOTAL EQUITY		215,720			217,775
TOTAL LIABILITIES AND EQUITY	¥	328,006		¥	315,289

See accompanying notes to consolidated financial statements.

– 2 –

(2)Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited)

For the six months ended September 30, 2011 and 2012

Consolidated Statements of Income

	Millions of Yen
	Six months  ended September 30, 2011			Six months ended September 30, 2012
NET REVENUES:
Product sales revenue	¥	61,559		¥	45,965
Service and other revenue		61,537			60,708
Total net revenues		123,096			106,673
COSTS AND EXPENSES:
Costs of products sold		37,007			26,483
Costs of services rendered and others		41,778			43,725
Selling, general and administrative		23,791			23,902
Earthquake related expenses		335			—
Total costs and expenses		102,911			94,110
Operating income		20,185			12,563
OTHER INCOME (EXPENSES):
Interest income		118			91
Interest expense		(726	)		(678	)
Foreign currency exchange gain (loss), net		(195	)		(369	)
Other, net		(7	)		(119	)
Other income (expenses), net		(810	)		(1,075	)
INCOME BEFORE INCOME TAXES AND EQUITY IN NET INCOME OF AFFILIATED COMPANY		19,375			11,488
INCOME TAXES		7,841			4,465
EQUITY IN NET INCOME OF AFFILIATED COMPANY		2			13
NET INCOME		11,536			7,036
NET INCOME ATTRIBUTABLE TO THE NONCONTROLLING INTEREST		74			81
NET INCOME ATTRIBUTABLE TO KONAMI CORPORATION	¥	11,462		¥	6,955

Consolidated Statements of Comprehensive Income

	Millions of Yen
	Six months  ended September 30, 2011			Six months ended September 30, 2012
Net income	¥	11,536		¥	7,036
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(2,342	)		(1,542	)
Net unrealized gains on available-for-sale securities		3			27
Pension liability adjustment		121			2
Other comprehensive loss		(2,218	)		(1,513	)
Comprehensive income		9,318			5,523
Comprehensive income attributable to the non controlling interest		74			81
Comprehensive income attributable to KONAMI CORPORATION	¥	9,244		¥	5,442
PER SHARE DATA:
	Six months ended September 30, 2011			Six months ended September 30, 2012
Net income attributable to KONAMI CORPORATION per share:
Basic	¥	82.89		¥	50.17
Diluted		82.89			50.17
Weighted-average common shares outstanding		138,272,696			138,619,565
Diluted weighted-average common shares outstanding		138,272,696			138,619,565

See accompanying notes to consolidated financial statements.

– 3 –

For the three months ended September 30, 2011 and 2012

Consolidated Statements of Income

	Millions of Yen
	Three months  ended September 30, 2011			Three months ended September 30, 2012
NET REVENUES:
Product sales revenue	¥	36,123		¥	26,699
Service and other revenue		32,058			30,846
Total net revenues		68,181			57,545
COSTS AND EXPENSES:
Costs of products sold		20,805			15,516
Costs of services rendered and others		21,199			22,305
Selling, general and administrative		12,962			12,541
Earthquake related expenses		54			—
Total costs and expenses		55,020			50,362
Operating income		13,161			7,183
OTHER INCOME (EXPENSES):
Interest income		78			37
Interest expense		(368	)		(333	)
Foreign currency exchange gain (loss), net		(199	)		(40	)
Other, net		(3	)		(4	)
Other income (expenses), net		(492	)		(340	)
INCOME BEFORE INCOME TAXES AND EQUITY IN NET INCOME OF AFFILIATED COMPANY		12,669			6,843
INCOME TAXES		5,220			2,571
EQUITY IN NET INCOME OF AFFILIATED COMPANY		13			10
NET INCOME		7,462			4,282
NET INCOME ATTRIBUTABLE TO THE NONCONTROLLING INTEREST		43			42
NET INCOME ATTRIBUTABLE TO KONAMI CORPORATION	¥	7,419		¥	4,240

Consolidated Statements of Comprehensive Income

	Millions of Yen
	Three months ended September 30, 2011			Three months ended September 30, 2012
Net income	¥	7,462		¥	4,282
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(1,697	)		(274	)
Net unrealized gains (losses) on available-for-sale securities		10			(15	)
Pension liability adjustment		107			1
Other comprehensive loss		(1,580	)		(288	)
Comprehensive income		5,882			3,994
Comprehensive income attributable to the non controlling interest		43			42
Comprehensive income attributable to KONAMI CORPORATION	¥	5,839		¥	3,952
PER SHARE DATA:
	Three months ended September 30, 2011			Three months ended September 30, 2012
Net income attributable to KONAMI CORPORATION per share:
Basic	¥	53.52		¥	30.59
Diluted		53.52			30.59
Weighted-average common shares outstanding		138,626,201			138,619,356
Diluted weighted-average common shares outstanding		138,626,201			138,619,356

See accompanying notes to consolidated financial statements.

– 4 –

(3) Consolidated Statements of Cash Flows (Unaudited)

	Millions of Yen
	Six months  ended September 30, 2011			Six months ended September 30, 2012
Cash flows from operating activities:
Net income	¥	11,536		¥	7,036
Adjustments to reconcile net income to net cash used in operating activities -
Depreciation and amortization		4,718			4,726
Provision for doubtful receivables		67			(177	)
Loss on sale or disposal of property and equipment, net		215			59
Equity in net income of affiliated company		(2	)		(13	)
Deferred income taxes		1,531			1,034
Change in assets and liabilities, net of businesses acquired:
Decrease (increase) in trade notes and accounts receivable		(7,519	)		6,782
Increase in inventories		(6,810	)		(5,193	)
Decrease (increase) in other receivables		305			(42	)
Increase in prepaid expenses		(65	)		(995	)
Decrease in trade notes and accounts payable		(3,368	)		(1,868	)
Increase (decrease) in accrued income taxes, net of tax refunds		622			(7,947	)
Decrease in accrued expenses		(55	)		(2,495	)
Increase in deferred revenue		5,634			925
Decrease in advance received		(126	)		(88	)
Decrease in deposits		(148	)		(2	)
Other, net		497			(1,036	)
Net cash provided by operating activities		7,032			706
Cash flows from investing activities:
Capital expenditures, including interest capitalized		(5,100	)		(5,306	)
Proceeds from sales of property and equipment		5			1
Decrease (increase) in lease deposits, net		320			(9	)
Decrease in term deposits, net		1,412			—
Acquisition of business		—			(1,245	)
Other, net		12			9
Net cash used in investing activities		(3,351	)		(6,550	)
Cash flows from financing activities:
Increase (decrease) in short-term borrowings, net		(1,500	)		1,152
Redemption of bonds		(5,000	)		(5,000	)
Principal payments under capital lease and financing obligations		(1,140	)		(1,291	)
Dividends paid		(2,229	)		(3,460	)
Purchases of treasury stock by parent company		(22	)		(3	)
Proceeds from sale-leaseback transactions		1,547			—
Other, net		1			2
Net cash used in financing activities		(8,343	)		(8,600	)
Effect of exchange rate changes on cash and cash equivalents		(923	)		(433	)
Net decrease in cash and cash equivalents		(5,585	)		(14,877	)
Cash and cash equivalents, beginning of the period		59,541			76,451
Cash and cash equivalents, end of the period	¥	53,956		¥	61,574

See accompanying notes to consolidated financial statements.

– 5 –

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

KONAMI CORPORATION (the “Company”) and its subsidiaries (collectively “KONAMI”) prepared the accompanying consolidated financial statements in accordance with U.S. generally accepted accounting principles (“U.S.GAAP”). KONAMI became publicly traded on the New York Stock Exchange in September 2002, and prepares its consolidated financial statements pursuant to the terminology, forms and preparation methods required in order to issue American Depositary Shares, which are registered with the U.S. Securities and Exchange Commission.

2. Reclassifications

Certain reclassifications have been made to the prior periods’ consolidated financial statements to conform to the presentation used for the current period.

3. New Accounting Pronouncements Adopted

Effective April 1, 2012, KONAMI has adopted Accounting Standards Update (“ASU”) 2011-05 “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which was subsequently amended by ASU2011-12 “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU2011-05”. ASU2011-05 requires the presentation of net income and other comprehensive income in a single continuous statement or in two separate but consecutive statements and eliminates the current option to report comprehensive income in the statement of equity. ASU2011-12 would defer the requirement to separately present within net income reclassification adjustments of items out of accumulated other comprehensive income, a part of which is required in ASU2011-05. The adoption of ASU2011-05 and ASU2011-12 did not have a material impact on KONAMI’s financial position and results.

4. Inventories

Inventories at March 31, 2012 and September 30, 2012 consisted of the following:

	Millions of Yen
	March 31, 2012		September 30, 2012
Finished products	¥	7,158	¥	8,029
Work in process		10,078		13,880
Raw materials and supplies		4,885		4,677
Total	¥	22,121	¥	26,586

5. Property and Equipment

Property and equipment at March 31, 2012 and September 30, 2012 consisted of the following:

	Millions of Yen
	March 31, 2012			September 30, 2012
Property and equipment, at cost:
Land	¥	14,532		¥	14,514
Buildings and structures		75,301			76,060
Tools, furniture and fixtures		25,050			25,104
Construction in progress		182			1,921
Total		115,065			117,599
Less-Accumulated depreciation and amortization		(52,814	)		(54,808	)
Net property and equipment	¥	62,251		¥	62,791

– 6 –

6. Business Combinations

On July 2, 2012, 4K Media Inc. (formerly 4K Acquisition Corp.), a subsidiary of the Company, entered into an asset purchase agreement with 4Kids Entertainment, Inc., which was engaged in the business of production of television and movie programs and licensing-out its content. The purpose of this agreement was to upgrade and extend the content of the Digital Entertainment business. The assets including merchandising rights to its content were acquired for ¥1,164 million in cash.

The following table summarizes the assets acquired at the acquisition date, with the acquisition cost allocated, preliminary, to each acquired asset:

	Millions of Yen
Current assets	¥	116
Property and equipment		7
Identifiable intangible assets		1,018
Other assets		23
Total assets acquired	¥	1,164

The results of operations of 4K Media Inc. from the acquisition date to this period ended September 30, 2012 were not material. The pro forma condensed combined financial information is not disclosed because the effect of this acquisition on KONAMI’s consolidated financial statements is not material.

7. Severance and Retirement Plans

Net periodic cost of KONAMI’s plans for the six and three months ended September 30, 2011 and 2012 included the following components:

During the fiscal year ended March 31, 2012, KONAMI terminated all of its defined benefit severance and retirement plans. Certain domestic subsidiaries made a transition to the defined contribution plans. Meanwhile, certain domestic subsidiaries encouraged the voluntary retirement plans, resulting in special granting termination benefits for the six months ended September 30, 2011.

	Millions of Yen
	Six months  ended September 30, 2011			Six months  ended September 30, 2012
Service cost – benefits earned during the period	¥	132			—
Interest cost on projected benefit obligation		15			—
Expected return on plan assets		(14	)		—
Recognized actuarial loss		20			—
Settlement loss		—		¥	3
Loss from special termination benefit		648			—
Net periodic cost	¥	801		¥	3

	Millions of Yen
	Three months  ended September 30, 2011			Three months  ended September 30, 2012
Service cost – benefits earned during the period	¥	66			—
Interest cost on projected benefit obligation		8			—
Expected return on plan assets		(7	)		—
Recognized actuarial loss		10			—
Settlement loss		—		¥	0
Loss from special termination benefit		422			—
Net periodic cost	¥	499		¥	0

– 7 –

8. Equity

The changes in the carrying amount of KONAMI CORPORATION stockholders’ equity, noncontrolling interest and total equity in the consolidated balance sheets for the six and three months ended September 30, 2011 and 2012 were as follows:

	Millions of Yen
For the six months ended September 30, 2011	KONAMI CORPORATION stockholders’ equity			Noncontrolling interest			Total equity
Balance at March 31, 2011	¥	193,914		¥	4,493		¥	198,407
Cash dividends attributable to KONAMI CORPORATION stockholders		(2,231	)		—			(2,231	)
Purchase of treasury stock		5,047			—			5,047
Equity transaction with noncontrolling interests and others		(639	)		(4,356	)		(4,995	)
Comprehensive income:
Net income for the period		11,462			74			11,536
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(2,342	)		—			(2,342	)
Net unrealized gains on available-for-sale securities		3			—			3
Pension liability adjustment		121			—			121
Comprehensive income for the period		9,244			74			9,318
Balance at September 30, 2011	¥	205,335		¥	211		¥	205,546

	Millions of Yen
For the six months ended September 30, 2012	KONAMI CORPORATION stockholders’ equity			Noncontrolling interest		Total equity
Balance at March 31, 2012	¥	215,458		¥	262	¥	215,720
Cash dividends attributable to KONAMI CORPORATION stockholders		(3,466	)		—		(3,466	)
Purchase of treasury stock		(2	)		—		(2	)
Comprehensive income:
Net income for the period		6,955			81		7,036
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(1,542	)		—		(1,542	)
Net unrealized gains on available-for-sale securities		27			—		27
Pension liability adjustment		2			—		2
Comprehensive income for the period		5,442			81		5,523
Balance at September 30, 2012	¥	217,432		¥	343	¥	217,775

	Millions of Yen
For the three months ended September 30, 2011	KONAMI CORPORATION stockholders’ equity			Noncontrolling interest		Total equity
Balance at June 30, 2011	¥	199,511		¥	168	¥	199,679
Purchase of treasury stock		(15	)		—		(15	)
Comprehensive income:
Net income for the period		7,419			43		7,462
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(1,697	)		—		(1,697	)
Net unrealized gains on available-for-sale securities		10			—		10
Pension liability adjustment		107			—		107
Comprehensive income for the period		5,839			43		5,882
Balance at September 30, 2011	¥	205,335		¥	211	¥	205,546

– 8 –

	Millions of Yen
For the three months ended September 30, 2012	KONAMI CORPORATION stockholders’ equity			Noncontrolling interest		Total equity
Balance at June 30, 2012	¥	213,480		¥	301	¥	213,781
Purchase of treasury stock		0			—		0
Comprehensive income:
Net income for the period		4,240			42		4,282
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(274	)		—		(274	)
Net unrealized losses on available-for-sale securities		(15	)		—		(15	)
Pension liability adjustment		1			—		1
Comprehensive income for the period		3,952			42		3,994
Balance at September 30, 2012	¥	217,432		¥	343	¥	217,775

9. Fair Value of Financial Instruments

Cash and cash equivalents, Trade notes and accounts receivable, Trade notes and accounts payable, Accrued expenses, and Short-term borrowings

The carrying amount approximates fair value because of the short maturity of these instruments.

Investments in marketable securities

The fair values of the Company and its domestic subsidiaries’ investments in marketable securities are based on quoted market prices.

Investments in non-marketable securities

For investments in non-marketable securities for which there are no quoted market prices, a reasonable estimate of fair value could not be made without incurring excessive costs. It was not practicable to estimate the fair value of common stock representing certain untraded companies. These investments are carried at cost.

Long-term debt

The fair values of the Company and its domestic subsidiaries’ long-term debt instruments are based on the quoted price in the most active market or the present value of future cash flows associated with each instrument discounted using the Company’s current borrowing rate for similar debt instruments of comparable maturity.

Derivative financial instruments

The fair values of derivative financial instruments, consisting principally of foreign exchange forward contracts, all of which are used for purposes other than trading, are estimated by obtaining quotes from counterparties or third parties.

The estimated fair values of the Company and its domestic subsidiaries’ financial instruments at March 31, 2012 and September 30, 2012 are as follows:

	Millions of Yen
	March 31, 2012						September 30, 2012
	Carrying amount			Estimated fair value			Carrying amount			Estimated fair value
Non-derivatives:
Investment in marketable securities	¥	429		¥	429		¥	365		¥	365
Long-term debt, including current portion		(10,000	)		(10,035	)		(5,000	)		(5,024	)
Derivatives:
Foreign exchange forward contracts:
Assets		—			—			—			—
Liabilities		0			0			—			—

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

– 9 –

10. Fair Value Measurements

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and requires that assets and liabilities carried at fair value are classified and disclosed in the following three categories:

Level 1	–	Quoted prices for identical assets or liabilities in active markets
Level 2	–	Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets
Level 3	–	Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of March 31, 2012 and September 30, 2012, our assets and liabilities measured at fair value on a recurring basis are summarized in the following table by the type of inputs applicable to the fair value measurements.

	Millions of Yen
March 31, 2012	Level 1		Level 2		Level 3		Total
Assets:
Marketable securities	¥	429		—		—	¥	429
Total assets	¥	429		—		—	¥	429
Liabilities:
Derivatives		—	¥	0		—	¥	0
Total liabilities		—	¥	0		—	¥	0

	Millions of Yen
September 30, 2012	Level 1		Level 2		Level 3		Total
Assets:
Marketable securities	¥	365		—		—	¥	365
Total assets	¥	365		—		—	¥	365
Liabilities		—		—		—		—
Total liabilities		—		—		—		—

Level 1 investments are comprised solely of available-for-sale securities, which is valued using an unadjusted quoted market price in active markets with sufficient volume and frequency of transactions.

Derivative financial instruments are comprised of foreign exchange forward contracts. Level 2 derivatives are valued using quotes obtained from counterparties or third parties, which are periodically validated by pricing models using observable market inputs, such as foreign currency exchange rates and interest rates.

As of March 31, 2012 and September 30, 2012, KONAMI did not have any Level 3 financial instruments that were measured and recorded at fair value on a recurring basis.

11. Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The operating segments are managed separately as each segment represents a strategic business unit that offers different products and serves different markets.

KONAMI operates on a worldwide basis principally with the following four business segments:

1. Digital Entertainment:	Production, manufacture and sale of digital content and related products including Content for social networks, Online games, Computer & Video Games, Amusement and Card Games.
2. Health & Fitness:	Operation of health and fitness clubs, and production, manufacture and sale of health and fitness related goods.
3. Gaming & Systems:	Development, manufacture, sale and service of gaming machines and the Casino Management System for overseas markets.
4. Pachinko & Pachinko Slot Machines:	Production, manufacture and sale of pachinko slot machines and LCDs units for pachinko machines.

Notes:

1. “Corporate” primarily consists of administrative expenses of the Company.

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

3. Intersegment sales and revenues are generally recorded at values that represent arm’s-length fair value.

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The following tables summarize revenue and operating income (loss) by operating segment which are the primary measures used by KONAMI’s chief operating decision maker to measure KONAMI’s operating results and to measure segment profitability and performance. This information is derived from KONAMI’s management reports which have been prepared based on U.S. GAAP.

a. Segment information

Six months ended September 30, 2011	Digital Entertainment		Health & Fitness		Gaming & Systems		Pachinko & Pachinko Slot Machines			Corporate and Eliminations			Consolidated
	(Millions of Yen)
Net revenue:
External customers	¥	57,767	¥	41,464	¥	10,543	¥	13,322			—		¥	123,096
Intersegment		343		114		—		3		¥	(460	)		—
Total		58,110		41,578		10,543		13,325			(460	)		123,096
Operating expenses		43,003		40,493		7,790		9,636			1,989			102,911
Operating income (loss)	¥	15,107	¥	1,085	¥	2,753	¥	3,689		¥	(2,449	)	¥	20,185
Six months ended September 30, 2012	Digital Entertainment		Health & Fitness		Gaming & Systems		Pachinko & Pachinko Slot Machines			Corporate and Eliminations			Consolidated
	(Millions of Yen)
Net revenue:
External customers	¥	52,317	¥	40,321	¥	11,393	¥	2,642			—		¥	106,673
Intersegment		374		14		—		1		¥	(389	)		—
Total		52,691		40,335		11,393		2,643			(389	)		106,673
Operating expenses		40,992		38,971		8,543		2,433			3,171			94,110
Operating income (loss)	¥	11,699	¥	1,364	¥	2,850	¥	210		¥	(3,560	)	¥	12,563
Three months ended September 30, 2011	Digital Entertainment		Health & Fitness		Gaming & Systems		Pachinko & Pachinko Slot Machines			Corporate and Eliminations			Consolidated
	(Millions of Yen)
Net revenue:
External customers	¥	31,827	¥	21,309	¥	5,445	¥	9,600			—		¥	68,181
Intersegment		181		11		—		3		¥	(195	)		—
Total		32,008		21,320		5,445		9,603			(195	)		68,181
Operating expenses		22,960		20,518		3,927		6,649			966			55,020
Operating income (loss)	¥	9,048	¥	802	¥	1,518	¥	2,954		¥	(1,161	)	¥	13,161
Three months ended September 30, 2012	Digital Entertainment		Health & Fitness		Gaming & Systems		Pachinko & Pachinko Slot Machines			Corporate and Eliminations			Consolidated
	(Millions of Yen)
Net revenue:
External customers	¥	29,655	¥	20,613	¥	6,188	¥	1,089			—		¥	57,545
Intersegment		216		5		—		1		¥	(222	)		—
Total		29,871		20,618		6,188		1,090			(222	)		57,545
Operating expenses		23,364		19,936		4,367		1,284			1,411			50,362
Operating income (loss)	¥	6,507	¥	682	¥	1,821	¥	(194	)	¥	(1,633	)	¥	7,183

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b. Geographic information

Six months ended September 30, 2011	Japan		United States		Europe			Asia/Oceania			Total		Eliminations			Consolidated
	(Millions of Yen)
Net revenue:
External customers	¥	102,495	¥	13,938	¥	3,729		¥	2,934		¥	123,096		—		¥	123,096
Intersegment		4,090		667		194			114			5,065	¥	(5,065	)		—
Total		106,585		14,605		3,923			3,048			128,161		(5,065	)		123,096
Operating expenses		88,877		12,118		4,211			2,828			108,034		(5,123	)		102,911
Operating income	¥	17,708	¥	2,487	¥	(288	)	¥	220		¥	20,127	¥	58		¥	20,185
Six months ended September 30, 2012	Japan		United States		Europe			Asia/Oceania			Total		Eliminations			Consolidated
	(Millions of Yen)
Net revenue:
External customers	¥	81,478	¥	16,957	¥	5,655		¥	2,583		¥	106,673		—		¥	106,673
Intersegment		5,339		899		75			266			6,579	¥	(6,579	)		—
Total		86,817		17,856		5,730			2,849			113,252		(6,579	)		106,673
Operating expenses		77,142		14,933		5,837			2,852			100,764		(6,654	)		94,110
Operating income (loss)	¥	9,675	¥	2,923	¥	(107	)	¥	(3	)	¥	12,488	¥	75		¥	12,563
Three months ended September 30, 2011	Japan		United States		Europe			Asia/Oceania			Total		Eliminations			Consolidated
	(Millions of Yen)
Net revenue:
External customers	¥	57,855	¥	7,201	¥	1,803		¥	1,322		¥	68,181		—		¥	68,181
Intersegment		2,177		388		169			31			2,765	¥	(2,765	)		—
Total		60,032		7,589		1,972			1,353			70,946		(2,765	)		68,181
Operating expenses		47,880		6,304		2,308			1,269			57,761		(2,741	)		55,020
Operating income (loss)	¥	12,152	¥	1,285	¥	(336	)	¥	84		¥	13,185	¥	(24	)	¥	13,161
Three months ended September 30, 2012	Japan		United States		Europe			Asia/Oceania			Total		Eliminations			Consolidated
	(Millions of Yen)
Net revenue:
External customers	¥	42,280	¥	9,670	¥	4,186		¥	1,409		¥	57,545		—		¥	57,545
Intersegment		3,657		474		24			245			4,400	¥	(4,400	)		—
Total		45,937		10,144		4,210			1,654			61,945		(4,400	)		57,545
Operating expenses		40,983		8,146		4,049			1,653			54,831		(4,469	)		50,362
Operating income	¥	4,954	¥	1,998	¥	161		¥	1		¥	7,114	¥	69		¥	7,183

For the purpose of presenting its operations in geographic areas above, KONAMI attributes revenues from external customers to individual countries in each area based on where the Company and its subsidiaries sold products or rendered services.

12. Commitments and Contingencies

KONAMI is subject to pending claims and litigation. After review and consultation with counsel, management considered that any liability that may result from the disposition of such lawsuits would not be material.

KONAMI has placed firm orders for purchases of property and equipment and other assets amounting to approximately ¥17,511 million as of September 30, 2012.

13. Subsequent Events

No reportable subsequent events occurred.

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