BRIEF STATEMENT OF CONSOLIDATED FINANCIAL RESULTS
FOR THE 2nd QUARTER OF THE FISCAL YEAR ENDING MARCH 2018
This is an English translation of summarized consolidated financial results prepared
for the convenience of non-resident shareholders. Should there be any inconsistency
between the translation and the official Japanese text, the latter shall prevail.

November 13, 2017
Faith, Inc. (Stock code 4295, Listed on TSE 1st section)(URL http://www.faith.co.jp/)
Representative: Hajime Hirasawa, CEO/President
Contact: Jiro Saeki, CFO/Director
Tel: +81-3-5464-7633
Date of Submission of Securities Report: November 14, 2017
Starting Date of the Dividend Payment: December 8, 2017
Preparation of Supplementary Materials for Quarterly Financial Results: Applicable
Information Meeting for Quarterly Financial Results to be Held: Applicable (for Institutional
Investors and Analysts)
Amounts are rounded down to the nearest JPY 1 million.

1. Results for the 2nd Quarter of the Fiscal Year Ending March 2018
(From April 1, 2017 to September 30, 2017)(1) Consolidated Operating Results(Percentages indicate changes compared with the same quarter of the previous fiscal year.)

Net Sales

Operating Income

Q2 of the year ending

Millionsof yen%March 2018
March 2017

10,703
10,3393.5
6.5

Millionsof yenOrdinary Income
Millionsof yen

%
△19.6
96.2

907
1,129

852
1,083

%
△21.3
86.7

Net Income
Millionsof yen

560
434

%
29.1
38.5

(Note) Comprehensive income: 2nd quarter of the fiscal year ending March 2018: ¥818 million (△9.3%); 2nd quarter of fiscal year ending
March 2017: ¥902 million (137.9%)

Net Income per
Share

Diluted Net
Income per Share

Yen
50.18
43.98

Yen
—
—

Q2 of the year ending
March 2018
March 2017(2) Consolidated Financial Position
Total Assets

Net Assets

Ratio of Equity CapitalMillions of yen

Millions of yen

26,552

18,813%
70.7

26,95918,066

59.5

Q2 of the year ending
March 2018Year ending March 2017

(Reference) Equity capital: 2nd quarter of fiscal year ending March 2018: ¥18,777 million; fiscal year ending March 2017: ¥16,052 million

2. Dividends
Dividends per Share
(Record dates)

Year ending March 2017
Year ending March 2018

1st Quarter

yen
—
—

3rd Quarter

Interim

yen
5.00
5.00

Year ending March 2018
(Forecast)Year-end

yen
5.00

yen
10.00

—

5.00

10.00

(Note) These figures have not been modified since the time of the most recently announced dividend forecast.

1

Total

yen
—

3. Forecast for the Consolidated Results for the Year Ending March 2018（from April 1，2017 to March 31，2018）(Percentages indicate changes compared with the previous fiscal year.)

Net Sales

Full year

Operating Income

Ordinary Income

Net Income
Attributable to the
Shareholders of the
Parent Company

Millionsof yen%Millionsof yen%Millionsof yen%Millions ofyen%

22,100

6.3

1,310

△25.5

1,300

△15.5

800

39.9

Net Income
per Share
Yen
64.18

(Note) These figures have not been modified since the time of the most recently announced business result forecast.

* Notes(1) Changes in significant subsidiaries (accompanying changes in scope of consolidation): None
Newly added subsidiaries: 0 companies (subsidiary’s name:)Removed subsidiaries: 0 companies (subsidiary’s name:)(2) Adoption of simplified accounting practices or specific procedures in preparation of the quarterly
consolidated financial reports: Applicable* For details, please refer to “2. Consolidated Financial Statements and Important Explanatory Notes, (4) Notes

Concerning the Consolidated Financial Statements (Adoption of Simplified Methods in the Preparation of theQuarterly Financial Statements)” on page 11 of the accompanying material.

(3) Changes in accounting policy, changes in accounting estimates, and restatements(i)
Changes accompanying revisions of accounting standards, etc.: None(ii) Changes other than the above: None(iii) Changes in accounting estimates: None(iv)

Restatements: None

(4) Outstanding shares (common shares)(i) Outstanding shares at the end of the term (including treasury shares):
The 2nd quarter of the fiscal year ending March 2018: 13,831,091 shares
The fiscal year ending March 2017: 11,960,000 shares(ii) Treasury shares at the end of the term:
The 2nd quarter of the fiscal year ending March 2018: 67,694 shares
The fiscal year ending March 2017: 2,091,180 shares(iii) Average number of shares during the interim accounting period:
The 2nd quarter of the fiscal year ending March 2018: 11,167,503 shares
The 2nd quarter of the fiscal year ending March 2017: 9,869,423 shares(Note)The major changes, namely the increase of 1,871,091 shares in the number of outstanding shares (including treasury shares)
and the decrease of 2,023,486 shares in the number of treasury shares at the end of the 2nd quarter of the fiscal year ending
March 2018, were due to the implementation of a share exchange with Nippon Columbia Co., Ltd. effective as of August 1,
2017.

* This financial results report is exempt from quarterly review procedures.
* Statement regarding the proper use of financial forecasts and other special remarks(Notice regarding statements concerning the future)
Statements concerning the future, such as performance forecasts, etc., described in the present material are based on
information currently available to the Company and on certain assumptions judged as reasonable by the Company. The
Company’s actual performance may differ substantially from these forecasts as a result of various factors beyond theCompany’s control. For details of cautions, etc., employed in making performance forecasts and the assumptions
underlying performance forecasts, please refer to “1. Qualitative Information Concerning the Settlement of Accounts forthe 2nd Quarter, (3) Explanation Concerning Future Forecast Information on the Consolidated Financial Results, etc.” onpage 4 of the accompanying material.
(To obtain supplemental documents relating to financial results)
Supplemental materials related to the Company’s quarterly and other financial results are posted on the company website.

2

Contents
1. Qualitative Information Concerning the Settlement of Accounts for the 2nd Quarter ····················(1) Explanation Concerning the Operating Results ····························································(2) Explanation Concerning the Financial Position ····························································(3) Explanation Concerning Future Forecast Information on the Consolidated Financial Results, etc.

2
2
4
4

2. Consolidated Financial Statements and Important Explanatory Notes ······································ 5(1) Consolidated Balance Sheet ··················································································· 5(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ········ 7(Consolidated Statement of Income) ·········································································· 7(Consolidated Statement of Comprehensive Income)······················································· 8(3) Consolidated Statement of Cash Flows ······································································· 9(4) Notes Concerning the Consolidated Financial Statements ················································· 11(Note Concerning the Premise of a Going Concern) ························································ 11(Note in the Case of Significant Changes in the Amount of Shareholders’ Equity) ··················· 11(Adoption of Simplified Methods in the Preparation of the Quarterly Financial Statements) ····· 11(Segment Information) ························································································· 11(Business Combination Related) ············································································· 12

1. Qualitative Information Concerning the Settlement of Accounts for the 2nd Quarter(1) Explanation Concerning the Operating Results
In the domestic information communication field, the popularization of devices such as smartphoneand tablet-type multifunctional mobile terminals is continuing to progress together with the increasing
diversification of devices. Although the rate of growth of this market is modest in comparison withduring the previous period of rapid popularization, the personal-use smartphone ownership rate has
quadrupled over the most recent five-year period from 14.6% in FY 2011 to 56.8% in FY 2016 (*1). In
keeping with the ongoing switch to smartphones, the demand for changes in services will continue
apace, and in future it will become increasingly important to develop services that match consumer
tastes and lifestyles and the changing marketplace even more quickly than before.
*1. 2017 White Paper on Information and Communications in Japan,
compiled by the Ministry of Internal Affairs and Communications

In this environment, the Faith Group is continuing to utilize the results of the efforts it has been pouring
into content digital distribution ever since its establishment, and is forging ahead with its Multi-Content
and Multi-Device Strategy of creating environments in which people can enjoy a wide diversity ofcontents whenever and wherever they choose. We are also strengthening the development of newservices in response to the changing market environment such as platforms that collect and organize theinformation flooding the Internet and then providing this to users after increasing its added value.
Regarding the Faith Group’s business performance for the second quarter of the consolidated fiscal year
ending March 2018, net sales increased by 3.5% compared with the same quarter of the previous fiscal
year to ¥10,703 million, operating income decreased by 19.6% year on year to ¥907 million, ordinary
income decreased by 21.3% to ¥852 million, and net income attributable to the shareholders of theparent company increased by 29.1% to ¥560 million.
Moreover, Faith, Inc. (hereinafter “the Company”) gained ownership of all the shares of Nippon
Columbia Co., Ltd. by means of a share exchange that was implemented on August 1, 2017 following
the granting of approval of the share exchange contract by the annual general meetings of bothcompanies, which took place on June 29, 2017 in the case of the Company and on June 23, 2017 in thecase of Nippon Columbia Co., Ltd. With this, Nippon Columbia Co., Ltd. has become a wholly owned
subsidiary of the Company, facilitating the centralization of our business strategy, speeding up decision
making, promoting the efficient utilization of both companies’ available resources including know-how
and human resources, strengthening our creative response in the face of the huge changes currently
enveloping the music industry, and allowing us to strive to further improve our corporate value.
Information on each business segment is as follows.
Content BusinessIn the Content Business, the Faith Group is actively pursuing the development of new products in
response to the market environment including the ongoing popularization of smartphones, changing
music listening styles, etc. In this business, the Company is proceeding with measures to enhance theadded value of its contents, such as functional improvement and linkage between various services, etc.,
by verifying the results of service contents and marketability, including with regard to existing
businesses, while also moving ahead with platformization in the interests of achieving income
diversification.
We are actively developing our FaRao PRO business by pursuing the functional expansion necessary
for in-store operations such signage and security camera functions, in addition to commercial-use BGM
and announcement functions using the Internet. For instance, we have begun providing FaRao PRO
services in France and Indonesia based on our Japanese service, and our efforts to utilize FaRao PRO ina variety of fields beyond commercial establishments have been highly evaluated, such as theintroduction of the service at nursing care facilities for the elderly in cooperation with the French city ofAngers, an initiative on which we presented a case study at the International Conference of Alzheimer’s
Disease International 2017 in Kyoto last April. In future, we aim to create and activate new BGM
markets both in Japan and overseas.

2

In Fans’, our platform of services for artists, we are enhancing the functions essential to artists’ musicalactivities such as official website construction, music and video distribution, sales of artist goods, andfan club operation. In providing a service that allows more artists to freely send out their musical work
and information, we are aiming to acquire new users, and we will endeavor to improve the quality of the
Fan’s service by pursuing usability.
As a result of the above developments, taking into account the ongoing positive deployment of newservices in keeping with the changing market environment and the decline in sales of services to featurephone users, the Content Business recorded net sales of ¥2,025 million, a decrease of 8.7% year on year,
and an operating loss of ¥58 million, compared with an operating loss of ¥3 million for same period of
the previous fiscal year.
Point Service BusinessIn the Point Service Business, sales of points issued by existing participating point card stores remainedrobust, thanks in part to measures such as double point sales. In addition, the self-liquidation business(*2) performed well and the Company also gained some new customers in the hotel industry, etc. As aresult, this business recorded net sales of ¥1,214 million, an increase of 5.8% year on year.
However, as a result of increased costs in line with an expansion of personnel and office facilities inconnection with investment in talented human resources, operating income decreased by 45.2% year on
year to ¥31 million.
*2. A campaign in which users can purchase various goods at a discount by saving points in the form of seals, etc.

Label Business
Amid the difficult environment facing the music and video-related industry in line with the continuing
shrinkage of the music market, the Label Business proceeded with its strategy of strengthening new
future-oriented businesses in order to overcome the present situation in which it remains dependent onsales of package products for which the market remains sluggish.
Regarding this segment’s performance, sales of J-Pop and education titles, which contributed
significantly to sales revenue in the previous fiscal year, recorded year-on-year declines, while
animation and game titles performed favorably. Meanwhile, the inclusion of record label company
Dreamusic Inc. as newly consolidated subsidiary of the Faith Group boosted overall Label Businesssales to ¥7,464 million, an increase of 7.0% compared with the same period of the previous fiscal year.
As for the profit and loss situation, due mainly to declining sales of high-margin products launched inprevious years, this segment recorded an operating income of ¥931million, a year-on-year decrease of
13.2%.
*Product and service names appearing in this document are trademarks or registered trademarks of Faith, Inc. either in Japan or in othercountries.

3(2) Explanation Concerning the Financial Position(Analysis of Financial Position)
Total assets as of September 30, 2017 decreased by ¥407 million compared to the end of the previous
consolidated fiscal year to ¥26,552 million. This result was due mainly to decreases in cash and deposits,
etc.
Total liabilities increased by ¥1,154 million compared to the end of the previous consolidated fiscal yearto ¥7,738 million. This result was due mainly to the repayment of loans.
Total net assets increased by ¥747 million compared to the end of the previous consolidated fiscal yearto ¥18,813 million. This was due mainly to the recording of a quarterly net income attributable to theshareholders of the parent company and to a decrease in treasury stock, etc.
As a result of the above, the equity ratio improved by 11.2 percentage points to 70.7%.
(Cash Flow Situation)
Cash and cash equivalents for the consolidated cumulative 2nd quarter of the current fiscal year
decreased by ¥828 million from the end of the previous consolidated fiscal year to ¥12,940 million.
Details of cash flow for the consolidated cumulative 2nd quarter and its contributory factors are as
follows:(Cash flow from operating activities)
Cash flow from operating activities amounted to an outflow of ¥296 million (compared with an inflowof ¥1,026 million for the same period of the previous fiscal year), due mainly to the recording adecrease in trade payables, etc.
(Cash flow from investing activities)
Cash flow from investing activities amounted to an outflow of ¥190 million yen (compared with an
inflow of ¥1,086 million for the same period of the previous fiscal year), due mainly to outgoings of¥530 million revenues of in respect of making fixed-term deposits and ¥87 million in respect ofacquisition of software, despite income of ¥500 million in respect of reimbursement of fixed-term
deposits and ¥137 million in respect of disposal of marketable securities.
(Cash flow from financing activities)
Cash flow from financing activities amounted to an outflow of ¥342 million (a decrease of 33.2%
compared with the same period of the previous fiscal year), due mainly to outgoings of ¥207 million in
respect of repayment of long-term loans, and ¥100 million in respect of repayment of short-term loans.

(3) Explanation Concerning Future Forecast Information on the Consolidated Financial
Results, etc.
Performance forecasts are made based on information currently available to the Company, but there is apossibility that the actual performance figures will differ significantly from the forecast figures due to avariety of factors. In addition, the current performance forecast for the full financial year is unchanged
from the forecast issued on August 10, 2017.

4

2. Consolidated Financial Statements and Important Explanatory Notes(1) Consolidated Balance Sheet
FY 2016(As of March 31, 2017)(Assets)
Current assets
Cash and deposits
Accounts and notes receivable
Marketable securities
Commercial products
Products in progress
Primary materials and inventory goods
Corporation tax refund receivable, etc.
Deferred tax assets
OthersAllowance for doubtful accounts
Total current assets
Fixed assets
Tangible fixed assets
Intangible fixed assets
Goodwill
OthersTotal intangible fixed assets
Investment and other assets
Investment securities
Deferred tax assets
OthersAllowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total assets(Liabilities)
Current liabilities
Accounts and notes payable
Short-term loans payable
Lease obligations
Accrued expenses payable
Income taxes payable
Reserve for bonuses
Reserve for point card certificates
Reserve for sales returns
OthersTotal current liabilities
Fixed liabilities
Long-term loans payable
Net defined retirement benefits
Lease obligations
Deferred tax liabilities
OthersTotal fixed liabilities
Total liabilities

5(Unit: thousands of yen)
2nd Quarter of FY 2017

(As of Sept. 30, 2017)14,268,853
2,659,104
230,572
561,536
356,686
49,98327,454
100,976
639,750△18,863
18,876,055

13,470,223
3,023,787
230,468
494,626
548,448
68,757
091,156
640,833△19,455
18,548,847

2,831,617

2,810,330

1,833,611
855,577
2,689,188

1,781,773
799,634
2,581,407

2,137,412
26,208718,609△319,539
2,562,690
8,083,496
26,959,552

2,199,618
26,215723,503△337,882
2,611,453
8,003,192
26,552,039

1,233,646
852,119
6,582
2,756,629
327,800
78,30043,57096,7482,164,786
7,560,185

1,135,881
667,600
3,043
2,642,810
155,445
79,133－
114,646
1,738,383
6,536,944

464,530
621,382
1,446
195,107
50,3201,332,787
8,892,972

375,963
577,108
1,084
204,841
42,3791,201,376
7,738,320

(Net assets)
Shareholder's equity
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholder's equity
Other accumulated comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustments
Cumulative adjustment for retirement benefit
obligations
Total other accumulated comprehensive income
Stock acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets

6(Unit: thousands of yen)
2nd Quarter of FY 2017

FY 2016(As of March 31, 2017)(As of Sept. 30, 2017)

3,218,000
3,705,680
11,953,901△3,039,450
15,838,131

3,218,000
2,970,081
12,441,165△97,121
18,532,125

267,014△11,513△41,119

293,427△11,944△35,626

214,381
15,691
1,998,376
18,066,579
26,959,552

245,856－
35,736
18,813,718
26,552,039

(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income(Consolidated Statement of Income)(Unit: thousands of yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Interest on securities
Gain on investment partnership management
Foreign exchange gains
Miscellaneous receipts
Total non-operating income
Non-operating expenses
Interest paid
Loss on equity method investment
Costs relating to Business Combination
Foreign exchange losses
Miscellaneous expenses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sale of fixed assets
Gain on sales of investment securities
Gain on change in equity
Gain on reversal of subscription rights to shares
Total extraordinary income
Extraordinary losses
Loss on disposal of fixed assets
Impairment loss on goodwill
Total extraordinary losses
Net income or net loss before income taxes
Corporate, local, and business taxes
Income taxes - deferred
Current quarter net income
Current quarter net income attributable to non-controllinginterests
Current quarter net income attributable to shareholders of
the parent company

7

2nd Quarter of FY 2016

2nd Quarter of FY 2017

(April 1-Sept.30, 2016)
10,339,227
6,087,028
4,252,199
3,122,964
1,129,234(April 1-Sept. 30, 2017)
10,703,830
6,299,575
4,404,254
3,496,835
907,418

519
2,858
15
23,598－
5,843
32,835

869
2,831
25
15,367817
9,928
29,8396,235
60,388
－
4,105
7,519
78,2491,083,821

4,245
28,50150,852－825
84,425
852,83274－－
27,043
27,117－112,927
5,859
15,691
134,477

4,122
－
4,122
1,106,816
186,565580
919,670
485,610－
23,421
23,421
963,888
169,849
8,018
786,020
225,582

434,060

560,437

(Consolidated Statement of Comprehensive Income)(Unit: thousands of yen)

Current quarter net income
Other comprehensive income
Valuation difference on other available-for-salesecurities
Foreign currency translation adjustments
Retirement benefit adjustments
Total other comprehensive income
Comprehensive income(Details)
Comprehensive income attributable to shareholders of
the parent company
Comprehensive income attributable to non-controllinginterests

8

2nd Quarter of FY 2016

2nd Quarter of FY 2017

(April 1-Sept. 30, 2016)
919,670(April 1-Sept. 30, 2017)
786,020△12,170

25,157△4,889△505△17,564
902,105△425
7,276
32,008818,028

415,551

591,912486,554226,116

(3) Consolidated Statement of Cash Flows(Unit: thousands of yen)

Cash flow from operating activities
Gain before income taxes and other adjustments
Depreciation and amortization
Amortization of goodwill
Impairment loss on goodwill
Increase/decrease in allowance for doubtful accounts (△ =decrease)
Increase/decrease in reserve for bonuses (△ = decrease)
Increase/decrease in reserve for point card certificates (△ =decrease)
Increase/decrease in liabilities for retirement benefits (△ =decrease)
Interest and dividends income
Interest on securities
Interest paid
Gain or loss on foreign exchange (△ = gain)
Investment gain or loss on equity method (△ = gain)
Gain or loss on investment partnership management (△ =gain)Gain or loss on change in equity (△ = gain)
Gain or loss on sale of investment securities (△ = gain)
Increase/decrease in trade receivables (△ = increase)
Increase/decrease in inventory assets (△ = increase)
Increase/decrease in trade payables (△ = decrease)
OthersSub-totalInterest and dividends received
Interest paid
Income tax refunded
Income tax paid
Cash flow from operating activities

9

2nd Quarter of FY 2016
(April 1-Sept. 30, 2016)

2nd Quarter of FY 2017
(April 1-Sept. 30, 2017)

1,106,816
167,460
69,839－△12,306

963,888
167,057
71,83823,421
18,555△264△4,407832△43,570△55,927△44,274△3,378
△15
6,235
2,424
60,388△23,598△3,700
△25
4,245
△982
28,501△15,367－－△267,250△60,979
307,268△128,194
1,164,110
3,599△6,236
7,492△142,484
1,026,482△5,859△112,927△306,116△143,626△209,588△396,382△4,0803,725△4,25027,454△319,211△296,363

(Unit: thousands of yen)

Cash flow from investing activities
Expenditure for opening of term deposits
Proceeds from withdrawal of term deposits
Expenditure for acquisition of marketable securities
Expenditure for acquisition of tangible fixed assets
Expenditure for acquisition of software
Expenditure relating to business transfer
Expenditure for acquisition of investment securities
Proceeds from sale of investment securities
Expenditure for acquisition of shares of affiliates
Proceeds from acquisition of subsidiary shares accompanying
changes in the scope of consolidation
Proceeds from collection of loans receivable
Expenditure for guaranteeing security deposits
Proceeds from collection of security deposits
OthersNet cash flow from investing activities
Cash flow from financing activities
Net increase/decrease in short-term loans payable (△ =decrease)
Expenditure for repayment of financing and lease obligations
Expenditure for repayment of long-term borrowing
Expenditure for acquisition of treasury stock
Payment of dividends
Payment of dividends to non-controlling shareholders
Proceeds from stock issuance to non-controlling shareholders
Net cash flow from financing activities
Effect of exchange rate on cash and cash equivalents
Net increase/decrease in cash and cash equivalents (△ =decrease)
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents resulting from new
consolidation
Cash and cash equivalents at end of the quarter10

2nd Quarter of FY 2016
(April 1-Sept. 30, 2016)

2nd Quarter of FY 2017
(April 1-Sept. 30, 2017)△500,000
2,008,881△230,000△22,658△147,849
－
－
8,206
－
16,989△530,000
500,000－△73,312△87,735△20,000△49,999
137,114△27,196
40,60060△3,008－△43,800
1,086,821

37,391△140
20△117,236△190,494－△100,000△9,098△198,060△364△49,432△13－△256,968△1,7191,854,615△3,900△207,799△6,010△49,300－
24,500△342,510
739△828,629

10,913,765
55,216

13,768,853－

12,823,597

12,940,223

(4) Notes Concerning the Consolidated Financial Statements(Note Concerning the Premise of a Going Concern)
Not applicable(Note in the Case of Significant Changes in the Amount of Shareholders’ Equity)
Effective as of August 1, 2017, the Company implemented a share exchange for the purpose of
converting its consolidated subsidiary Nippon Columbia Co., Ltd. into a wholly owned subsidiary with
the Company as the wholly owning parent company. Primarily as a result of this share exchange, during
the consolidated cumulative 2nd quarter accounting period of the current fiscal year, the Company’s
capital surplus declined by ¥735,598 thousand and treasury shares declined by ¥2,942,329 thousand, sothat at the end of the current 2nd quarter accounting period, the capital surplus was ¥2,970,081 thousand
and the treasury shares was ¥97,121 thousand.

(Adoption of Simplified Methods in the Preparation of the Quarterly Financial Statements)
Tax expenses for the Company and a portion of its consolidated subsidiaries are calculated by making areasonable estimate of the effective tax rate after applying tax effect accounting to the amount ofquarterly net income before tax deduction for the consolidated financial year including the current 2ndquarter accounting period, and then multiplying the amount of quarterly net income before tax deduction
by the current estimated effective tax rate.

(Segment Information)
Ⅰ 2nd quarter of the previous consolidated fiscal year/FY 2016 (April 1, 2016 through Sept. 30, 2016)

1. Information on sales and profit or loss by reportable segment(Unit: thousands of yen)Content

Point Service

Label

Total

Amount recorded in
Adjustment
Consolidated Financial
amount (Note 1) Statements (Note 2)

Net sales
Sales to externalcustomers
Intersegment sales
or transfer amount

2,217,531

1,147,550

6,974,145

10,339,227－

10,339,227

59,069－21,65480,724△80,724－

Total

2,276,601

1,147,550

6,995,800

10,419,951△80,724

10,339,227△3,65358,013

1,074,182

1,128,543

691

1,129,234

Segment income orloss (△)

Notes: 1. The segment income or loss (△) adjustment amount of ¥691 thousand is calculated by eliminating intersegment
transactions.
2. Segment income or loss amounts are adjusted with operating income in the quarterly consolidated profit and loss statement.

2. Information regarding impairment loss on fixed assets or goodwill by segment reported
This information is omitted since there is no critical impairment loss on fixed assets or significant
change in amount of goodwill.

11Ⅱ 2nd quarter of the current consolidated fiscal year/FY 2017 (April 1, 2017 through Sept. 30, 2017)

1. Information on sales and profit or loss by reportable segment(Unit: thousands of yen)Amount recorded in
Adjustment
Consolidated Financial
amount (Note 1) Statements (Note 2)Content

Point Service

Label

Total

2,025,499

1,214,125

7,464,205

10,703,830－

10,703,830

72,958－

4,898

77,857△77,857－

Total

2,098,458

1,214,125

7,469,103

10,781,687△77,857

10,703,830

Segment income orloss (△)△58,424

31,800931,975

905,352

2,066

907,418

Net sales
Sales to externalcustomers
Intersegment sales
or transfer amountNotes: 1. The segment income or loss (△) adjustment amount of ¥2,066 thousand is calculated by eliminating intersegment
transactions.
2. Segment income or loss amounts are adjusted with operating income in the quarterly consolidated profit and loss statement.

2. Information regarding impairment loss on fixed assets or goodwill by segment reported
This information is omitted since there is no critical impairment loss on fixed assets or significant
change in amount of goodwill.

(Business Combination Related)
Transactions under common control(Conversion of a consolidated subsidiary into a wholly owned subsidiary by means of a share exchange)
On August 1, 2017, the Company and Nippon Columbia Co., Ltd. (hereinafter referred to as “Nippon
Columbia”) implemented a share exchange (hereinafter referred to as “the share exchange”) involving

the Company as the wholly owning parent company and Nippon Columbia as the wholly owned
subsidiary.
(1) Transaction Overview① Name and business contents of company undergoing business combination
Name: Nippon Columbia
Business contents: Production, advertising and sale of audio, video and game software titles,
management of music artists, etc.
② Date of business combination
August 1, 2017
③ Legal form of business combination
A share exchange involving the Company as the wholly owning parent company and Nippon
Columbia as the wholly owned subsidiary④ Names of companies following business combination
No change⑤ Other matters related to the transaction
Under the present rapidly changing business environment, the Company and Nippon Columbia areaiming to make use of the technology and human resources of both companies by proceeding with the12unification of their capital and their business activities. Through the share exchange, both companies
will be able to boldly make the investments necessary to introduce new business methods on both theuser side and the content creator side (including artists, etc.) of the business. Even more than atpresent, this will make possible the creation of new services and new markets, which will in turnfurther improve the corporate value of both companies.

(2) Summary of accounting treatment
The Company accounted for the business combination as a transaction under common control basedon the Accounting Standard for Business Combinations (Accounting Standards Board of Japan
Statement No. 21, September 13, 2013) and the Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures (Accounting Standards Board ofJapan Implementation Guidance No. 10, September 13, 2013).
(3) Details of acquisition cost of additionally acquired shares issued or owned by the subsidiary andtype of consideration
Consideration for the acquisition: shares of the Company’s common stock valued at ¥4,823,818
thousand(4) Exchange ratio by type of shares, method of calculation, and number of shares to be allotted① Exchange ratio by type of shares
The Company

Nippon Columbia(wholly owning parent company)(wholly owned subsidiary)

1

0.59

Share exchange ratio② Method of share exchange ratio calculation

In determining the share exchange ratio, the Company selected Nomura Securities Co., Ltd. as its
third-party appraisal institution and Anderson Mori & Tomotsune as its legal adviser, while
Nippon Columbia selected Plutus Consulting Co., Ltd. as its third-party appraisal institution and

Iwata Godo as its legal advisor. Nomura Securities Co., Ltd. analyzed the value of both theCompany’s and Nippon Columbia’s shares using market share price analysis and discounted cash
flow (DCF) analysis, and calculated the share exchange ratio in consideration of these analyses in

a comprehensive manner. Plutus Consulting Co., Ltd. analyzed the value of both the Company’sand Nippon Columbia’s shares using market share price analysis, comparable company analysis and
DCF analysis, and calculated the share exchange ratio in consideration of these analyses in acomprehensive manner. The share exchange ratio was decided through consultations between thetwo parties based on the results of the above-mentioned calculations and the advice provided by
the legal advisors.
③ Number of shares allotted
3,899,611 shares of the Company’s common stock(Of the above-mentioned number of shares, 2,028,520 treasury shares held by the Company wereallotted, while the remaining 1,871,091 shares comprised newly issued shares of common stock.）13