Business Risks

(As of June 20, 2018)

Cautions Related to Business Forecasts

In this site's present business results forecasts, plans, strategies, etc., for Fields and its affiliated companies, those without historical facts are related to future business results. These are management's judgments based on information obtainable at the present time, and include risks and uncertainties. Therefore, investors are cautioned not to depend wholly on these forecasts alone.

Please understand that actual business results may vary considerably from these forecasts because of a variety of important factors. They include the economic situation surrounding the Company's business domains, market directions, and yen/dollar and yen/euro exchange rates.

Risks Related to Our Business and Management Status

Among items that relate to the conditions of businesses or accounting and which are included in the securities report, the principal items that could be risk factors and other items that could affect investors’ decisions significantly are as follows.

Recognizing the possibility of these risks actualizing, the Fields Group (the Company and its consolidated subsidiaries) pursues a policy of avoiding actualization and responding if risks actualize. However, decisions on investing in Fields’ shares should be taken in light of careful consideration of the details of these and other items.

Also, actualization of risks other than those the Group has envisioned and stated below could affect the Group’s business results significantly. Furthermore, unless stated otherwise, forward-looking statements are the Group’s judgments as of the date of filing the securities report (June 29, 2015). They do not cover all possible risks.In addition, because forward-looking statements include uncertainties, actual results could differ from such statements due to changes in business conditions.

1. Business Model

The Group advances businesses that use IP to develop content for diverse media and platforms. In relation to each IP, media compatibility or media trends could affect the Group’s business results.

Therefore, the Group stabilizes earnings and grows business through selection and concentration of business by consolidating our contents and IP business to two consolidated subsidiaries.

2. Changes in Consumer Preferences and Economic Conditions

Trends in leisure activities, entertainment, and other types of recreation tend to affect some of the Group’s businesses. In particular, changes in consumer preferences or awareness with regard to leisure activities or changes in style or fashion in relation to leisure activities could affect the Group’s business results.

Furthermore, lackluster domestic economic conditions that curb consumer spending or statutory regulations or industry bodies’ self-imposed regulations could reduce demand for the Group’s products or services in leisure-related fields, which could affect the Group’s business results.

Therefore, the Group researches and analyzes trends in consumer preferences and leisure-related fields, avoid relying on specific business platform in Japan, and has promoted the strategy which implements a multimedia development in Japan and overseas. In addition, the Company has created a new business platform and has promoted to build up the structure that can respond quickly and effectively to new business platform etc.

3. Investment

(1) Alliances

By strengthening alliances among in-house companies and alliances with outside companies or forming new alliances, the Group increases the business lines or bolsters the capabilities of existing businesses and develops new businesses efficiently.

In this process, the Group invests in order to establish new companies through joint ventures with other companies or makes additional investments in existing companies. In the future, the Group could continue such investments.

As a result, significant expenses could arise from these investments, business acquisitions, or business mergers.

Furthermore, if the performance of a joint venture established with a third party or an investee’s business deteriorated significantly, and business results remained lackluster beyond a certain period, the Group could incur losses due to increases in additional investments or impairment losses or valuation losses on investment securities.

In addition, business earnings may not grow in accordance with strategic targets or plans, and joint ventures with third parties may not perform as hoped. Such contingencies could affect the Group’s business results.

Therefore, when deciding on such investments, the Group gives adequate consideration to avoiding risk in relation to the future profitability of investments.

(2) New Businesses

The Group intends to continue actively creating and cultivating new services and businesses to cater to customer needs, diversify earnings sources, and realize continuous growth.

However, if the process of creating new services or businesses added inherent risks to the said services or businesses, or if difficult-to-foresee problems such as dramatic changes in business conditions arose, the new services or businesses may not progress as planned. Such contingencies could affect the Group’s business results.

Therefore, the Company clarifies the significance and aims of new businesses. It then considers the future business development that investment will entail, analyzes and manages risk, and reaches decisions that enable ambitious forward-looking initiatives and protect foundations simultaneously.

Furthermore, the Company periodically conducts in-house verification of the extension or termination of investment or finance to new businesses throughout the Group. In conjunction with these efforts, the Group utilizes outside resources through strategic business alliances as required.

4. Infringement of IP

The Group’s multifaceted rollouts of IP or content could result in third parties infringing the Group’s IP or content or the Group infringing third parties’ IP or content. Such contingencies could affect the Group’s business results.

Furthermore, the IP and content that the Group plans, develops, and produces or which it acquires from creators or rights holders or owns include diverse rights, such as copyrights of multiple related rights holders, rights relating to copyrights, trademark rights, portrait rights, and patent rights. As a result of receiving licenses with defective rights or differences in perception between the Group and rights holders, the Group could be prohibited from using content or receive damages claims. Also, when the Group grants usage rights of IP or content to third parties, it could receive damages claims from the said third parties or become involved in lawsuits. Therefore, the Group is aware of the importance of the value of IP or content and is strengthening its management.

Furthermore, the Group educates executives and other employees, establishes rights for IP or content that it has created or invented, and continues measures to prevent infringement of these rights. Meanwhile, when the Group plans, develops, produces, acquires, or owns IP or content, it clarifies the associated rights’ attributes, scopes, and details through contracts and takes the utmost care to avoid infringing the rights of multiple related rights holders.

5. Pachinko and Pachislot Machines Industry’s Statutory Regulations, Self-imposed Regulations, and Market Conditions

The Group’s design, development, and sale of pachinko and pachislot machines are not directly subject to control by legal regulations for pachinko and pachislot machine manufacturers or related laws and regulations, including the Act on Control and Improvement of Amusement Businesses, etc. (the Amusement Business Act) and the Public Safety Commission’s “regulations for the verification of licenses, formats, and other aspects of pachinko and pachislot machines.” However, pachinko and pachislot machine manufacturers within the Group are subject to the above legal regulations. On the other hand, there are cases where industry bodies implement self-imposed regulations for pachinko and pachislot machine manufacturers, pachinko hall operators, and pachinko and pachislot machine distributors, as part of efforts to restore soundness in the industry.

Furthermore, amendments to statutory regulations or the implementation of new self-imposed regulations could require responses to the said regulations that delay the delivery of pachinko and pachislot machines to pachinko hall operators or change demand for pachinko and pachislot machines among pachinko hall operators. Factors other than statutory regulations, such as changes in market conditions or economic conditions, could cause dramatic changes in pachinko hall operators’ business conditions. Such contingencies could affect the Group’s business results. Therefore, the Group promotes initiatives aimed at the sound development of the pachinko and pachislot machines industry.

In addition, the Group plans and develops pachinko and pachislot machines that have strong entertainment value, which are instrumental in attracting new customers and keeping existing customers.

6. Securing and Development of Personnel

The Group could be unable to secure or develop required personnel as planned due to the limited availability of talented personnel and other factors. Furthermore, the Group could be unable to prevent the loss of talented personnel. Also, the Group’s business collaborations and alliances could stop functioning properly due to the rapid hiring of personnel. As a result of such factors, the Group could be unable to conduct business activities as planned, which could affect its business results.

Therefore, the Group views personnel as the most significant asset supporting growth and views hiring and developing talented personnel as an important management task. The senior management team discusses and advances overall hiring with a view to securing and developing talented personnel.

7. Compliance

The Group takes a range of measures reflecting its view of compliance as an important management task. However, the Group could be unable to avoid the actualization of compliance risk completely. Infringement of laws could diminish the Group’s social credibility or brand image or lead to damages claims. Such contingencies could affect the Group’s business results.

Therefore, the Group has established compliance guidelines and built systems for compliance advancement. Furthermore, the Group further heightens corporate ethics and compliance by conducting training for executives and other employees.

8. Information Security

The Group keeps important operational information as well as the confidential and personal information of customers and suppliers. If information was leaked externally due to unforeseen circumstances or third parties acquired such information and used it improperly, the Group could not only receive damages claims or incur expenses in dealing with the matter but also suffer diminished credibility. Such contingencies could affect the Group’s business results.

Therefore, the Group implements management information rigorously by strengthening its information security countermeasures and conducting training for executives and other employees.

9. Accounting System

The introduction of, or changes in, accounting standards or tax systems that the Group has not foreseen could affect its business results or financial position.

The Group owns a significant amount of fixed assets, such as property and equipment and goodwill. If the market value of the assets the Group owns decreased markedly or the profitability of businesses deteriorated, the Group could incur impairment losses due to the application of impairment accounting to fixed assets, which could affect the Group’s business results or financial position.

Furthermore, the Group owns investment securities for the purpose of building operational relationships as well as purely for the purpose of investment. Because investment securities are evaluated based on trends in securities markets and the financial positions and business results of the companies that issue securities, if the Group implemented impairment treatment due to falls in market values or decreases in real values, the Group could recognize impairment of securities or valuation losses, which could affect its business results or financial position.

Therefore, in light of advice from such outside experts as certified public accountants and tax accountants, the Group invests based on appropriate processes and implements accounting treatments and disclosures appropriately.

10. Financing

In order to realize a stable supply of financing, the Group has entered into syndicate loan contracts with several financial institutions. These contracts include financial covenants that would force the Company to forfeit the benefit of time regarding loan obligations and require lump-sum repayments of loans if the Company were to violate certain conditions. This could subsequently affect the Group’s financial position. As of the publication date of the securities report, the Group has not violated any financial covenants pertaining to these syndicate loan contracts.