Last checked at 7 Jun 2006 09:51
Konami Corporation07 June 2006 Notice of the 34th Ordinary General Meeting of Shareholders Stock Code Number: 9766 June 7, 2006 Dear Shareholder, You are cordially invited to attend the 34th Ordinary General Meeting ofShareholders, which will be held as described hereunder. If you are unable to attend the meeting, you may exercise your voting rightseither in writing or over the Internet (instructions overleaf). Please completethe voting forms enclosed after reviewing the reference materials included. Toensure your vote is counted, please complete all online procedures or return thecompleted postal ballot by no later than Wednesday, June 28, 2006. Sincerely yours, Kagemasa Kozuki Representative Director KONAMI CORPORATION 4-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo MEETING AGENDA 1. Date and Time: 10:00 a.m., Thursday, June 29, 2006 2. Venue: "Arena" of Konami Sports & Life Co., Ltd., 10-1, Higashi Shinagawa 4-chome, Shinagawa-ku, Tokyo 3. Agenda: Reports 1. Business Report, Consolidated Balance Sheet and Consolidated Statement ofIncome for the 34th fiscal year (from April 1, 2005 to March 31, 2006); and onthe Reports of the Independent Auditor and of the Board of Statutory Auditorsregarding Consolidated Financial Statements for the 34th fiscal year. 2. Balance Sheet and Statement of Income for the 34th fiscal year. Proposals Proposal 1 Acceptance of Proposed Appropriation Plan of Earned Surplus for the 34th fiscal year Proposal 2 Amendments to the Articles of Incorporation Proposal 3 Election of eight members to the Board of Directors 4. Information on executing voting rights: To vote using the Internet, please read carefully the procedures for voting byelectronic means on page 3 (overleaf) in exercising your voting right. 5. Method of notification to shareholders: In case any amendments or changes are made to the reference materials for thegeneral meeting of shareholders prior to the date of the meeting, KONAMICORPORATION shall notify its shareholders by mail or via KONAMI CORPORATION'sweb site (www.konami.net). * If attending the meeting in person, please remember to bring the ballotenclosed with these materials and hand it to the receptionist. (This is an English translation of the Report for the 34th Fiscal Year (the"Report") of Konami Corporation provided for your reference and convenience.This translation includes a translation of the audit report of KPMG AZSA & Co.,Konami's independent auditor, of the financial statements included in theoriginal Japanese language Report.) Procedures for Voting If you are unable to attend the meeting, you may exercise your voting right byfollowing one of the procedures described below. ADR holders cannot vote in thismanner. Please contact the ADR Depositary if you wish to vote. Procedures for voting by electronic means Shareholders are asked to follow the procedures detailed below if they wish toexercise their voting rights using the Internet. 1. Shareholders may only exercise their voting rights online through thededicated voting website designated by KONAMI CORPORATION. Voting website URL: http://www.webdk.net 2. Shareholders choosing to exercise their voting rights online need to use thevoting code and password specified on the enclosed voting form. Once you haveentered the site, please vote for or against the resolution by following theinstructions on screen. 3. Online votes may be accepted up to 18:00, Wednesday, June 28, 2006. However,shareholders are kindly requested to register online votes as early as possibleto facilitate the counting of online votes. 4. If you duplicate your vote, i.e., if you exercise your voting rights both bymail and via the Internet, we will consider only the Internet vote to be valid. 5. If you vote a number of times over the Internet, or if you duplicate yourvote using a PC and a mobile phone, we will consider the final vote to be thevalid one. 6. Any connection fees to the Internet providers or time charges (telephonecharges, etc.) incurred by shareholders in exercising votes online are to beborne by such shareholders. System requirements for voting by electronic means The following are systems requirements for accessing voting website. (1) Internet access. (2) Shareholders choosing to exercise their voting rights using a PC shouldnote that the site only supports the following browser software: Microsoft(R)Internet Explorer 5.5 or above, Netscape(R) 6.2 or above. The site supports anyhardware platform running the software specified above. (3) Shareholders choosing to exercise their voting rights using a mobile phoneshould note that a handset model that supports 128-bit SSL (encrypted)communication is required (for security reasons, the site has been designed onlyto be accessible by mobile phones with 128-bit SSL encryption technology). (Microsoft(R) is a registered trademark in the United States and othercountries of Microsoft Corporation of the U.S. Netscape(R) is a registeredtrademark in the United States and certain other countries of NetscapeCommunications Corporation.) 1. Business Performance (1) Konami Group Business Conditions and Results Moderate economic recovery was the overall trend in the Japanese economy in theconsolidated fiscal year ended March 31, 2006. Corporate performance improved,capital investments increased, and personal consumption rose moderately. Therewas also healthy recovery in the global economy. Although the EU economyremained stagnant, the U.S economy continued to grow steadily and the Chinaeconomy maintained solid growth. With respect to the industries in which we operate, in the entertainmentindustry, demand for videogame software has grown in step with the spreadingpopularity of the new-style portable game consoles from Nintendo and SonyComputer Entertainment, and the online application content business hasprogressed with further advances in IT technology. In the health industry,demand for fitness clubs among middle-aged and senior consumers, our main targetmarket, is rising as the Japanese population ages, and the market is expected toexpand into new service areas such as preventive nursing care and healthpromotion. Demand in the gaming industry has expanded, as casinos are becominglegalized in new localities. Under these circumstances, the Digital Entertainment segment has maintainedsolid sales. Sales of the WORLD SOCCER Winning Eleven series rose worldwide,especially in Europe, reaching a record high in the number of titles sold. Salesof trading card games also expanded globally, and "e-AMUSEMSMENT" serviceproducts for amusement arcades sold at steadily rising levels. KONAMICORPORATION (the "Company") promoted business efficiency by restructuring thegroup through a merger with a videogame software production company and otherrealignments. Content was developed on multiple levels, and product lineups wereselected and streamlined in various genres. In the Health & Fitness segment, we expanded our network of sports facilitiesand endeavored to further boost the quality of our services by steadilyinstalling our original e-XAX IT health management system, chiefly in the newKonami Sports Clubs. In March 2006 we exhibited fitness machines forinstitutional use at the worldfs largest fitness trade show, Las Vegas, U.S.A.(IHRSA International Health, Racquet & Sports Club Association 2006). Thesemachines attracted a high level of interest among visitors. In the Gaming & System segment, Konami concluded a sales agreement in October2005 with Casiloc, Inc., which is under the management of the Quebec provincialgovernment in Canada whereby we provided Casiloc with the Konami CasinoManagement System. We will continue to promote sales of our system to build astable profit base. In March 2006, we received high reviews for our new platformK2V and other products exhibited at the CMAA (The Club Managers'AssociationAustralia) 2006 game machine exhibits in Sydney, Australia - majorshowcase for state-of-art gaming machines from around the world. As a result, consolidated net revenues for the year ended March 31, 2006amounted to Y 262,137million (100.6% of the figure for the year ended March 31,2005), consolidated operating income was Y 2,481 million (8.8% of the figure forthe year ended March 31, 2005), consolidated income before tax was Y 8,438million (30.8% of the figure for the year ended March 31, 2005), andconsolidated net income was Y 23,008 million (219.4% of the figure for the yearended March 31, 2005). Performance by business segment Digital Entertainment In our Computer & Video Games business, the WORLD SOCCER Winning Eleven seriesrecorded solid sales all over the world, with sales of more than 7 million unitsincluding all the series released during the period. The high quality of thegames and the latest player data explain the strong support of our consumers.Another factor behind the rising sales volumes for the units has been theCompanyfs decision to start developing products for PlayStation Portable. Inaddition, music games have gained popularity, mainly in North America, and salesof the PlayStation 2 version of Dance Dance Revolution EXTREME2 have exceededsales of its predecessor. Well-established series such as Yu-Gi-Oh!, METAL GEARSOLID, PAWAFURU PUROYAKYU, and GENSOSUIKODEN also achieved solid sales. In our Toy & Hobby business, we continued to achieve strong sales of theYu-Gi-Oh! Trading Card Game series, a globally expanding series with aparticularly strong presence in the Japanese, U.S., and European markets. Wealso released card games based on the popular animated TV series MALHEAVEN andEYESHIELD21, as well as a new toy series called SAZER X. All of these titles areselling well. In the Amusement business, we continued to enjoy strong sales of MAH-JONG FIGHTCLUB, a series of titles incorporating the "e-AMUSEMENT" service which bringstogether the Company and entertainment centers across Japan in a network. Wealso launched Baseball Heroes, a videogame played with cards carrying images ofprofessional baseball players, and QUIZ MAGIC ACADEMY III, a quiz game thatgives players the chance to test their knowledge of trivia against each other.Both received favorable reviews. The music game series continue to be popularwith growing sales. Our multiplayer token-operated horse racing gamesGI-HORSEPARK and GI-TURFWILD3 have also received favorable reviews in themarket. In the Online business, we developed an online match-up service for the WORLDSOCCER Winning Eleven series in Japan, Europe, North America, and Asia. We alsolaunched services for Yu-Gi-Oh! ONLINE in Korea in December 2005. Our mobilesite in Japan, Konami Net DX, launched and distributed titles already popular inthe home and arcade arenas such as PAWAFURU PUROYAKYU and QUIZ MAGIC ACADEMY,and Winning Eleven is now providing services via an independent mobile site. In the Multimedia business we published several guides and released severalsoundtracks on CD relating to popular videogames, all of which receivedfavorable reviews. We also released a CD album, a DVD album of live concertsmusic of popular voice actors, and a series of products tied in with ouroriginal animated TV program, GOKUJO SEITOKAI. As a result, consolidated net revenues in the Digital Entertainment segment wereY 165,276 million for the year ended March 31, 2006 (101.0% of the figure forthe year ended March 31, 2005). Health & Fitness In the fitness club management business, we further expanded our network ofKonami Sports Clubs through direct managing facilities. We opened nine newfacilities, including Honten Nishinomiya (Hyogo), Myoden (Chiba), Fukuoka-Kashii(Fukuoka), Suzuka (Mie), and Asahikawa (Hokkaido), bringing the total number offacilities up to 209 as of the end of March 2006. Konami Sports Club HontenNishinomiya (Hyogo), which opened in February 2006, is one of the largest sportsfacilities in Japan with a fifty-meter regulation-size pool, a machine gymequipped with some 100 training machines as e-XAX IT health management system,and other advanced facilities incorporating the IT technology and know-how ofthe Konami Group. In the public sports center management business, we added facilities in publicsports centers, including those in Itabashi-ku (Tokyo) and Osaka-shi (Osaka),increasing the number of facilities to 67 as of the end of March, 2006. With 34more facilities added in April, we managed 101 facilities as of the end of May,2006. As more and more people become health conscious in today's rapidly agingsociety, we will make our utmost efforts to maximize the accumulated know-howand experiences of the Konami Group in the management of public facilities.Through these efforts, the Konami Group will be helping people in communitieseverywhere become fitter. As a new undertaking in the sports facilities business, in July 2005, our KonamiSports Clubs became the first private sector facilities in Japan to be grantedthe right to call themselves JOC Athlete Support Centers authorized by TheJapanese Olympic Committee. Konami Sports Clubs are committed to supportingJOC-designated athletes in partnership with JOC. "The First Konami Sports ClubAction Soccer Tournament," acting as Japan's preliminary tournament leading upto the Action Soccer World Cup (to be held in October 2006), was held in January2006. This is one of our efforts to promote sports exchanges on a global scale. As an output of our development activities, we exhibited a range of fitnessproducts for commercial use at the International Home Care & RehabilitationExhibition 2005, and at an event held at Tokyo Big Sight in September 2005. Ouroriginal machine program services developed for an aging society - aprogram to promote a "healthier, more enjoyable, and more attractive" life- received especially favorable comments. We also exhibited "GROOVEMOTION DDR," our new proposal for group exercise, and "EZTWISTER," an innovativemuscle and balance training machine, at IHRSA (International Health, Racquet &Sportsclub Association) 2006, the world's largest fitness trade show (held inLas Vegas, U.S. in March 2006). Both products attracted a great deal of interestfrom visitors. In the area of supplement products, we released EXERDIET and KONAMI SPORTS CLUBBLACKCURRANT, two original Konami supplement, to further expand our productline-up. As a result, consolidated net revenues in the Health & Fitness segment totaled Y81,209 million for the year ended March 31, 2006 (102.7% of the figure for theyear ended March 31, 2005). Gaming & System The construction of our new office building, which is to become the center ofour business activities in North America, was completed in June 2005. This ispart of our effort to strengthen our operating base. We have also begunmarketing our new K2V platform in the North American and Australian markets toefficiently promote global development. As for the Konami Casino ManagementSystem now being marketed full scale, in October 2005, we concluded a salesagreement for the System with Casiloc, Inc., a casino operator under themanagement of Quebec provincial government in Canada, for sales to three Quebeccasinos (approximate 6,300 slot machines in total) and also concluded a salesagreement with a casino in Oklahoma, a new market for us. Furthermore, we haveinstalled slot machines in profit-sharing agreements in order to generate steadyrevenues and ensure more stable management. In Australia we began selling a linkprogressive jackpot system which won wide acclaim in August at the AustralianGaming Expo 2005, one of the largest events of its kind in Oceania. We have alsobegun providing knock-down components to Russia. Through these endeavors, we areexpanding our presence in both the domestic market and the overseas markets ofEurope, Asia, and South America. As a result, consolidated net revenues in the Gaming & System segment wasY10,623 million for the year ended March 31, 2006 (91.2% of the figure for theyear ended March 31, 2005). (2) Konami Group Capital Expenditures and Financing Activities Capital expenditures in the consolidated fiscal year ended March 31, 2006totaled Y16,462 million. Principal capital investments were in new sports andfitness club facilities and related renovations and in the construction ofinternal backbone systems. Capital spending was financed primarily from cash and deposits and operatingcash flow, with some additional financing from bank loans. The Company redeemedits No. 3 straight corporate bond issue (Y15.0 billion, matured in September2005) and plans to redeem its No.4 straight corporate bond issue (Y15.0 billion,maturing in September 2006) using cash reserves. Going forward, the Companyplans to maintain current financing levels to fund dynamic business developmentand to ensure adequate short-term liquidity. (3) Operating Results and Assets 1) Consolidated operating results and assets (U.S. GAAP) (Millions of Yen, except per share data) Years ended March 31 2003 2004 2005 2006 Net revenues 253,657 273,412 260,691 262,137 Operating income (loss) (21,870) 40,713 28,136 2,481 Net income (loss) (28,519) 20,104 10,486 23,008 Basic net income (loss) per share (yen) (234.58) 166.86 87.41 175.86 Total assets 278,250 294,497 304,321 302,637 Total shareholders' equity 90,406 102,129 105,857 163,815 Notes: 1. In line with the requirements of American Depositary Receipt issuance, thefigures for consolidated operating results and assets are presented inconformity with U.S. GAAP, which comprises accounting standards and principlesgenerally accepted in the United States. 2. In the year ended March 31, 2003, we had our goodwill and other intangiblefixed assets of Health & Fitness Business, appraised by an independent appraisalcompany in the U.S., and wrote off 47,599 million yen of impairment of assetswhich the book value exceeded its fair value. 3. In the year ended March 31, 2006, we had our tangible fixed assets and otherintangible fixed assets of Health & Fitness Business, appraised by anindependent appraisal company in the U.S., and wrote off 19,713 million yen ofimpairment of assets which the book value exceeded its fair value. 2) Non-consolidated operating results and assets (Japanese GAAP) (Millions of Yen, except per share data) Years ended March 31 2003 2004 2005 2006 Net revenues 130,186 146,654 134,117 122,591 Ordinary income 13,068 16,910 13,447 19,291 Net income (loss) (11,284) 10,381 12,794 16,572 Net income (loss) per share (yen) (92.82) 83.71 105.33 124.75 Total assets 186,668 183,031 187,798 202,303 Total shareholders' equity 105,107 108,016 111,423 153,339 (4) Issues for Konami Group Restructuring of business operations in order to respond to changing marketconditions In the market in which the Konami group operates, regardless of geographic areasor age, the needs of consumers are rapidly diversifying and growing. Also, asthe Internet environment has improved, online service has become widespread. As Japan has become an aging society, people have become more focused on theirhealth and the retirement of people in the baby boom generation has created newmarkets. These changes in market conditions will make timely management decision makingand globalizing of the business more important that ever. The Konami group hasprepared a management base which we believe appropriately meets the needs of themarket, by strengthening the management system through group restructuring andshifting to a holding company structure by company separation and by furtherpromoting the globalization of our business. Group restructuring and shift to a holding company structure by companyseparation The merger between Konami Sports Life Corporation (hereafter, referred to as"Konami Sports Life") and Konami Sports Corporation (hereafter, referred to as"Konami Sports") took place on February 28, 2006, with Konami Sports remainingas the surviving company, and on March 1, 2006, the Company became the soleparent company through a share exchange with the merged Konami Sports. Afterthis share exchange, Konami Sports changed its registered name to Konami Sports& Life Co., Ltd. On March 31, 2006, Konami Digital Entertainment Co., Ltd. was newly establishedthrough a company separation to succeed the Company's Digital Entertainmentbusiness, and the Company shifted to a holding company structure. The major objectives of shifting to a holding company structure were as follows: (1) Further improvement of management transparency The Konami Group has been actively working to improve corporate governance andwill endeavor to further strengthen group governance through its recent shift toa holding company structure. We will promote transparency of management by strengthening our group managementstructure, separating and clarifying the decision-making and supervisoryfunctions of the entire group from the executive function of each business,speeding up the management process, conducting business evaluations, andallocating management resources from the viewpoint of the shareholders. (2) Creating a speedy and flexible management structure We will clarify the roles of our "Digital Entertainment Business," "Health &Fitness Business," and "Gaming & System Business." Each group will cultivatecreativity and expertise in its fields and cope with the changes in today'sbusiness environment with speed and flexibility. To respond more effectively torapidly changing market conditions, we will build a system to facilitate ourparticipation in new business collaborations and making capital investments in atimely manner. (3) Building a thorough structure of profit accountability We will clarify our profit accountability structure by evaluating theprofitability of each of our businesses more carefully than before. The holding company will be responsible for planning the corporate strategy ofthe entire group, planning for investment projects, including the allocation ofmanagement resources, and checking the status of the businesses executed in eachsubsidiary. Business subsidiaries will make timely decisions in each businessarea of the Company and accelerate the management process. The holding companywill thus aim to maximize corporate value at the Konami Group level. 1. Corporate Data (As of March 31, 2006) (1) Principal Business Konami Group's principal business and principal products are listed below. Digital Entertainment Business: Computer & Video Games Video game software for PlayStation 2 Video game software for PlayStation Portable Video game software for Nintendo DS Video game software for Game Boy Advance Video game software for NINTENDO GAMECUBE Video game software for Xbox Video game software for Xbox360 Video game software for downloads by mobile phone Procurement and distribution of consumer-use video game software produced byother companies Toy & Hobby Card games Toys for boys Toys for babies Educational toys Electronic toys Amusement Video game machines for arcades Music-simulation game machines Token-operated game machines for arcades Online Building systems related to online games Management and operation of online servers Distribution of content for mobile phones Multimedia Music CDs, DVDs Books, magazines Health & Fitness Business: Operation of sports and fitness clubs Fitness equipment Health-related products Gaming & System Business: Video slot machines and mechanical slot machines for casinos Casino management systems (2) Main Konami Group Offices Holding company KONAMI CORPORATION Chiyoda-ku, Tokyo Operating companies in Japan Konami Digital Entertainment Co., Ltd. Minato-ku, Tokyo Konami Sports & Life Co., Ltd. Shinagawa-ku,Tokyo Konami Logistics and Service, Inc. Zama-shi, Kanagawa HUDOSN SOFT CO., LTD. Chuo-ku, Tokyo Internet Revolution Inc. Minato-ku,Tokyo Operating companies overseas Konami Digital Entertainment, Inc. USA Konami Gaming, Inc. USA Konami Australia Pty Ltd. Australia Konami Digital Entertainment B.V. Holland Konami Digital Entertainment GmbH Germany Konami Digital Entertainment Limited Hong Kong Note: Locations are of each company's headquarters. (3) Status of Shares 1. Number of shares authorized 450,000,000 2. Number of shares outstanding 143,555,786 Notes: 1. Outstanding shares increased by 10,794,142 shares as a result of the mergeron April 1, 2005 with Konami Computer Entertainment Studios, Inc., KonamiComputer Entertainment Tokyo, Inc., and Konami Computer Entertainment Japan,Inc. 2. Outstanding shares increased by 4,024,078 shares as a result of a shareexchange on March 1, 2006 with Konami Sports Corporation (now Konami Sports &Life Co., Ltd.) 3. Number of shares constituting one unit 100 4. Number of shareholders 62,295 (4) The ten largest shareholders Shareholders' Investment The Company's Investment in the Company in Major Shareholders Number of Percentage Number of Percentage Shares of Total Shares of Total (thousands) (%) (thousands) (%) Kozuki Foundation for Sports and Education 14,330 10.52 - - Kozuki Holding B.V. 13,530 9.93 - - Japan Trustee Services Bank, Ltd. (Trust Account) 11,438 8.40 - - The Master Trust Bank of Japan, Ltd. (Trust Account) 11,221 8.24 - - Kozuki Capital Corporation 7,036 5.16 - - Sumitomo Mitsui Banking Corporation 4,477 3.29 - - Konami Sports & Life Co., Ltd. 3,048 - 28,290 100.00 BNP PARIBAS Securities (Japan) Ltd. 2,893 2.12 - - Carillon DMA OTC 2,006 1.47 - - Trust & Custody Services Bank, Ltd. 1,930 1.42 - - (Securities investment trust account) Notes: 1. The Company holds 3,354 thousands treasury stock. 2. Through its share exchange agreement with the Company, on March 1, 2006,Konami Sports & Life Co., Ltd. acquired 3,048 thousands shares of the Company.However, since they are mutually held shares, they have been excluded from thenumber of voting rights. (5) Acquisition, Disposition, and Holdings of Treasury Stock 1) Acquisition of shares Common stock 34,227 shares Amount of shares acquired Y87 million 2) Disposition of shares Common stock 5,935,424 shares Amount of shares disposed Y18,120 million 3) Holdings as of the end of current fiscal year Common stock 3,354,958 shares (6) Issuance of stock options 1) Outstanding stock acquisition rights are as follows: No. 1 stock acquisition rights Date of issuance resolution: June 20, 2002 Number of stock options: 15,578 Type of shares subject to stock options: Common stock Number of shares subject to stock options: 1,557,800 shares Value of stock options issued: Issued without consideration Stock acquisition rights whose obligations were succeeded to through shareexchange agreement as of March 1, 2006 Date of issuance resolution: June 23, 2004 Number of stock options: 12,020 Type of shares subject to stock options: Common stock Number of shares subject to stock options: 949,580 shares Value of stock options issued: Issued without consideration 2) Stock acquisition rights issued under particularly advantageousconditions during the fiscal year to persons other than shareholders No. 2 to No. 9 stock acquisition rights Date of issuance resolution: June 23, 2005 Number of stock options: 3,954 Type of shares subject to stock options: Common stock Number of shares subject to stock options: 395,400 shares Value of stock options issued: Issued without consideration Period of exercise of rights From August 1, 2005to June 30, 2008 Conditions for exercise of rights Those conditions stipulated in agreements to allot stock acquisition rights that were entered into between the Company and recipients pursuant to resolutions of the Ordinary General Meeting of Shareholders and meetings of the Board of Directors. Reasons and conditions for extinguishment of rights The Company may at any time and without consideration extinguish unexercised that it has purchased and holds. Item concerning the assignment of rights All transfers of rights shall require the approval of the Board of Directors Nature of advantageous conditions Issued without consideration 3) Names of persons receiving allotments of stock acquisition rights andnumber received Employees of the Company, directors of affiliated companies, statutory corporateauditors of affiliated companies and employees of affiliated companies (top tenrecipients) Number of Type and number of sharesName stock options subject to stock options Remarks Shingo Takatsuka 106 Common stock 10,600 shares Employee of the Company Hideo Kojima 105 Common stock 10,500 shares Employee of the Company (Corporate Officer) Motoyuki Yoshioka 105 Common stock 10,500 shares Employee of the Company (Corporate Officer) Satoshi Shimomura 105 Common stock 10,500 shares Employee of the Company Michihiro Ishizuka 100 Common stock 10,000 shares Employee of the Company (Corporate Officer) Shinji Enomoto 50 Common stock 5,000 shares Employee of the Company Kuniaki Kinoshita 42 Common stock 4,200 shares Employee of the Company (Corporate Officer) Kenichiro Honda 36 Common stock 3,600 shares Employee of the Company Koji Igarashi 36 Common stock 3,600 shares Employee of the Company Junko Kawano 36 Common stock 3,600 shares Employee of the Company Classification of stock acquisition rights issued to employees of the Companyand employees of affiliated companies Number Type and number of shares subject Total number of to stock options persons granted of stock warrants options Remarks Employees of the Company 3,911 Common stock 391,100 shares 524 Employees of affiliated companies 43 Common stock 4,300 shares 7 (7) Employees 1. Konami Group Number of Employees Change from End of Previous Term Digital Entertainment Business 2,664 483 Health & Fitness Business 1,549 112 Gaming & System Business 320 (9) Other Business 196 95 Entire Company (corporate staff) 398 (101) Total 5,127 580 Notes: 1. Employees include all persons on the Konami Group payroll. 2. Employees classified as corporate staff for the entire Company areadministrative staff not assigned to any particular business segment. 2. KONAMI CORPORATION Change from Average Length of ServiceNumber of Employees End of Previous Term Average Age (years) (years) 39 (837) 35.9 5.3 Notes: 1. Employees include all persons on the parent company payroll. 2. The year-on-year decline in number of employees was the result of a companyseparation in which Konami Digital Entertainment Co., Ltd. succeeded to theCompany's digital entertainment business on March 31, 2006. (8) Group Status 1. Major subsidiaries Company Capital Voting Rights Major Businesses Percentage Konami Digital Entertainment Y26,000 million 100.0 Planning, production, manufacture and Co., Ltd. sale of online games, consumer-use video games, amusement machines, toys, card games, content for mobile phones, music CDs and DVDs, books, magazines, etc. Konami Sports & Life Co., Ltd. Y5,040 million 100.0 Operation of sports clubs; planning, production, and sales of health and fitness-related products and services Konami Logistics and Service,Inc. Y100 million 100.0 Repair services; general freight transportation Konami Real Estate, Inc. Y10,000 million 100.0 Real estate leasing and management Konami School, Inc. Y80 million 100.0 Fostering and training of digital creators Konami Career Management, Inc. Y60 million 100.0 Recruiting agency HUDSON SOFT CO., LTD. Y5,064 million 53.9 Planning, manufacture and sales of content for mobile phones and online games, and software for consumer-use games Internet Revolution Inc. Y1,250 million 70.0 Operation of portal sites Konami Digital Entertainment, Inc. US$21,500 thousand (100.0) Production and sales of consumer-use 100.0 video game software in U.S.A. Konami Gaming, Inc. US$25,000 thousand (100.0) Production, manufacture and sales of 100.0 gaming machines in U.S.A. Konami Digital Entertainment B.V. Eur 9,019 thousand 100.0 Sales of toys, hobby products and products for amusement facilities in Europe Konami Digital Entertainment Eur 5,113 thousand (100.0) Sales of consumer-use video game GmbH 100.0 software in Europe Konami Digital Entertainment HK$19,500 thousand 100.0 Sales in Asia Limited Konami Software Shanghai, Inc. US$2,000 thousand 100.0 Production of consumer-use video game software in Asia Konami Australia Pty Ltd. A$3,000 thousand 100.0 Production, manufacture and sales of gaming machines in Australia Notes: 1. Voting Rights shown in parentheses are indirect ownership percentages, andare included in the percentage indicated in the second line. 2. In March 2006, a number of group companies changed their trade names: KonamiCorporation of Europe B.V. became Konami Digital Entertainment B.V.; Konami ofEurope GmbH became Konami Digital Entertainment GmbH; and Konami Marketing(Asia) Limited became Konami Digital Entertainment Limited. 2. New developments in corporate consolidation 1) In April 2005, the Company merged with Konami Computer EntertainmentStudios, Inc., Konami Computer Entertainment Tokyo, Inc., Konami ComputerEntertainment Japan, Inc., Konami Online, Inc. and Konami Media Entertainment,Inc. 2) In April 2005, as a result of the Company's acceptance of a third partyallotment of additional shares, HUDSON SOFT CO., LTD, previously anequity-method affiliate, became a 53.99% owned consolidated subsidiary of theCompany. Hudson Entertainment, Inc., a subsidiary of HUDSON SOFT CO., LTD,became a consolidated subsidiary of the Company. 3) In June 2005, the Company merged with Konami Traumer, Inc. 4) In October 2005, the Company merged with Konami Marketing, Inc. Before themerger, Konami Marketing, Inc. divided its distribution and customer-servicedepartments and established Konami Logistics and Service, Inc. 5) In October 2005, Konami Digital Entertainment, Inc. merged with KonamiMarketing, Inc. 6) In February 2006, Konami Sports Corporation merged with Konami Sports LifeCorporation. In March, Konami Sports Corporation became a wholly ownedsubsidiary of the Company through a share exchange. Konami Sports Corporationthen changed its registered name to Konami Sports & Life Co., Ltd. 7) In February 2006, the Company and Internet Initiative Japan Inc.established a joint venture company called Internet Revolution Inc. 8) In March 2006, through a company separation, the Company established KonamiDigital Entertainment Co., Ltd., which succeeded to its digital entertainmentbusiness. 3. Consolidated results (U.S. GAAP) The Company consolidates 23 companies, including the 15 major subsidiarieslisted above, and applies the equity method to one affiliated company. An overview of our consolidated performance is provided above under the heading"1. Business Performance, (1) Konami Group Business Conditions and Results." 4. Other developments in corporate consolidation 1) In April 2005, the Company sold its entire shares of and terminated itsequity relationship with TAKARA Co., LTD., previously an equity-methodaffiliate. 2) In March 2006, the Company purchased 20 percent of the outstanding shares ofResort Solution Co., Ltd., making it an equity-method affiliate. (9) Lenders, Loans and Shares Held by Lenders Number of shares of the Company owned by the lenderLender Amount of loan Number of Shares Percentage of Total (millions) (thousands) (%) Sumitomo Mitsui Banking Corporation 2,259 4,477 3.29The Bank of Tokyo-Mitsubishi UFJ, Ltd. 1,400 - -Mizuho Corporate Bank, Ltd. 313 - - (10) Directors and Corporate Auditors Position Name Areas of responsibility and primary duties Representative Director Kagemasa Kozuki Chairman of the Board and CEO Representative Director Kagehiko Kozuki Vice Chairman Representative Director Noriaki Yamaguchi CFO Director Kimihiko Higashio CHO Director Tsutomu Takeda Chairman, Konami Sports & Life Co., Ltd. (Former Representative Director and President, Asatsu-DK Inc.) Director Tomokazu Godai President, Maya Tec Co., Ltd. Director Hiroyuki Mizuno Director, Research Institute of Kochi University of Technology (Former Vice President, Matsushita Electric Industrial Co., Ltd.) Director Akira Gemma Senior Corporate Adviser, SHISEIDO Co., Ltd. (Former Representative Director and President, SHISEIDO Co., Ltd.) Standing Corporate Auditor Noboru Onuma (Former Director, Sumitomo Mitsui Banking Corporation) Standing Corporate Auditor Tetsuro Yamamoto (Former Director, The Bank of Tokyo-Mitsubishi UFJ, Ltd.) Corporate Auditor Minoru Nagaoka President, Capital Markets Research Institute (Former Chairman, Tokyo Stock Exchange) Corporate Auditor Masataka Imaizumi Chairman, Police Association (Former Superintendent-General of the Metropolitan Police Department) Note 1: Board members Tomokazu Godai, Hiroyuki Mizuno and Akira Gemma areexternal directors as defined under Article 188, Section 2-7-2 of the CommercialCode. Note 2: Corporate auditors Noboru Onuma, Tetsuro Yamamoto, Minoru Nagaoka andMasataka Imaizumi are external corporate auditors as defined under Article 18,Section 1 of the "Law for Special Exceptions to the Commercial Code concerningAudits, etc. of Corporations." Note 3: Changes in the status of directors during the year ended March 31, 2006 were as follows. Retired June 23, 2005 Director Toshiro Tateno Appointed June 23, 2005 Director Kimihiko Higashio (11) Payments to independent auditors 1) Total payments to independent auditors by the Company and its subsidiaries: Y194 million 2) Of total in 1) above, total payments by the Company and its subsidiaries for certified auditing services: Y175 million 3) Of total in 2) above, total payments by the Company for services rendered as independent auditors: Y121 million Note: The auditing contract between the Company and the independent auditorsmakes no distinction between auditing services based on the Law Concerning theCommercial Code and Special Treatment Under the Code for the Audit, etc. ofKabushiki Kaisha and auditing services based on the Securities & Exchange Law.Since no effective distinction can be made in practice, only the total amountsare listed. 3. Important Events Following the End of the Fiscal Year Not applicable. Consolidated Balance Sheet (As of March 31, 2006) (Millions of yen) ASSETS: LIABILITIES: Current assets Y144,327 Current liabilities Y81,224 Cash and cash equivalents 68,694 Short-term borrowings 958 Trade notes and accounts receivable, Current portion of long-term debt net of allowance for doubtful and capital lease obligations 24,492 accounts of Y541 millions at March 31, 2006 32,294 Inventories 20,109 Trade notes and accounts payable 19,357 Deferred income taxes, net 16,510 Accrued income taxes 7,487 Prepaid expenses and other current assets 6,720 Accrued expenses 16,323 Deferred revenue 5,353 Other current liabilities 7,254 Property and equipment, net Y42,452 Long-term liabilities Y55,477 Long-term debt and capital leaseInvestments and other assets Y115,858 obligations, less current portion 35,631 Investments in marketable 572 Accrued pension and severance costs 2,658 securities Investments in affiliates 6,050 Deferred income taxes, net 11,924 Identifiable intangible 38,575 Other long-term liabilities 5,264 assets Goodwill 22,102 Lease deposits 25,277 Minority interest in consolidated subsidiaries Y2,121 Other assets 20,103 Deferred income taxes, net 3,179 Commitments and contingencies - SHAREHOLDERS' EQUITY: Common stock 47,399 Additional paid-in capital 77,110 Legal reserve 284 Retained earnings 53,756 Accumulated other comprehensive income 3,957 182,506 Treasury stock (18,691) Total shareholders' equity 163,815 Total liabilities, minority interests Total assets Y302,637 and shareholders' equity Y 302,637 Consolidated Statement of Income (Year ended March 31, 2006) (Millions of yen) Net revenues Y262,137 Costs and expenses 259,656 Costs of products sold 184,744 Impairment charge for long-lived assets 10,533 Impairment charge for identifiable intangible assets 9,180 Selling, general and administrative expenses 55,199 Operating income 2,481 Other income (expenses) 5,957 Interest income 716 Interest expense (1,137) Gain on sale of shares of an affiliated company 6,917 Other, net (539) Income before income taxes, minority interest and equity in net income of affiliated companies 8,438 Income taxes (10,270) Income before minority interest and equity in net income of affiliated companies 18,708 Minority interest in income of consolidated subsidiaries (4,267) Equity in net income of affiliated companies 33 Net income Y23,008 Assumptions underlying preparation of consolidated financial statements Summary of Significant Accounting Policies 1. Basis of presentation for consolidated financial statements The consolidated statutory report including consolidated balance sheets andconsolidated statements of income has been prepared on the basis of accountingprinciples generally accepted in the United States of America ("U.S. GAAP"), incompliance with Article 179, Section 1 of the Commercial Code EnforcementRegulations. However, in compliance with such article, certain disclosure thatis required on the basis of U.S. GAAP is omitted. 2. Methods and standards for the valuation of assets (1) Marketable and Investment Securities Marketable securities and securities held for trading purposes are stated atfair value when readily determinable. Held-to-maturity debt securities arestated at amortized cost after adjustment for any premium or discount. Realizedgains and losses from the sale of available-for-sale securities are determinedbased on the average cost method. (2) Inventories Resalable products, finished products, work-in-process, raw materials andsupplies are stated at the lower of cost or market. Cost is determined by thefirst-in first-out method for merchandise, by the identified-cost method forsoftware, and by averaging for all other items. 3. Depreciation methods Tangible fixed assets are depreciated mainly using the declining balance methodwhile intangible fixed assets are amortized mainly using the straight-linemethod. 4. Accounting standards for material reserves (1) Allowance for doubtful accounts Generally, allowance for doubtful accounts is calculated based on the actualratio of bad debt losses incurred. For specific accounts with higher possibilityof bad debt loss, the allowance is determined by respective judgment. (2) Accrued pension and severance costs The Company's financial statements have been prepared in conformity withStatement of Financial Accounting Standards ("SFAS") No.87, "Employers'Accounting for Pensions." With defined-benefit pension schemes operated bymultiple business owners, SFAS No.87 requires the recognition of net pensionexpense based on the value of obligatory contributions for each fiscal period. 5. Consumption Tax Consumption tax is excluded from the stated amount of revenue and expenses. 6. Goodwill and identifiable intangible assets Goodwill represents the difference between the cost of acquired companies andamounts allocated to the estimated fair value of their net assets. Identifiableintangible assets represent intangible assets related to trademarks, membershiplists, gaming licenses, existing technologies, customer relationships andfranchise contracts, etc. acquired in connection with acquisitions ofsubsidiaries. In accordance with SFAS No. 142, reviews are conducted at leastonce annually to identify any impairment against fair value for goodwill andintangible assets subject to amortization with indefinite useful lives, and atest for any impairment loss is conducted at the end of each consolidated fiscalperiod. Intangible assets subject to amortization with definite useful lives areamortized over a period of 2-15 years corresponding to the estimateduseful life. 7. Impairment of long-lived assets In accordance with SFAS No.144 "Accounting for the Impairment or Disposal ofLong-Lived Assets", the Company's long-lived assets are reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying amount ofan asset may not be recoverable. When the carrying amount of assets exceeds theestimated future cash flows (undiscounted) for the assets, the impairment to berecognized is measured by the amount by which the carrying amount of the assetsexceeds the estimated fair value of the assets. Assets to be disposed of arereported at the lower of the carrying amount or fair value less costs to sell. 8. Scope of consolidation Major consolidated subsidiaries are listed in "2.Corporate Data (8) GroupStatus." 9. Rounding policy Amounts of less than one million yen are rounded to the nearest unit. Notes to Consolidated Balance Sheet 1. Accumulated depreciation of tangible fixed assets Y63,026 million 2. Accumulated other comprehensive income A breakdown of accumulated other comprehensive income at the consolidated levelin the year ended March 31, 2006 is as follows. Foreign currency translation adjustments Y3,906 million Unrealized gains on available-for-sale securities - net Y66 million Adjustments of minimum pension liabilities Y (15) million Accumulated other comprehensive income Y3,957 million Notes to Consolidated Statement of Income Basic net income per share Y175.86 Diluted net income per share Y175.80 (English Translation of the Auditors' Report Originally Issued in the Japanese Language) Independent Auditors' Report May 26, 2006 The Board of Directors KONAMI CORPORATION: KPMG AZSA & Co. Hideki Amano (Seal) Designated and Engagement Partner Certified Public Accountant Hidetoshi Fukuda (Seal) Designated and Engagement Partner Certified Public Accountant We have audited the consolidated statutory report, that is the consolidatedbalance sheet and the consolidated statement of income of KONAMI CORPORATION("the Company") for the 34th business year from April 1, 2005 to March 31, 2006in accordance with Article 19-2(3) of the "Law for Special Exceptions to theCommercial Code Concerning Audit, etc. of Kabushiki Kaisha." The consolidatedstatutory report is the responsibility of the Company's management. Ourresponsibility is to express an opinion on the consolidated statutory reportbased on our audit as independent auditors. We conducted our audit in accordance with generally accepted auditing standardsin Japan. Those auditing standards require us to obtain reasonable assurance about whetherthe consolidated statutory report is free of material misstatement. An audit isperformed on a test basis, and includes assessing the accounting principlesused, the method of their application and estimates made by management, as wellas evaluating the overall presentation of the statutory report and supportingschedules. We believe that our audit provides a reasonable basis for ouropinion. Our audit procedures also include those considered necessary for theCompany's majority-owned subsidiaries. As a result of the audit, in our opinion, the consolidated statutory reportreferred to above presents fairy the consolidated financial position of theCompany and consolidated subsidiaries, and the consolidated results of theiroperations in conformity with related laws and regulations and the Articles ofIncorporation of the Company. Our firm and engagement partners have no interest in the Company which should bedisclosed pursuant to the provisions of the Certified Public Accountants Law ofJapan. Report of the Board of Corporate Auditors on the Consolidated Financial Statements Having received reports from each corporate auditor regarding the methods andresults of the audit for the 34th term of business that extended from April 1,2005 to March 31, 2006, and based on discussion of relevant matters, we, theBoard of Corporate Auditors, present our report on the Company's consolidatedfinancial statements (the consolidated balance sheet and statement of income). 1. Outline of Auditing Procedures by the Corporate Auditors Based on the auditing standards established by the Board of Corporate Auditorsand in accordance with the allocation of responsibilities, each of the auditorsreceived reports and explanations from the directors of the Company and theindependent auditors regarding the consolidated financial statements and, wheredeemed necessary, audited the operations and financial condition of subsidiariesand consolidated subsidiaries, based on documents requested from these firms. 2. Conclusions of the Audit (1) We affirm that the methods and the conclusions of the audit by KPMG AZSA & Co., the independent auditors are proper. (2) Based on the results of subsidiaries and consolidated subsidiaries audits,we note no material findings with respect to the consolidated financialstatements. May 29, 2006 Board of Corporate Auditors KONAMI CORPORATION Noboru Onuma (Seal) Standing Statutory Corporate Auditor Tetsuro Yamamoto (Seal) Standing Statutory Corporate Auditor Minoru Nagaoka (Seal) Statutory Corporate Auditor Masataka Imaizumi (Seal) Statutory Corporate Auditor Note: Statutory Corporate Auditors Messrs. Noboru Onuma, Tetsuro Yamamoto, Minoru Nagaoka andMasataka Imaizumi are external statutory corporate auditors as provided for inArticle18.1 of the former "Law for Special Exceptions to the Commercial Codeconcerning Audits, etc. of Corporations" of Japan. Balance Sheet (As of March 31, 2006) (Millions of yen) ASSETS: LIABILITIES: Current assets Y59,170 Current liabilities Y30,651 Cash and cash equivalents 43,980 Bonds redeemable within 1 year 15,000 Prepaid expenses 45 Current portion of long-term debt 1,992 Deferred income taxes, net 891 Other accounts payable 6,356 Short-term loans to 12,890 Accrued expenses 128 subsidiaries Other accounts receivable 1,192 Income taxes payable 6,791 Other 188 Short-term deposits received 138 Allowance for doubtful accounts (18) Other 243 Fixed assets Y143,132 Long-term liabilities Y18,312 Tangible fixed assets 81 Straight Bonds 15,000 Buildings improvement 37 Long-term debt 1,980 Transportation equipment 4 Liabilities for directors' retirement benefits 1,332 Tools and fixtures 39 Intangible fixed assets 3 In-house software 3 Total liabilities Y48,963 Other 0 Investments and other assets 143,048 SHAREHOLDERS' EQUITY: Investment securities 952 Common stock 47,398 Investments in subsidiaries Capital reserves 43,568 and affiliates 139,628 Additional paid-in capital 36,893 Deferred income taxes, net 544 Other capital reserves 6,674 Lease deposits 1,264 Gain on reduction of capital or capital reserves 6,674 Other 658 Retained earnings 72,546 Legal reserved 283 Appropriated earned surplus 34,094 General reserve 34,094 Unappropriated earned surplus 38,168 Net unrealized gains 64 on available-for-sale securities Treasury stock (10,238) Total shareholders' equity Y153,339 Total assets Y202,303 Total liabilities and shareholders' equity Y202,303 Statement of Income (Year ended March 31, 2006) (Millions of yen) I Net revenues Y122,591 II Costs and expenses 108,286 Costs of products sold 75,499 Selling, general and administrative expenses 32,786 Operating income 14,305 III Non-operating income 5,679 Interest and dividend income 5,417 Foreign exchange gains 139 Other 122 IV Non-operating expenses 693 Interest expenses 64 Bond interest expense 346 Other 282 Ordinary income 19,291 V Extraordinary income 5,707 Gain on sale of shares of an affiliated company 5,555 Gain on reversal of allowance for doubtful accounts 151 VI Extraordinary losses 247 Loss on disposal and sale of fixed assets 247 Income before income taxes 24,751Current 8,803Deferred (625)Net income 16,572 Unappropriated earned surplus carried fowared 7,710 Transfer from legal reserve 17,402 Interim cash dividends 3,518 Unappropriated earned surplus Y 38,168 Summary of Significant Accounting Policies 1. Methods and standards for the valuation of assets (1) Marketable and Investment Securities Securities in affiliated companies are stated at cost based on the movingaverage method. Other investment securities - Quoted securities: the market value method is applied, based on the market value as of the fiscal year-end. The entire positive or negative valuation difference with the purchase price is booked directly as shareholders' equity, and the cost of securities sold is calculated using the moving average method Unquoted securities: valued at cost using the moving average method (2) Derivatives Stated at fair value. (3) Inventories Finished products and raw materials and supplies are stated at cost determinedby the moving average method. Work in process consisting of hardware products is stated at cost determined bythe moving average method while work in process consisting of software productsis stated at cost determined by the specific identification method. 2. Depreciation methods Tangible fixed assets are depreciated mainly using the declining balance methodwhile intangible fixed assets are amortized mainly using the straight-linemethod. For in-house software, amortization is computed using the straight-linemethod based on the estimated useful life of 5 years. Long-term prepaid expensesare amortized mainly using the straight-line method. 3. Accounting standards for material reserves (1) Allowance for doubtful accounts Generally, allowance for doubtful accounts is calculated based on the actualratio of bad debt losses incurred. For specific accounts with higher possibilityof bad debt loss, the allowance is determined by respective judgment. (2) Accrued pension and severance costs (Prepaid pension expense) Provided based on the estimated amount of the projected benefit obligation andthe plan assets at the year-end. Unrecognized net transition asset is creditedto expense over 13 years on a straight-line basis. Unrecognized actuarial netgain or loss will be amortized from the following fiscal year within the averageremaining service period of 8 years on a straight-line basis. (3) Liabilities for directors' retirement benefits Reserved as per Article 43, of the Commercial Code to provide for the payment ofspecial retirement allowances to directors and corporate auditors. The amount iscalculated based on the amount to be paid at the end of the term as per internalregulations. 4. Leases Finance leases other than those that are deemed to transfer ownership of theleased property to the lessee are accounted for as operating lease transactions. 5. Consumption Tax Consumption tax is excluded from the stated amount of revenue and expenses. 6. Rounding policy Amounts of less than one million yen are rounded to the nearest unit. 7. Others The rules governing exemptions for affiliates under Article 48, Section 1 of theCommercial Code are applied to the presentation of certain parts of thefinancial statements. Changes in Accounting Policy 1. Accounting standards for loss on impairment of fixed assets Beginning with the reporting term, the Company has adopted the new accountingstandards for recognition of loss on impairment of fixed assets(Opinionconcerning establishment of accounting standard for impairment of fixed assets,issued by the Business Accounting Council dated August 9, 2002, and its relatedguideline issued on October 31, 2003). There is little impact to the incomestatement. 2. Accounting standards for retirement benefits Beginning with the reporting term, the Company has adopted the new accountingstandards for retirement benefits based on Accounting Standard No. 3, "PartialRevision of Accounting Standard for Retirement Benefits" and Financial Standardsimplementation Guidance No. 7, "Implementation Guidance for Partial Revision ofAccounting Standard for Retirement Benefits" issued on March 16, 2005. As aresult of this change, the impact is minimal. Notes to Balance Sheet 1. Monetary assets and liabilities in relation to subsidiaries and affiliatedcompanies (Millions of yen)Short-term assets 13,822Short-term liabilities 5,961Long-term assets 106Long-term liabilities - 2. Accumulated depreciation of tangible fixed assets Y204 million 3. Major leased assets In addition to tangible fixed assets shown on the balance sheet, computers usedfor research, development, and production and some office equipment are leased. 4. Number of outstanding shares and treasury stock Total shares outstanding at end of term: 143,555,786 shares Number of own shares held at end of term: 3,354,958 shares 5. Limitation on dividend Net asset value as stipulated in Article 124 Section 3 of the Commercial Code:Y64 million Notes to Statement of Income 1. Transactions with subsidiaries and affiliated companies (Millions of yen) Revenues 68,562 Purchases 3,406 Selling, general and administrative expenses 8,630 Non-operating transactions 5,408 2. Net income per share Y124.75 Proposed Appropriation Plan of Earned Surplus (Year ended March 31, 2006) (Yen) Unappropriated earned surplus at year-end Y 38,168,302,792 To be appropriated as follows.Cash dividends 3,785,422,356(Y27.0 per share)Directors' bonuses 220,000,000General reserve 18,000,000,000Unappropriated earned surplus carried forward to next year Y16,162,880,436 Notes: 1. On November 30, 2005, interim cash dividends amounting to Y3,518,264,025(Y27.0 per share) were paid. 2. Cash dividends exclude dividends on 3,354,958 shares of treasury stock. (English Translation of the Auditors' Report Originally Issued in the Japanese language) Independent Auditors' Report May 8, 2006 The Board of DirectorsKONAMI CORPORATION: KPMG AZSA & Co. Hideki Amano (Seal) Designated and Engagement Partner Certified Public Accountant Hidetoshi Fukuda (Seal) Designated and Engagement Partner Certified Public Accountant We have audited the statutory report, that is the balance sheet, the statementof income, the business report (limited to accounting matters) and the proposalfor appropriation of unappropriated retained earnings, and its supportingschedules (limited to accounting matters) of KONAMI CORPORATION ("the Company")for the 34th business year from April 1, 2005 to March 31, 2006 in accordancewith Article 2(1) of the "Law for Special Exceptions to the Commercial CodeConcerning Audit, etc. of Kabushiki Kaisha". With respect to the aforementionedbusiness report and the supporting schedules, our audit was limited to thosematters derived from the accounting books and records of the Company. Thestatutory report and supporting schedules are the responsibility of theCompany's management. Our responsibility is to express an opinion on thestatutory report and supporting schedules based on our audit as independentauditors. We conducted our audit in accordance with generally accepted auditing standardsin Japan. Those auditing standards require us to obtain reasonable assuranceabout whether the statutory report and supporting schedules are free of materialmisstatement. An audit is performed on a test basis, and includes assessing theaccounting principles used, the method of their application and estimates madeby management, as well as evaluating the overall presentation of the statutoryreport and supporting schedules. We believe that our audit provides a reasonablebasis for our opinion. Our audit procedures also include those considerednecessary for the Company's subsidiaries. As a result of the audit, our opinion is as follows: (1) The balance sheet and the statement of income present fairly the financialposition and the results of operations of the Company in conformity with related laws and regulations andthe Articles of Incorporation of the Company. (2) As mentioned in "Changes in accounting policy", effective April 1, 2005 theCompany has been applying the Accounting Standard for the Impairment of FixedAssets (Opinion Concerning Establishment of Accounting Standard for theImpairment of Fixed Assets; Business Accounting Council, August 9, 2002) and theImplementation Guidance for the Accounting Standard for Impairment of FixedAssets (Financial Accounting Standard Implementation Guidance No. 6; AccountingStandards Board of Japan; October 31, 2003). We consider the nature of thesechanges and the reasons therefore to be appropriate. This change results from adecision to apply the Accounting Standard and the Implementation Guidanceeffective April 1, 2005. (3) The business report (limited to accounting matters) presents fairly thestatus of the Company in conformity with related laws and regulations and theArticles of Incorporation of the Company. (4) The proposal for appropriation of unappropriated retained earnings has beenprepared in conformity with related laws and regulations and the Articles ofIncorporation of the Company. (5) With respect to the supporting schedules (limited to accounting matters)there are no items to be noted that are not in conformity with the provisions ofthe Commercial Code. Our firm and engagement partners have no interest in the Company which should bedisclosed pursuant to the provisions of the Certified Public Accountants Law ofJapan. COPY OF THE BOARD OF STATUTORY CORPORATE AUDITORS' REPORT We, the Board of Corporate Auditors, have received reports from each of theCorporate auditors on the Conduct of business activities by the directors of theCompany during the 34th termCWhich extended from April 1, 2005 to March 31, 2006and on the methods and results of the audit covering such term. After meetingand discussing these matters, we report as follows: 1. Outline of Auditing Procedures by the Corporate Auditors Based on the auditing standards established by the Board of Corporate Auditorsand in accordance with audit policies and plans, each of the auditors attendedmeetings of the Board of Directors and other important meetings; intervieweddirectors regarding the execution of their duties (including matters such asoversight of internal control systems for legal compliance and risk management);inspected important accounting documents; carried out investigations of theCompany's business operations and financial condition at the Head Office and allmajor sites; and audited the operations and financial condition of majorsubsidiaries as necessary, based on documents requested from these firms. In addition to the above-mentioned auditing procedures, with respect to suchmatters as the engagement of a director in a competing business, the conduct oftransactions causing a conflict of interest between a director and the Company,the provision of benefits by the Company without consideration, the conduct ofirregular transactions with subsidiaries or shareholders of the Company, andacquisitions and disposal of own shares by the Company, we employed such methodsas requiring reports from directors and others and made detailed inspections orsuch matters. 2. Conclusions of the Audit (1) We affirm that the methods and the conclusions of the audit by KPMG AZSA &Co., the independent auditors are proper. (2) We affirm that the business report fairly presents the situation of theCompany in compliance with the provisions of applicable laws, regulations andthe Articles of Incorporation. (3) That the proposition relating to the appropriation of retained earnings hasnothing to be pointed out considering the state of property of the Company andother circumstances; (4) That the accompanying detailed statements fairly present the matters to bestated therein and contain nothing to be pointed out; and (5) We affirm that there have been no illegal acts committed or any seriousviolations of laws and regulations or the Company's Articles of Incorporationwith regard to the directors' execution of corporate duties. We also affirm that there have been no violations by directors with regard tomatters such as engaging in a competing business or other operational conflictsof interest, receipt of remuneration other than that for execution of corporateduties, conduct of irregular transactions with subsidiaries or shareholders ofthe Company, or the acquisition or disposal of shares in the Company. (6) We note no material findings with respect to the directors' execution ofduties in regard to internal control systems. (7) Based on the results of subsidiary audits, we note no material findingswith respect to the directors' execution of duties. May 9, 2006 Board of Corporate AuditorsKONAMI CORPORATION Noboru Onuma (Seal) Standing Statutory Corporate Auditor Tetsuro Yamamoto (Seal) Standing Statutory Corporate Auditor Minoru Nagaoka (Seal) Statutory Corporate Auditor Masataka Imaizumi (Seal) Statutory Corporate Auditor Note: Statutory Corporate Auditors Messrs. Noboru Onuma, Tetsuro Yamamoto,Minoru Nagaoka and Masataka Imaizumi are external statutory corporate auditorsas provided for in Article18.1 of the former "Law for Special Exceptions to theCommercial Code concerning Audits, etc. of Corporations" of Japan. Reference Materials for the General Meeting of Shareholders 1. Proposals and related items Proposal 1: Acceptance of Proposed Appropriation Plan of Earned Surplus for the34th fiscal year. Details of this proposal appear on page 33 of the appended materials. The Company believes that the maintenance of a high dividend and the enhancementof enterprise value are important means of providing value to shareholders. Based on the policy concerning dividends described above, the dividend for thecurrent term is proposed to be Y27 per share. When this dividend is added to the interim dividend (Y27 per share), the totaldividend for the year will be Y54 per share, the same amount as the 33rd fiscalyear. Considering our financial results for the year ended March 31, 2006, the Companyproposed to pay Y220 million of directors' bonus to our four directors. Proposal 2: Amendments to the Articles of Incorporation The Company proposes to make partial amendments to the Articles of Incorporationfor the reasons outlined below. 1. Reasons for amendments (1) As a holding company and to correspond to the business development of theKonami group, we plan to make a partial amendment to the Article 2 (Purpose). (2) With the enactment of the "Corporate Law" (Law No. 86, 2005) and the "Lawto Accommodate Relevant Laws in line with the Enforcement of the Corporate Law"(Law No. 87, 2005) effective on May 1, 2006, it is proposed that: (a) Article 4 (Governing Bodies) be newly established in order tocreate governing bodies of the Company; (b) Article 7 (Issuance of Share Certificates) be newlyestablished to enable the Company to make such issuance; (c) Article 10 (Rights concerning Shares Constituting Less ThanOne Unit) be newly established to define rights of shareholders holding sharesless than one minimum share-trading unit; (d) Article 17 (Internet Disclosure of Reference Documents, etc.and Deemed Provision) be newly established to adopt the system to disclose viainternet reference documents, etc. for a general shareholders meeting; (e) Current Article 15 (Exercise of Voting Rights by Proxy) beamended to Article 19 (Exercise of Voting Rights by Proxy), which defines themethod to prove the proxy's authority and number of the proxy when voting rightsare exercised by proxy at a General Meeting of Shareholders; (f) Article 25 (Omission of Resolution of the Board ofDirectors) be newly established in order to allow the Board of Directors to makea resolution flexibly in writing or in an electronic method where necessary; (g) Article 28 (Limited Liability Contracts with ExternalDirectors) be newly established to enable the Company to enter into contractswith External Directors under which their liabilities shall be restricted. (h) Article 36 (Limited Liability Contracts with ExternalCorporate Auditors) be newly established to enable the Company to enter intocontracts with External Corporate Auditors under which their liabilities shallbe restricted. (i) Article 38 (Governing Bodies to Determine Distribution ofSurplus, etc.) be newly established to enable the Company to take flexibledividend policy as it was approved to determine distribution of surplus, etc. byresolution of the Board of Directors rather than General Meeting ofShareholders; and (j) In addition to the above, amendments be made or added toterms or expressions used or provisions of relevant laws quoted in theseArticles of Incorporation to make such terms or expressions or quotationsconsistent with the Corporate Law. (3) It is necessary for the Company to revise overall provisions of and makeany necessary amendment to words or phrases contained in these Articles ofIncorporation by making a full review thereof. 2. Particulars of the amendments The Company proposes that the current Articles of Incorporation be amended asfollows: (Amendments are underlined) Current Articles of Incorporation Amended Proposed Amendments Chapter I: GENERAL PROVISIONS Chapter I: GENERAL PROVISIONS Article 1 (Trade Name) Article 1 (Trade Name) The name of the Company is Konami Kabushiki (Unchanged)Kaisha, being expressed as "KONAMI CORPORATION" inEnglish. Article 2 (Purposes) Article 2 (Purposes) The purpose of the Company shall be to own shares (Unchanged)of companies which run the following businesses ora foreign company which runs equivalentbusinesses, and be engaged in the control andadministration of the subject companies' businessactivities as well as implementation of operationsincidental to such activities. 1. Research, development, manufacture and 1. (Unchanged) distribution of software and hardware relating to electric appliances and electronic components; 2. Planning, production, manufacture, rental 2. (Unchanged) and distribution of music, audio and visual software (including disks, tape and film, etc.); production and acquisition of master copies, and transferal or usage permission thereof; 3. Acquisition, management, promotion of usage 3. (Unchanged) and development of music copyright and related performance rights, and transferal or usage permission thereof; 4. Planning, production and distribution of 4. (Unchanged) books, magazines, sheet music and other publications; 5. Development, manufacture and distribution of 5. (Unchanged) toys; 6. Design of character products (with images of 6. (Unchanged) people, animals, etc. which have unique names or characters); 7. Planning, production and distribution on the 7. Planning, production, distribution on the Internet Internet; and Internet related services; 8. Planning, establishment and operation of (Deleted) shopping complex on the Internet, provision of know-how thereof and correspondence sales; 9. Provision and distribution of software using (Deleted) communication circuits; (Newly added) 8. Gathering online distribution, processing and online sales of information, pictures and music using electrical communication and electrical communication related services; (Newly added) 9. Information processing services and information reporting services; 10. Management of sports facilities and 10. Management and control of sports facilities, amusement arcades; amusement arcades, restaurants, accommodations, hot spring bathing facilities, saunas and parking lots; (Newly added) 11. Management of schools for training and educating sport instructors, producers of digital content (application software for digital technology) and producers of computer software; (Newly added) 12. Medical treatment services and beauty services; 11. Distribution of soft drinks, foods, 13. (Unchanged) alcoholic beverages, sports gear, clothing and computer game machines; 12. Advertising agency, insurance agency, 14. Advertising agency, insurance agency, broadcasting broadcasting business and leisure business business, travel agency and leisure business including tour, sports, etc.; including tour, sports, etc.; 13. Purchase and sale of antiques; 15. (Unchanged) 14. Sale, purchase, lease, blockage and 16. (Unchanged) management of real estate; 15. Job placement; 17. (Unchanged) (Newly added) 18. General lease business and finance business; 16. Holding of and investment in securities; 19. (Unchanged) 17. Acquisition and management of copyrights, 20. (Unchanged) trademark rights, design rights, performance rights and rights to produce records and videos related to the preceding items; 18. Import, export and agency business related 21. (Unchanged) to each of the preceding items; 19. Investment in the party in charge of the 22. (Unchanged) business specified in the preceding items; and 20. Any and all businesses incidental to any of 23. (Unchanged) the preceding items. Article 3 (Location of Head Office) Article 3 (Location of Head Office)The Company shall have its head office in (Unchanged)Chiyoda-ku, Tokyo. (Newly added) Article 4 (Governing Bodies) The Company shall have a Board of Directors, Corporate Auditors, a Board of Corporate Auditors and Accounting Auditors. Article 4 (Method of Public Notice) Article 5 (Method of Public Notice)Public notices of the Company shall be published (Unchanged)electronically. In cases where accident or otherunavoidable circumstances preclude onlinepublication, notices shall be carried in the NihonKeizai Shimbun. Chapter II: SHARES Chapter II: SHARES Article 5 (Total Number of Shares to be Issued) Article 6 (Total Number of Shares Authorized to be Issued) The total number of shares authorized to be issued The total number of shares authorized to be issued by theby the Company shall be four hundred fifty million Company shall be four hundred fifty million (450,000,000).(450,000,000); provided, however, that the numbershall be, in case of cancellation, reduced by thenumber of shares so cancelled. (Newly added) Article 7 (Issuance of Share Certificates) The Company shall issue share certificates for its shares. Article 6 (Acquisition of the Company's Own Article 8 (Acquisition of the Company's Own Shares)Shares) In accordance with the provisions of Article 165, paragraphIn accordance with the provisions of item 2, 2 of the Corporate Law, the Company may acquire its ownparagraph 1 of Article 211-3 of the Commercial shares through market transactions by resolution of theCode, the Company may purchase and hold its own Board of Directors.shares through a resolution adopted by its Boardof Directors. Article 7 (Number of Shares Constituting One Unit Article 9 (Number of Shares Constituting One Unit andand Non-Issuance of Share Certificates Non-Issuance of Share Certificates Constituting Less thanConstituting Less than One Unit) One Unit) 1. The number of shares of the Company which (Unchanged)constitute one (1) unit shall be one hundred(100). 2. The Company shall not issue any sharecertificates for shares constituting less than one(1) unit ("Shares Constituting Less than OneUnit"); unless otherwise provided for in the ShareHandling Regulations. (Newly added) Article 10 (Rights concerning Shares Constituting Less than One Unit) Shareholders of the Company holding Shares Constituting Less than One Unit (including beneficial shareholders, hereinafter the same) cannot exercise their rights as shareholders other than as enumerated below: (1) rights provided for in each item of Article 189, Paragraph 2 of the Corporate Law; (2) rights provided for in Article 166, Paragraph 1 of the Corporate Law; (3) rights of shareholders to subscribe for shares or stock acquisition rights in accordance with the number of shares they hold; and (4) rights to make a request provided for in Article 11 hereof. Article 8 (Requests for purchase of fractional Article 11 (Requests for purchase of fractional unitunit shares) shares) 1. Shareholders (including, hereinafter, 1. Shareholders shall have the right to request thatbeneficial shareholders) who hold shares numbering the Company sell to them that number of shares whichless than one unit shall have the right to request will bring their current holdings numbering less than one(hereinafter, "request for additional shares") unit up to one unit.that the Company sell to them that number ofshares which will bring their current holdings upto one unit. 2. The periods for such requests ofadditional shares, the methods required to beused, etc., shall be governed by rules establishedby the Board of Directors. 2. (Unchanged) Article 9 (Transfer Agent) Article 12 (Administrator of Shareholders' Register) 1. The Company shall have a transfer agent 1. The Company shall appoint an administrator of thewith respect to its shares. shareholders' register. 2. The transfer agent and its handling 2. The administrator of the shareholders' registeroffice shall be selected by a resolution of the and its handling office shall be designated by resolutionBoard of Directors and public notice thereof shall of the Board of Directors, and public notice thereof shallbe given. be given. 3. The shareholders' register (including 3. The preparation and retention of the register ofbeneficial shareholders' register, hereinafter, shareholders (including register of beneficialthe same) of the Company and its lost stock shareholders, hereinafter the same), ledger of stockcertificates register shall be kept at the acquisition rights and register of lost share certificatestransfer agent's handling office and the of the Company or any other business related thereto shallregistration of transfer of shares, registration be entrusted to the administrator of shareholders' registerof pledge, record of trust assets, delivery of and shall not be handled by the Company.share certificates, the recording of lost stockcertificates, purchase and sale of SharesConstituting Less than One Unit, acceptance ofnotifications and other matters relating to sharesshall be handled by the transfer agent and not bythe Company. Article 10 (Share Handling Rules) Article 13 (Share Handling Rules)The class of share certificates, the registration The handling business relating to shares of the Companyof transfer of shares, registration of pledge, and fees thereof shall be subject to the provisions of therecord of trust assets, delivery of share Share Handling Regulations determined by the Board ofcertificates, the recording of lost stock Directors as well as laws and regulations and thesecertificates, purchase and sale of Shares Articles of Incorporation.Constituting Less than One Unit and other mattersrelating to shares shall be subject to theprovisions of the Share Handling Regulationsdetermined by the Board of Directors as well asthese Articles of Incorporation. Article 11 (Record Date) (Deleted)1. The Company shall deem that theshareholders, who are listed or recorded on theShareholders' Registers as of March 31 of everyyear are entitled to exercise their voting rightsat the ordinary general meeting of shareholdersfor the relevant fiscal year. 2. In addition to the preceding paragraph,the Company may, giving prior public notice, fix arecord date for the occasion whenever necessary bya resolution of the Board of Directors. Chapter III: GENERAL MEETING OF SHAREHOLDERS Chapter III: GENERAL MEETING OF SHAREHOLDERS Article 12 (Convocation) Article 14 (Convocation) An ordinary general meeting of shareholders of the An ordinary general meeting of shareholders of theCompany shall be convened within three (3) months Company shall be convened in June of each year and anafter the day following each account settlement extraordinary general meeting of shareholders shall bedate of every fiscal year and an extraordinary convened from time to time whenever necessary. Such generalgeneral meeting of shareholders shall be convened meetings of shareholders shall be held within the wards infrom time to time whenever necessary. Such general Tokyo.meetings of shareholders shall be held within thewards in Tokyo. (Newly added) Article 15 (Record Date for Ordinary General Meeting of Shareholders) The record date for the determination of voting rights at the Company's ordinary general meeting of shareholders shall be March 31st of each year. Article 13 (Convener and Chairperson) Article 16 (Convener and Chairperson)Chairman or President shall convene the general Chairman or President shall convene the general meetingsmeetings of shareholders of the Company and act as of shareholders of the Company and act as a chairperson. Ifa chairperson, unless otherwise provided for by both Chairman and President are unable to act in thislaws or regulations. If both Chairman and capacity, one of the other Directors shall take his/herPresident are unable to act in this capacity, one place in the order previously determined by a resolution ofof the other Directors shall take his/her place in the Board of Directors.the order previously determined by a resolution ofthe Board of Directors. (Newly added) Article 17 (Internet Disclosure of Reference Documents, etc. and Deemed Provision Thereof) In convening a general meeting of shareholders, the Company may, pursuant to the relevant regulation issued by the Ministry of Justice, deem that it has duly provided its shareholders with the information which must be mentioned or displayed in the reference document of a general meeting of shareholders, business report, financial statements and consolidated financial statements by disclosing such information using the Internet. Article 14 (Method of Resolution) Article 18 (Method of Resolution)1. Unless otherwise provided for by laws, 1. Unless otherwise provided for by laws andregulations or these Articles of Incorporation, regulations or these Articles of Incorporation, resolutionsany resolution at a general meeting of at a general meeting of shareholders shall be approved byshareholders shall be approved by the majority of the majority of the voting rights of the shareholdersthe voting rights of shareholders present. present who are entitled to exercise their voting rights at said meeting.2. Extraordinary resolutions, subject toArticle 343 of the Commercial Code, can be made by 2. Extraordinary resolutions, subject to Article 309,a two-thirds vote of the shareholders present, who Paragraph 2 of the Corporate Law, can be made by apossess one-third or more of the total voting two-thirds vote of the shareholders present, who possessrights. one-third or more of the voting rights of the shareholders who are entitled to exercise their voting rights at said meeting. Article 15 (Exercise of Voting Rights by Proxy) Article 19 (Exercise of Voting Rights by Proxy) A shareholder may exercise his/her voting rightby a proxy who is also a shareholder having votingright of the Company; provided, however, that only A shareholder may exercise his/her voting right by one (1)one (1) proxy shall be admitted and such proxy proxy who is also a shareholder having voting right of theshall be required to submit documents evidencing Company; provided, however, that such shareholder or proxyhis/her authority. submits to the Company documents evidencing his/her authority at the general meeting of shareholders at which the proxy is voting on behalf of the shareholder. Chapter IV: DIRECTORS AND THE BOARD OF DIRECTORS Chapter IV: DIRECTORS AND THE BOARD OF DIRECTORS Article 16 (Number of Directors) Article 20 (Number of Directors)The number of Directors of the Company shall not (Unchanged)be more than twelve (12). Article 17 (Election of Directors) Article 21 (Election of Directors)1. Directors of the Company shall be elected 1. (Unchanged)at a general meeting of shareholders. 2. Directors of the Company shall be electedby the majority of the voting rights of 2. Directors of the Company shall be elected by theshareholders present at a general meeting of majority of the voting rights of shareholders present at ashareholders where shareholders having one third general meeting of shareholders who have one third (1/3) or(1/3) or more of voting rights of all the more of the voting rights of the shareholders entitled toshareholders shall be present. exercise their voting rights thereat. 3. The election of Directors of the Company 3. (Unchanged)shall not be made by a cumulative voting. Article 18 (Term of Office of Directors) Article 22 (Term of Office of Directors)1. The term of office of Directors of the 1. The term of office of Directors of the Company shallCompany shall expire upon the conclusion of the expire upon the conclusion of the ordinary general meetingordinary general meeting of shareholders with of shareholders with respect to the last business yearrespect to the last fiscal year ending within one ending within one (1) year after their election.(1) year after their assumption of office. 2. The term of office of Directors electedto increase the number of Directors shall expireat the time of expiration of the term of office ofthe other incumbent Directors. (Deleted) 3. The term of office of the Directorelected to fill a vacancy of a retired Directorshall be the remaining period of the term ofoffice of such retired Director. (Deleted) Article 19 (Representative Directors and Article 23 (Representative Directors and Directors withDirectors with Title) Title) Directors who represent the Company, President and 1. Director(s) who represent the Company shall beany other Directors with specific titles shall be appointed at a meeting of the Board of Directors.appointed at a meeting of the Board of Directors. (Newly added) 2. The President and Director and any other Directors with specific titles shall be appointed at a meeting of the Board of Directors. Article 20 (Convocation of the Meeting of the Article 24 (Convocation of the Meeting of the Board ofBoard of Directors and Chairperson) Directors and Chairperson) 1. Chairman or President shall convene a 1. (Unchanged)meeting of the Board of Directors and act as achairperson unless otherwise provided for by lawsor regulations. If both Chairman and President areunable to act in this capacity, one of the otherDirectors shall take his/her place in the orderpreviously determined by a resolution of the Boardof Directors. 2. Notice of convocation of a meeting of the 2. (Unchanged)Board of Directors shall be dispatched to eachDirector and Corporate Auditor three (3) daysprior to the date of such meeting; provided,however, that such period may be shortened in caseof emergency. (Newly added) 3. With the consent of all the Directors and Corporate Auditors, a meeting of the Board of Directors may be held without complying with the convocation procedures. (Newly added) Article 25 (Omission of Resolution of the Board of Directors) In case where requirements as provided for in Article 370 of the Corporate Law are satisfied, the Company deems that relevant resolutions of the Board of Directors shall have been duly made. Article 21 (Regulations of the Board of Article 26 (Regulations of the Board of Directors)Directors) (Unchanged)Matters regarding the Board of Directors of theCompany shall be determined pursuant to theRegulations of the Board of Directors unlessotherwise provided for by laws, regulations orthese Articles of Incorporation. Article 22 (Remuneration) Article 27 (Remuneration, etc.)The remuneration of Directors shall be determined The remuneration for Directors, annual bonus and otherat a general meeting of shareholders. proprietary benefits received from the Company as consideration for execution of their duties (hereinafter referred to as "Remuneration, etc.") shall be determined by resolution of a general meeting of shareholders. (Newly added) Article 28 (Limited Liability Contracts with External Directors) In accordance with the provisions of Article 427, Paragraph 1 of the Corporate Law, the Company may enter into contracts with External Directors under which their liabilities provided for in Article 423, Paragraph 1 of the said law shall be restricted. Chapter V: CORPORATE AUDITORS AND THE BOARD OF Chapter V: CORPORATE AUDITORS AND CORPORATE AUDITORS THE BOARD OF CORPORATE AUDITORS Article 23 (Number of Corporate Auditors) Article 29 (Number of Corporate Auditors)The number of Corporate Auditors of the Company (Unchanged)shall not be more than five (5). Article 24 (Election of Corporate Auditors) Article 30 (Election of Corporate Auditors) 1. Corporate Auditors of the Company shall 1. (Unchanged)be elected at a general meeting of shareholders. 2. Corporate Auditors of the Company shallbe elected by the majority of the voting rights ofshareholders present at a general meeting ofshareholders where shareholders having one third 2. Corporate Auditors of the Company shall be elected(1/3) or more of voting rights of all the by the majority of the voting rights of shareholdersshareholders shall be present. present at a general meeting of shareholders who have one third (1/3) or more of the voting rights of the shareholders entitled to exercise their voting rights thereat. Article 25 (Term of Office of Corporate Auditors) Article 31 (Term of Office of Corporate Auditors) 1. The term of office of Corporate Auditorsof the Company shall expire upon the conclusion ofthe ordinary general meeting of shareholders with 1. The term of office of Corporate Auditors of therespect to the last fiscal year ending within four Company shall expire upon the conclusion of the ordinary(4) years after their assumption of office. general meeting of shareholders with respect to the last business year ending within four (4) year after their election.2. The term of office of the Corporate Auditor elected to fill a vacancy of a retired 2. The term of office of the Corporate AuditorCorporate Auditor shall be the remaining period of elected to fill a vacancy of a retired Corporate Auditorthe term of office of such retired Corporate shall expire when such predecessor's full term of officeAuditor. would have expired. Article 26 (Standing Corporate Auditors) Article 32 (Standing Corporate Auditors)Corporate Auditors shall elect Standing Corporate The Board of Corporate Auditors shall, by resolutionAuditors from and among themselves. thereof, elect Standing Corporate Auditors from among the Corporate Auditors. Article 27 (Notice of Convocation of the Meeting Article 33 (Notice of Convocation of the Meeting of theof the Board of Corporate Auditors) Board of Corporate Auditors)Notice of convocation of a meeting of the Board of 1. (Unchanged)Corporate Auditors shall be dispatched to eachCorporate Auditor three (3) days prior to the dateof such meeting; provided, however, that suchperiod may be shortened in case of emergency. (Newly added) 2. If the consent of all Corporate Auditors is obtained, a meeting of the Board of Corporate Auditors may be held without following the procedures for convening the meeting. 1.Article 28 (Regulations of the Board of Corporate Article 34 (Regulations of the Board of CorporateAuditors) Auditors) Matters regarding the Board of Corporate Auditors (Unchanged)shall be determined pursuant to the Regulations ofthe Board of Corporate Auditors unless otherwiseprovided for by laws, regulations or theseArticles of Incorporation. Article 29 (Remuneration) Article 35 (Remuneration, etc.) The remuneration of Corporate Auditors shall be The remuneration, etc. for Corporate Auditors, shall bedetermined at a general meeting of shareholders. determined by resolution of a general meeting of shareholders. (Newly added) Article 36 (Limited Liability Contracts with External Corporate Auditors) In accordance with the provisions of Article 427, Paragraph 1 of the Corporate Law, the Company may enter into contracts with External Corporate Auditors under which their liabilities provided for in Article 423, Paragraph 1 of the said law shall be restricted. Chapter VI: ACCOUNTS Chapter VI: ACCOUNTS Article 30 (Business Year) Article 37 (Business Year)The business year of the Company shall commence The business year of the Company shall commence on April 1on April 1 of every year and end on March 31 of of every year and end on March 31 of the following year.the following year and the account settlement dateshall be the last day of each business year. (Newly added) Article 38 (Governing Bodies to Determine Distribution of Surplus, etc.) The Company shall determine the matters listed in each Item of Article 459, Paragraph 1 of the Corporate Law, including distribution of surplus, by resolution of the Board of Directors, and not by resolution at a general meeting of shareholders, unless otherwise provided for by laws or regulations. Article 31 (Dividend and Interim Dividend) Article 39 (Base Date for Distribution of Surplus) 1. Dividends shall be paid to the 1. The base date for dividends of the Company shallshareholders or the registered pledgees who are be March 31st of each year.listed or recorded on the Shareholders' registersas of the account settlement date. 2. The Company may, by a resolution of the 2. The base date for interim dividends of the CompanyBoard of Directors, distribute interim dividends shall be September 30th of each year.to the shareholders or the registered pledgees who are listed or recorded on the Shareholders' registers as of September 30 every year. (Newly added) 3. In addition to the dates referred to in the preceding two paragraphs, the Company may set a base date and distribute surplus on such date. Article 32 (Prescription) Article 40 (Prescription of Dividends) If any dividend or any interim dividend remains In the case of cash dividends, the Company shall beunreceived after expiration of full three (3) exempted from the obligation of paying them if they remainyears from the day on which such dividends become unreceived for three (3) years after the date of thedue and payable, the Company shall be relieved of commencement of payment thereof.the obligation to pay such dividends. Proposal 3: Election of eight members to the Board of Directors Because the terms of office for all eight directors expire as of the end of thisGeneral Meeting of Shareholders, this proposal requests the election of eightdirectors. Candidates for the new board are as follows: Name Resume, representation of other companies, etc. and position and Shares of the responsibility while assuming directorship Company's stock (Date of Birth) owned 1 Kagemasa Kozuki Mar. 1969 Founded Konami Industries (private enterprise) (Nov. 12, 1940) Mar. 1973 Established Konami Industries Co., Ltd. (now KONAMI CORPORATION) with the paid-in capital of Y1 million 98,353 Mar. 1974 Assumed the office of Representative Director and President Jun. 1987 Representative Director and Chairman of the Board Jun. 1994 Representative Director and Chairman of the Board and CEO (to present) 2 Kagehiko Kozuki Dec. 1983 Joined the Company as Manager of Production division (Mar. 7, 1944) May 1984 Director Aug. 1990 Managing Director 117,148 May 1991 Senior Managing Director Jun. 1997 Director and Vice Chairman Mar. 1998 Representative Director and Vice Chairman (to present) 3 Noriaki Yamaguchi Jun. 1994 Joined the Company as Advisor (Jan. 26, 1944) Jun. 1994 Managing Director in charge of International Business Division 51,127 Jul. 1995 Managing Director in charge of Administration Division Feb. 1996 Managing Director in charge of Finance and Accounting Division Jun. 2000 Director and Executive Corporate Officer Finance and Accounting Division Jun. 2001 Representative Director and Executive Corporate Officer Finance and Accounting Division Jan. 2003 Representative Director and Executive Corporate Officer, Vice President & CFO Mar. 2006 Representative Director and CFO (to present) Name Resume, representation of other companies, etc. and position and Shares of the responsibility while assuming directorship Company's stock (Date of Birth) owned 4 Kimihiko Higashio Dec. 1997 Joined the Company (Sep. 24, 1959) Jan. 2000 Executive Corporate Officer (Kansai Region Representative) 22,041 May 2003 Executive Corporate Officer (Division President, Human Resources) Jun. 2005 Director and Division President, Human Resources Mar. 2006 Director and CHO (to present) Representation of other companies, etc. • Representative Director and President, Konami Career Management, Inc. 5 Tsutomu Takeda Mar. 1996 Representative Director and President, Asatsu Inc. (the present-day Asatsu-DK Inc.) (May 13, 1937) Sep. 2001 Director and Senior Corporate Adviser 23,665 Jun. 2003 Director of the Company (to present) Representation of other companies, etc. • Representative Director and Chairman of the Board, Konami Sports & Life Co., Ltd. 6 External Director May 1992 Director (to present) Tomokazu Godai 7,923 (Oct. 6, 1939) Representation of other companies, etc. • Representative Director and Chairman of the Board, Maya Tec Co., Ltd. • Representative Director and President, Santetsu Giken Co., Ltd. • Representative Director and Chairman of the Board, Hiroshima River Industry Co., Ltd. 7 External Director Jun. 1990 Vice President, Matsushita Electrical Industrial Hiroyuki Mizuno Co., Ltd. Aug. 1994 Adjunct Professor, Stanford University (Apr. 20, 1929) 8,800 Jun. 2001 Director of the Company (to present) Mar. 2003 Director, Research Institute of Kochi University of Technology (to present) 8 External Director Jun. 1997 Representative Director and President, SHISEDO Co.,Ltd. Akira Gemma Jun. 2001 Representative Director and Corporate Officer, (Aug. 1, 1934) Chairman of the Board 7,300 Jun. 2003 Senior Corporate Adviser (to present) Jun. 2004 Director of the Company (to present) Note: No special conflicts of interest exist between the Company and the proposed candidates for director. This information is provided by RNS The company news service from the London Stock Exchange
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