With a broad business portfolio, we will seek to achieve growth and development while maintaining stability.
		President and COO Kazuhiko Note

Can you tell us about the Company’s operating results for the fiscal year 2010?
　
During fiscal 2010, the Japanese economy was not able to achieve a full recovery. Personal spending and the employment situation remained challenging. The economy suffered enormous damage from the Great East Japan Earthquake, and the economic outlook has become more uncertain. The sectors in which we operate face difficult circumstances, including a declining birthrate, a diversification of consumers’ needs, and a slowdown in the packaged market in association with the growth of Internet delivery.
　 In these circumstances, Group sales were down from the year-ago level, with the Visual and Music business struggling. However, the Group posted impressive earnings, attributable to very good performances in the Toy business and the Amusement business.
　The Happinet Group recorded net sales of 190,891 million yen, down 1.7% from the previous year, operating income of 2,855 million yen, up 22.7%, ordinary income of 3,013 million yen, up 19.9%, and net income of 1,376 million yen, an increase of 16.7%, in fiscal 2010.


What were the factors behind the strong performance in the Toy business and Amusement business? What future initiatives will you take?

There were two factors: We generated hit products and managed inventory properly in both the Toy and Amusement businesses.
　In the Toy business, toys for boys and girls, especially Kamen Rider OOO and Tamagotchi iD, and in the Amusement business, goods, especially Kamen Rider, for toy vending machines as well as card game machines for children, including Dragon Ball Heroes, sold very well and drove the markets. The lead time, namely the time from order placement to delivery, for products in the two businesses is long, about three months. It is therefore very important to assess appropriate order quantities, reduce stock clearance, and increase inventory turnover. The value of inventory and stock clearance remained at appropriate levels, resulting in high earnings in both businesses, as in the previous fiscal year.
　We will continue to manage inventory properly. We have established the foundation for making profits in the Amusement business. We will aggressively expand into areas where we expect demand in fiscal 2011.

What were the reasons for the poor performance in the Visual and Music business? What are your plans for the future in this area?

In addition to external factors, including the spread of content delivery, we have a problem of long-held returned merchandise. With a resale system, there is a system for CDs, of packages, where goods sold from manufacturers to distributers like us and then to retailers can be returned. Since there are upper limits on the quantities of returned goods, we sometimes have to hold goods returned from retailers for long periods. We believe that we need to urgently improve the system with manufacturers and retailers for returning goods to reduce long-held inventory.
　 We will also seek to deal in appropriate titles. In consultation with manufacturers and retailers, we will set standards for determining titles that we will handle and will take steps to ensure that we can make adequate profits together with manufacturers and retailers.

Have you been affected by the Great East Japan Earthquake?

The Group sustained damage to certain goods and equipment and was affected by rolling outages. However, no damage has had a serious impact on any business of the Group.
　We have made a donation through the Japanese Red Cross Society to the affected areas. We have also made a donation and sent relief supplies to Iwaki, which supported the making of the film Hula Girls, the DVD for which we are selling.



What message do you have for shareholders?

Our basic policy on the distribution of profits to shareholders is to pay stable and sustainable dividends. In line with this policy, we paid a term-end dividend of 15 yen per share for fiscal 2010, unchanged from fiscal 2009. As a result, our annual dividend came to 30 yen per share, including an interim dividend of 15 yen per share.
　 We operate a broad portfolio of businesses as a comprehensive entertainment trading company with a diverse range of products. We believe that, to meet the expectations of shareholders, our mission is to take advantage of this broad portfolio of businesses to increase our presence in the market and achieve further growth while maintaining operational stability.
　 We are grateful for the continued understanding and support of our shareholders.