Annual Report 2004

Profile

Fields Corporation was established in 1988 as a distributor of pachinko/pachislot machines. The
pachinko/pachislot industry accounts for at least 30% of the revenues generated in Japan’s leisure market,
reaching as high as ¥29.6 trillion in 2003.※
In this market, we have conducted business transactions with about 12,000 pachinko hall operators
throughout Japan and with nearly every maker of pachinko/pachislot machines. Drawing upon our
nationwide sales network, we have helped boost the sales growth of both operators and makers while
maintaining our operational capacity to earn significant profits.
We have recently acquired rights to use a number of copyrighted characters that are well-known in Japanand overseas and have effectively incorporated them into the development of pachinko/pachislot machines,
toward increasing the number of pachinko/pachislot fans who will be attracted to these enhanced
pachinko/pachislot machines and halls. Fields Corporation (hereinafter, “Fields” or “the Company”) is
successfully established as the No.1 distributor of game machines, with uniquely strong abilities in productplanning for, and sales of, pachinko/pachislot machines. Similar strengths lie in our ability to support sales
promotions for both pachinko hall operators and the makers of pachinko/pachislot machines.
※Source: “2004 White Paper on Leisure” published by Japan Productivity Center for Socio-Economic Development

Corporate Philosophy:

The Greatest Leisure for All People

With the coming era of innovative pachinko/pachislot
machines, we are entering a new stage of growth.
Fields and our consolidated subsidiaries (together, the “Fields Group”) have revolutionised
the amusement industry through open and flexible distribution strategies, aggressive promotional activities,
and broadened content drawing on our acquisition of rights to use well-known characters.
With the advent of new pachinko machines using widely recognised characters,
the game of pachinko has become more popular than ever and is steadily capturing a broader base of customers.
We at Fields would like to develop pachinko/pachislot games
into an innovative entertainment field and attract new fans to this market, beyond the existing 17 million or more players
across the country who enjoy the exciting experience of playing these games.
Fields is effectively using the business networks we have established, both within and outside the industry,and leveraging our strong earnings base.
We are creating new opportunities that appear as times change and are growing with the industry.

Each falling ball lands either in a pocket, which retains the ball, removing it fromplay, or in a pocket that releases additional balls to the player and triggers an
animated video and audio simulation of a slot machine-like display on a small
screen in the middle of the machine. The simulation features revolving numbers
or objects that, if correctly matched or aligned, results in a jackpot of various
amounts of additional balls, which are dispensed to the player. A player
succeeds at pachinko by accumulating as many balls as possible.

The Pachinko/Pachislot Industry in Japan

Pachinko/pachislot is one of the most popular forms of entertainment inJapan. The Japan Productivity Center for Socio-Economic Development(the“JPC-SED”), a research arm of the Japanese Ministry of Economy,
Trade and Industry, estimates that in 2004, the latest date for which it has
released information, approximately 13.6% of the total population in Japan(approximately 17.4 million people) played pachinko/pachislot.
Pachinko/pachislot is played in Japan at approximately 16,000 halls located A pachislot machine resembles a Western style slot machine in appearance.
throughout the country.
Like a traditional slot machine,a pachislot machine has three spinning reels andoffers the possibility of a jackpot. The player deposits tokens and then starts the
A pachinko machine consists of a colourful upright board, with a series ofreels spinning by pulling a small lever. However, instead of stopping the reelsround-headed pins mounted on the board. The pins can be moved around with the single press of one button by the player, the three pachislot reels areon the board to create a variety of patterns. In appearance, a pachinko
stopped individually by pushing a button below each reel, adding an element ofmachine resembles an upright and compact Western pinball machine.
skill and challenge to the game.
In playing pachinko, the player pays for an initial quantity of small steel
balls, which are fed into the machine. The player sits on a chair in front of
the machine and turns a knob to fire balls from inside the machine up to the
top of the board. The knob allows the player to control the speed of theballs as they shoot up. The balls cascade down and bounce about when
striking the array of round-headed pins mounted on the board.

Contents

After purchasing an initial quantity of balls (for a pachinko machine) or tokens(for a pachislot machine), the player plays the game and may exchange any
accumulated balls or tokens for prizes. Depending on the player’s success inwinning balls or tokens, a player can choose from a wide variety of available
prizes, including snacks, cigarettes, toy animals and figures, cosmetics,
household goods, electrical appliances and brand name goods.

Our Tracks

03

Our Advantages05

Our New Challenges

07

Message from the Management

09

Special Feature: Evolving Business Scheme

14

Financial Section

26

Corporate Data

44

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Our Tracks

We have consistently taken the lead in developing the market
for pachinko hall operators and pachinko/pachislot machine makers,
and most importantly, for the fans of pachinko/pachislot.

In line with our corporate philosophy, “The Greatest Leisure for All People,” Fields has set its sights on thepachinko/pachislot market, the most popular public leisure activity in Japan, and has aimed to revitalise the market
through a variety of new challenges. We have established a nationwide sales network and solidified a unique position
that connects the many pachinko/pachislot fans with pachinko halls and pachinko/pachislot machine makers, while
continuing to grasp the needs of all industry participants and providing proposal-oriented services through intensive
marketing.

Amid mounting concern overgambling, regulations weretightened
As the popularity of pachinko overheated,
regulations for the industry weretightened, which in turn curbed
enthusiasm for gambling. To keep fans
attracted to pachinko, the industry faced
the pressing need to develop machines
without depending on the draw ofgambling.

As a forerunner in entertainment-oriented trends for pachinko/pachislot machines
Fields started selling machines using copyrighted characters, ahead of its rivals in the industry, and has continued,
in partnership with each Fields Group company, to acquire rights to use popular characters in the development ofpachinko/pachislot machines with high entertainment value. Linking pachinko/pachislot to other entertainment, suchas computer games and movies, to increase fan appeal, Fields has been helping revitalise the industry.

■ Established Professional Management

With the objective of more openly and flexibly distributing pachinko/pachislot machines

Co.,Ltd. and Total Workout Corporation

Taking advantage of our strength as an independent distributor, Fields has changed the conventional practice of theindustry in which each pachinko hall only installed the machines of a single maker. Now, operators of halls are introducing avariety of product lines to offer a wide range of machines from different makers. Our innovation and flexibility in distribution
has contributed to increasing customer satisfaction and enhanced the sales channels of makers.

■ Established branch offices in Tokyoand Kyushu■ Hosted the hall design competition,
inviting architects from Japan andoverseas■ Established branch offices nationwide in the Tohoku,■ Established White Trash Charms

Chugoku, Shikoku and Kansai regions

Japan Co., Ltd.

■ The Company was established in Nagoya for

Aiming to revitalise thepachinko/pachislot
machine market andincrease the number offans...

selling pachinko/pachislot machines

Growing demand andincreasingly diversified
preferences for entertainment■ Formed partnership with Sammy Corporation (currently,
SEGA SAMMY HOLDINGS INC.),an pachinko/pachislot
machine maker, for joint sales

As the leisure market expanded,
entertainment needs and preferences
diversified. Those who wanted to experiencea new form of entertainment directed theirattention to pachinko/pachislot. The number ofwomen players, who previously had seldom
been found in pachinko halls, was also on theincrease.

■ Initiated a sole distributorship for Rodeo Corporation,a pachislot maker, through joint capital investment■ Sparked a boom in pachislot machines■ Launched Communications Satellite (CS)that feature copyrighted characters

broadcasting service for the pachinko industry incollaboration with Mitsui & Co., Ltd.

Carefully observing the potential needs of the pachislot market■ Bought out “Leisure Nippon Newspaper Company”

Because of their reputation for providing a highly exciting gaming experience, pachislot machines gained
many fans. Focusing attention on the machines’ growth potential, Fields affiliated with a pachislot
machine manufacturer ahead of the competition. We then developed machines using copyrighted
characters, which led to explosive sales.

to build our new vision for the industry■ Launched “Hall TV” system,a pachinko hall management support system

To raise awareness and invigorate the industry
Fields aggressively disseminated information about pachinko/pachislot through the mass
media, and then raised public and industry awareness of these games as diverse
amusement that stands to attract an increasing number of fans. We also helped pachinkohalls select suitable machines by providing them with the latest market information.

Advances in liquid crystal
display (LCD) and chiptechnologies
Introduction of LCD screens enabledpachinko/pachislot machines to provide
richness in action and story lines. Many
excellent machines are on the market or
currently under development, designed todeliver high entertainment value by
incorporating large LCD screens andhigh-quality digital content.

03

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Our Advantages

Planning for pachinko/pachislot machines

Supporting pachinko/pachislot machine planning throughcollaboration of each Fields Group company

Operating as a uniquely effective distributor withsophisticated capabilities.

Fields is thoroughly familiar with pachinko/pachislot machines
and related trends in demand, based on its businessexperience. Additionally, we have established a network ofgroup companies, as well as creators outside thepachinko/pachislot industry, capitalizing on our strengths
in the acquisition of usage rights for well-known
characters and in the planning and production ofentertainment content. With the collaborative effort
of each Fields Group company, attractive
machines incorporating copyrighted charactersthat more closely meet the market’s needs can becreated and produced. Taking advantage of thiscapability, we support makers in development oforiginal pachinko/pachislot machines.

Pachinko/pachislot machine sales

Providing advantages to both machine makers
and halls through our industry-leading,nationwide sales network
Fields is the only distributor in Japan with a nationwide sales network.
In addition, as an independent vendor, we can handle nearly every
model from every maker. Based on these advantages, we are able toact as a sales agent over a broad range of marketing channels forpachinko/pachislot machines, effectively deploying our nationwide
sales force of 29 branch offices and 450 sales personnel (as of
September 2004). With this structure, we have significantly contributed
to the sales growth of makers, as well as the enhancement of hallamenities, through a variety of product lines. Our
Nationwide
network also enables us to gather a broad range
sales networkof market information.

29 branches with
450 sales personnel
in six regions of Japan

Hokkaido
andTohokuPachinko machine
makers:23 companies

Planning for
pachinko/pachislot
machines

Pachinko/pachislot
machine sales

Approximately
12,000 pachinko halls
nationwide

Marketing

Pachislot machine
makers:about 38 companies

MarketingSupporting hall management based on a deep reservoir ofaccumulated knowledge
Kanto
Chubu
Kansai
Chugoku and Shikoku
KyushuFields’ Functional Values

Fields keeps abreast of the latest market trends affecting makers
and hall operators. By effectively using this information, we
strongly support the development of pachinko/pachislot
machines while providing services for parlor management. We
have constructed a Knowledge Communication System thatorganises, in a database, a wide variety of information gathered
daily by category, ranging from information on halls andpachinko/pachislot machines to sales results of our sales staff,
trading area analysis and statistical data. Our sales staff
nationwide exchange this information to accurately grasp market
trends and provide proposal-oriented services closely related tohall management, in an intelligent and attentive manner. Thisapproach has been well received by halls across the country,
contributing to increasing their attractiveness and advantages,
and resulting in a broader fan base for pachinko/pachislot
machine play.

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Knowledge Communication System:
Including market analysis, potential customer demand,
trading areas and market share

Our New Challenges
Toward increasing the number of pachinko/pachislot machine fans,
Fields is accelerating its production capability and expanding
its structural framework.

(Sole distribution rights for pachislot machines)■ “Kaizoku (Pirates)” released

November 2003
A strategic alliance with Daido Co., Ltd.
(currently, Bisty Co., Ltd.), a subsidiary ofSankyo Corporation, was formed in a sole
distributor agreement.

(Sole distribution rights for pachinko machines)■ “CR Fever Kung-Fu Gal” released

cBistycKadokawa Daieic1999 Kadokawa Daiei TNHN

Annual Highlights(Sole distribution rights forpachislot machines)■ “Yajyu (Wild beast)” released

cSEGA
cSEGA/Smilebit■ “Slotter Kin-Taro,” a successor to theblockbuster game machine, released■ “Charlie’s Angels” released■ “Gamera High Grade Vision,”equipped with the largest available
LCD screen, released■ “Jet Set Radio,” a pachislot version
of a worldwide hit game, released

cHiroshi Motomiya/SHUEISHA/CIA

cRiki Enterprise
cSammycSEGA/SONICTEAM
cSammyJuly 2003
Our sales tie-up with Sammy Corporation, an
pachinko/pachislot machine maker, wasreinforced to initiate sales of pachinko machines
equipped with dedicated frames.

(Sole distribution rights
for pachinko machines)■ “CR Ume-Matsu Paradise,”drawing upon two well-known
Japanese movie stars, released■ “CR City Hunter,” reminiscent of a
popular comic, released■ “CR Sonic,” using a popularcharacter from a world-famous game,released■ “CR Rikidouzan,” based on alegendary professional wrestler andproviding an innovative gaming experience, released

cNP/GD/PKL
cPC/BP
cSammy2003

cTukasa Hojo
cSammyJanuary 2004
A business and equity alliance wasconcluded with D3PUBLISHER INC.,
a game publisher.

Business collaboration with several makers
reinforced joint development framework forpachinko/pachislot machines.

Machines that use copyrighted characters to provide
a highly exciting game experience brought to market inalliance with makers.

We reinforced our sales tie-up with Sammy Corporation in July 2003, and formed a strategic alliancewith Bisty Co., Ltd. (formerly, Daido Co., Ltd.) of the SANKYO Co., Ltd. in November 2003. These
collaborative efforts have resulted in increasing our business partners to three makers, including theexisting partnership with Rodeo Corporation, and the further strengthening of our joint product planning
framework for pachinko/pachislot machines. In January 2004, we concluded a basic agreement with
D3PUBLISHER INC., a game publisher, for a business and capital tie-up. We have consolidated thedevelopment foundation for an extensive variety of entertainment products, with the expectation ofbuilding synergies in combined use of pachinko/pachislot machines.

In the fiscal year ended March 2004, Fields introduced to the market a wide variety ofpachinko/pachislot machines by teaming up with several makers. Most of these machines used
copyrighted characters, such as those portrayed by famous movie stars, and well-known cartoon
and animation characters. The machines can be expected to create a sensation and spur demandby revitalising the market. And, by continuously placing on the market more machines using
copyrighted characters, we are energising fans and providing a more captivating sense ofinteraction with the games and characters. In line with this vision, we will strive to grow along withmakers and hall operators.

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Message from the Management

Pursuing Supreme Leisure Time
Pachinko/pachislot in the mass-market leisure industry

Combination and
Linkage as the Key
Hidetoshi Yamamoto
President and CEO

Since its establishment in 1988, Fields Corporation has
continued to grow as a distributor of pachinko/pachislot
machines. Today, we have established the largest sales networkin the industry, with 29 branch offices and 450 sales personnel
nationwide.
Pachinko/pachislot has found its way into society on anationwide scale in Japan, and is among the most popular formsof entertainment there. The market size reached ¥29.6 trillion in2003 and accounts for no less than 30% of the revenues
generated in the Japan’s leisure market. Moreover, 17.4 million
people, or 13.6% of the total population in Japan, enjoy playing

these games.* There are at least 16,000 pachinko halls acrossthe country. This means that pachinko/pachislot has anextremely promising future in the community-based amusement
industry.
Focusing our attention on this potential, we have been seeking
to define the modality of the pachinko/pachislot industry and ourown business activities from a long-term perspective, in line withour corporate philosophy: “The Greatest Leisure for All People.”* Source: “2004 White Paper on Leisure” published by Japan Productivity Center
for Socio-Economic Development

How pachinko/pachislot machines can meet the growing demand for leisureAs society matures in the wake of higher rates of economic
growth, the need for leisure grows and the way people spend
their spare time becomes more diversified. In this context, wehave been considering the following questions: What will ourdaily lives be like, and what will be the nature of the times, in2010 for example? What forms of leisure will there be? How can
the pachinko/pachislot industry further entertain people anddevelop along with each company in the industry, and whatvalue will the pachinko/pachislot industry add? What should
pachinko hall operators and machine makers do? What can we
do? We call these explorations the embodiment of a vision for
the industry.
Our first step in this quest was the acquisition of Leisure Nippon
Newspaper Company in 1992. Above all, we thought it wasSize of the leisure market, by category

necessary to build a consensus across the industry through themass media in order to advance into a new stage of growth. We
believe our attempts, which have more recently utilised such
emerging forms of mass media as personal computer networks
and CS broadcasting services, have led to greater recognition ofpachinko/pachislot across society, a stronger promotion of its
understanding, as well as an increase in the number of pachinkofans. Furthermore, we embarked on the formulation of a new“Pachinko Industry Theory” in 1999 in cooperation with the
Sanwa Research Institute Corporation (currently, UFJ InstituteLtd.). Today, we are working to incorporate the results of these
efforts into planning projects for pachinko/pachislot machines,
and production projects for pachinko hall space.

Progress in the pachinko/pachislot machine industry
Playing population(Unit: ten thousand)Size of the pachinko market(Unit: ¥100 Million)
35

3,000

Games, gambling,and eating and drinking

32.0%

Pachinko/pachislot
industry
36.0%

2,500
30

2,000
1,500

25

1,000

Sports5.4%

Sightseeing
and outdoor
amusement

12.7%

Hobbies andcreative
activities

500

13.9%
0
1994

1995

Source: “2004 White Paper on Leisure” published by Japan Productivity Center for Socio-Economic Development

09

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

1996

1997

1998

1999

2000

2001

2002

2003

0

Message from the Management

Limited-space and time-distributed leisure: the essence of the game of pachinko
Let us explain this in more detail. Before embarking on theformulation of a new “Pachinko Industry Theory,” we analysed
the inner nature of the game of pachinko. What we recognised,
as if for the first time, was that, unlike casinos and horse racing,pachinko cannot be a form of entertainment in which players‘strike it rich.’
Why? First of all, pachinko must be played within the basic
premise that players must visit pachinko halls. In other words,
the games are confined to a limited area; it is a form of leisuresubject to space restrictions. And, pachinko machines, as
regulated by law, can only shoot 100 pachinko balls a minute. At
the same time, the cost per ball for playing is fixed at ¥4 or less,and therefore, unlike casinos, the cost of playing cannot befreely set. That is to say, the game is also a time-consuming formof leisure in which players must spend time on a pachinko
machine in order to win. These two factors, limitations of spaceand extension of the pace of the action, predetermine thegambling and gaming appeal of pachinko.
In order to attract more customers within these two parameters,
the pachinko industry has typically built a solid customer basefor its fans from a select segment of people by feeding thedesire to gamble, through such measures as intermittently
allowing customers to ‘hit the jackpot.’ In other words, theindustry has maintained the loyalty of as many as 20 million
players only through the relentless pursuit of this passion forgambling.
This being the case, we have concluded that there are manyother ways we can and should pursue the attraction of morefans. There are already 16,000 pachinko halls nationwide, so wecertainly couldn't ask for a better opportunity, as these bases
already provide easily accessible entertainment sites for the
public at large. If there is sense of limited space associated withthe halls, we should create an enhanced, more enjoyable space.
And if the players are subject to an extended time format, weshould come up with some ideas for enabling them to spendthat time enjoying the game of pachinko. With this change in ourown mind set, we sought to introduce a hall production project toheighten entertainment value, instead of depending only on thedesire to gamble. Moreover, this involves the creation of hall
spaces that can be enjoyed by anyone, in any local community,
and requires the development of pachinko/pachislot machinesthat deliver optimal entertainment value.

To Resonate in Harmony with All People,
We pursue:
Complete understanding of the nature ofpachinko makers and pachinko halls;
our goals and the actions we should take;and enhancements in what we do for makers and halls.
Progress in the number of pachinko halls andthe number of machines installed in each hall
Number of pachinko halls(Unit: Halls)
20,00018,224

Sales and operating income of Fields

Number of machines installed in each hall
(Unit: Machines)

Sales (Unit: ¥million)

17,773

17,426

17,173

Increasing the number of fans, focussing on the younger generation
Our strategies are based on the presupposition that there is
ample room for increasing the number of pachinko fans byenhancing the appeal of the game, and on the belief that
capitalising on opportunities for growing the pachinko industry
will only be brought about by increasing the number of fans.
Based on this concept, the core target is young people, 18 years
or older, who are finished high school and are legally allowed toplay pachinko. Effectively conveying the charm of pachinko will
enable them to enjoy playing pachinko for a longer time, and webelieve this segment will expand over the medium term.

11,95180,000We have already begun a full-fledged planning and development
project to provide the best time-distributed leisure. In order tomaintain maximum appeal of pachinko/pachislot as enjoyable
entertainment, we have drawn up a business strategy centred on
the content of well-known characters that are recognised inevery arena. In this strategy, our network of partnerships inJapan and overseas, including alliances with each Fields Group
company, affords a strong advantage.
With regard to acquisition of the rights to use well-known
characters, we will use our human network, built up by
Professional Management Co., Ltd. and Total Workout
Corporation, which are Fields Group companies, to successfully

16,801

16,504

65,14016,076
61,04160,00015,0005,730

Growth rate of content industry in global markets(Unit: ¥100 million)(Growth rate: %)8.0

12,000

6,861

10,000

56
6,000

8,000

7,236

continue acquiring copyrights for characters modelled after firstrate athletes, artists and performers in such areas asentertainment and sports. We also plan to acquire more
copyrights for characters of world-famous and ‘big-name’ K-1
fighters, (K-1 is a mixed martial art that recently made its debutin Japan), while sponsoring K-1 martial arts events. In terms ofalliances with overseas corporations, we expect that a strategic
partnership with SUN R&P Co., Ltd., a company that manages
the licensing of copyrights related to three major Hollywood
movie studios, will represent another major asset for expanding
our own business domains.

Forecast of value of Japanese content in global markets

7,000
16,988

Today, the general public is flooded with a wide variety ofentertainment businesses and facilities. However, innovativeadvances in liquid crystal display (LCD) and chip technologies
have added a sense of realistic performance by a variety ofcharacters on LCD screens, and these advances are now being
incorporated into pachinko/pachislot machines. In thisenvironment, we are capable of providing the best possible
entertainment value at the most accessible and comfortablelocations of any type of amusement or leisure activity.

Accelerating our copyright business by acquiring rights for well-known charactersthat play a central role in customer appeal

8,000

350
18,164

Operating income (Unit: ¥million)

Combining and Linking Value, and Increasing the Number of Fans

7.0

446
299
698

6.0
5.0

5,000

6,000
304.3

4,000
294.7

10,00040,000300

1,700

34,560

2,000

284.9
279.9

4,000
3,000

92
34
182

268.0

5,000

768

268.0

2.0

1995

1996

1997

1998

1999

2000

2001

2002

11,496

0

0

250

0
FY2000

2003

1.0

1,000
10,017

0

3.0

5,364

2,532

20,000

260.5

418

2,000

274.3
270.3

4.0

3,268

Source: “2004 White Paper on Leisure” published by Japan Productivity Center for Socio-Economic Development

FY2001

FY2002

FY2003

2001
Games

Broadcast2010
Publication

Music(Year)

0.0

2002

Motion pictures

2003
Asia/Pacific

2004
Worldwide

2005

2006 (Year)
World's GDP growth rate

FY2004

Source: Report published by Japan’s Ministry of Economy, Trade and Industry

Source: Commerce and Information Policy Bureau, Japan’s Ministry of Economy,
Trade and Industry (Compiled from references offered by PWC, IMF)

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Message from the Management

Shifting proposed activities into full swing based on a solid partnership
Developing content and equipment that incorporate copyrighted
characters, Digital Lord Corporation, one of our affiliates,
functions as an expert in producing the creative images thathave become the key allure of pachinko/pachislot machines. We
have also established a new department in-house to strengthen
the planning and development of pachinko/pachislot machines.
This department is now intensifying its efforts on planning
products that are expected to attract more customers, in close
partnership with pachinko/pachislot machine makers. In January
2004, we concluded a business and capital alliance agreementwith D3PUBLISHER INC., a game publisher, looking toward
worldwide game markets. We are determined to offer broader
entertainment through this joint venture, which is not exclusively
associated with the pachinko/pachislot market, while using
copyrighted characters as the platform.

In line with these efforts, we also strive to support hall operatorswith integrated consulting services to help them create better
hall spaces, in addition to our planning and sales activities in thepachinko/pachislot market.
Despite our emphasis on effectively using a variety of
copyrighted characters, we have no intention of changing ourbusiness strategy, which calls for collaboration with many
partners. New entertainment fields interweave various values
and provide a mechanism for creating new value from theseinter-relationships. We believe entertainment in years to comewill be an essential part of our life by overcoming sector barriersand combining and inter-linking the individual values of eachsector. To this end, we will continue to undertake bold newchallenges.
Special Feature

Market size of the pachinko/pachislot industry and
Fields Corporation's targets

Evolving Business Scheme

Profit of pachinko halls ¥29.6 trillion (Total usage fees for pachinko balls)
Gross profit

Prizes ¥26.8 trillion

Fields Group hopes to continue growing along with every company in the industry,including pachinko halls and pachinko/pachislot machine makers,
with the highest priority on improving customer satisfaction and expanding the fan base.
So far, we have established a solid profit-earning foundation through sales of pachinko/pachislot machines,
which has been our main line of business.

¥2.8 trillion

Gross profit ¥2.8 trillion

Incoming new machines(Purchase cost of pachinko/
pachislot machines)

Fields' targets

Pachinko machines¥670.7 billion
Pachislot machines¥525.4 billion■ Construction costs for newhalls and remodeling costs
for existing halls■ Advertisement and service costs■ Peripheral equipment costs■ Other costs■ Net profit

Above figures are Fields' estimates. Sources: “2004 White Paper on Leisure” published by Japan
Productivity Center for Socio-Economic Development, and the “Pachinko Related Manufacturing
Industry 2004” report published by Yano Research Institute Ltd.

From now on, we will continue to acquire rights to use well-known characters,
both inside and outside Japan, and focus on planning and development activities for amusement machines that can meetmarket needs by making use of such rights.
We will also aggressively invest in the planning and development of prizes andthe creation of new entertainment centered on pachinko/pachislot.

This kind of network is inevitable.
However, timing is everything. Let’s do what is required.
Let’s do it now, not later.
Success is assured if we deliver benefits to people.

Contents
Achieving progress in expanding the fan base, acting as a central creative force in the market

15

I: Acquisition and retention of usage rights for well-known characters

17

II: Further strengthening alliances with pachinko/pachislot machine makers

19

III: Reinforcing merchandising

21

IV: Enhancing support system for pachinko halls

23

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Special Feature

Evolving Business Scheme

Achieving progress in expanding the fan base, acting as a central creative force in the market
Fields Group has acquired rights to use well-known characters in Japan and overseas and has developed content utilising the attractivenessof these characters by incorporating them into pachinko/pachislot machines.
By proposing attractive machines to halls nationwide, we have contributed to raising the entertainment value of pachinko/pachislot games and attracting more customers.
At the same time, we apply the developed content to a wide variety of media to enhance the inter-compatibility of pachinko/pachislot with other entertainment and further boost the number of fans.

III : Reinforcing merchandising

Advertisement
planner

CM creatorGamecreatorTV planner

Copywriter

BroadcastprogramcreatorCopyrights

P21
Application of media mix
TV & CM,
arcade games,
home-use games,
cellular phone content,
books, CDs,various goods,
DVD software, toys,
cartoons, animation,and movies

Other merchandise product users

SportsTV & Movies

Direct sale
Pachinko/pachislot fans

Cartoons&
Animation

Nationwide
sales
branchoffices

Copyright
Acquisition
Copyright Management
Planning and development of content/
Sales of pachinko/pachislot machines

Indirect sale

Domestic Overseas
players
players

Nationwide
pachinko halls

Subagent

Subagent

Entertainers&
Artists

Agent for selling
pachinko/pachislot
machines(sole distributor)

Agent for selling
pachinko/pachislot
machines

Commercialisation(Grant of copyrights)

Games

Game players

Game software sales

Pachinko/pachislot
machine makers

I : Acquisition and retention of usage
rights for well-known characters

P17

II : Further strengthening alliances withpachinko/pachislot machine makers

P19

IV : Enhanced support systemfor pachinko halls

15

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

P23

Special Feature

Evolving Business Scheme

I : Acquisition and retention of usage rights for well-known characters

In partnership with each Fields Group company, we have been acquiring rights to use a series of well-known characters,
both in Japan and overseas
Utilising famous, widely recognised characters is a prerequisite for increasing the number of fans in today’s amusement game market.
Under the Fields Group umbrella, each group company has formed a powerful human network in a wide variety of areas, such asentertainment and sports. By fully leveraging these networks, we are acquiring rights to use well-known characters that are extremely
popular and appealing to the general public.

Motion Pictures

Fields Group companies

Professional Management Co.,Ltd.
This company engages in humanresource management across a
broad range of fields, including the
sports and entertainment industries. It
has established solid track records inthe management of celebrities,
including Kazuhiro Kiyohara (aprofessional baseball player with the
Yomiuri Giants), Chiyotaikai (a professional sumo wrestler),and Ahn Jung Hwan (a professional soccer player in theJapanese Professional Football League). Acting as acoordinator to help further build these celebrities’ value, thiscompany establishes a strong trust with them, furthering its
ability to acquire rights to use copyrighted characters.

Digital Lord Corporation
This is a creator group led by Koji
Kawaguchi, who formerly played a vitalrole as a producer at Nintendo Co.,
Ltd., a major game production
company in Japan, and who is now´
acting as a director for The Pokemon
Company. Digital Lord Corporation has
contributed to acquiring rights to use
copyrighted characters, making use of
his broad personal connections
Koji Kawaquchi
Representative Director
primarily in the game industry. The
company also plans and develops a variety of high-quality
software, including LCD software for pachinko/pachislot
machines, and provides the software to pachinko/pachislot
machine makers.

We are working to acquire a wide range of copyrights for characters andperformers in Japanese movies by participating in production at theplanning stage. In the fiscal year ended March 2004, we undertook
product planning for pachinko games, such as “CR Gokujyo! Ume-Matsu
Paradise,” using Tatsuo Umemiya and Hiroki Matsukata (well-known
Japanese movie stars), in coordination with pachinko machine makers, tocapitalise on each character’s personal qualities. In foreign films, we haveacquired usage rights focusing on popular Hollywood movies.

SportsEach Fields Group company has contributed to improving the value ofcharacters associated with top athletes through their group company
business activities, and is building relationships of trust with these
sports stars. Using such relationships as starting points, the Fields
Group continues to engage in activities to acquire usage rights.
In May 2004, we formed an alliance with FEG Co., Ltd., which sponsors
K-1 martial arts events, to acquire a wide range of K-1 related
merchandising rights. We will continue to effectively apply the powerfulcontent of K-1, a sport that has gained popularity among many martial
arts fans, to pachinko/pachislot machines, as well as other media.

Entertainers & Artists

Fields Group companies

As a rule with regard to entertainers and artists affiliated withentertainment agencies, we negotiate with such agencies for exclusive
rights concerning the use of copyrights for pachinko/pachislot
machines. We are also actively concentrating our efforts on improving
the value of characters through the effective use of copyrights, and on
searching for the most promising artists of the next generation.

Cartoons & Animation
We conduct smooth negotiations with several major publishingcompanies to acquire copyrights. Presently, we have acquired rights to
use the artwork of Hiroshi Motomiya, a Japanese cartoonist, as content
for pachinko/pachislot machines. Moreover, we are proceeding withnegotiations to extend areas for the use of copyrights, including usage
rights for games and merchandising rights.

Games
Having acquired a number of copyrights for use in hit
games in Japan and overseas, we are now planning
related pachinko/pachislot machines that will utilise
these copyrights. Looking ahead, we will strengthen
existing alliances with influential game production
companies, such as D3PUBLISHER INC., in an effort
to enhance vitality in the planning of relevant machines.

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

White Trash Charms Japan Co.,Ltd.
This company operates shops
carrying fashion accessories thatare widely cherished, even by
Hollywood stars. These
accessories are gaining in
popularity, not only in Japan, butalso in Europe and the UnitedStates. The company helps builda network linking popular actors
and Fields, in Japan and overseas.

Total Workout Corporation
This company provides many
top-class athletes andentertainers with opportunities totrain at a prestigious fitness club.
Kevin Yamazaki, the company's
acting president, is a famous
trainer who has coached manyelite athletes. While helping manycelebrities keep in shape, thecompany plays a key role as acoordinator in connecting themwith Fields.

Special Feature

Evolving Business Scheme

II : Further strengthening alliances with pachinko/pachislot machine makers

Expanding our scope of activities, from pachinko/pachislot machine sales to product planningfor machines featuring copyrighted characters
Fields continually negotiates with all pachinko/pachislot machine makers, through its agency business, to sell pachinko/pachislot machines,
while making full use of its nationwide distribution network.
In collaboration with major makers, we plan and produce attractive amusement machines that accurately meet market needs, thereby
strongly supporting the machine development of makers.

Collaborative operations with Sammy
Corporation and Rodeo Corporation
Fields has reinforced a sales tie-up with Sammy
Corporation, the leading pachislot machine maker, inorder to enable both companies to cooperate in thestrategic planning, development and sales of pachinko
machines. Fields has also invested in Rodeo Corporation,
another member of the Sammy Corporation Group, andacts as Rodeo’s exclusive distributor.
Sammy Corporation Group is blessed with excellent
planning and development ability, having recently
received recognition not only as a pachislot maker but
also as a pachinko maker. Fields supports the SammyGroup in expanding its sales network forpachinko/pachislot machines, capitalising on Fields’
nationwide sales network.
In the fiscal year ended March 2004, we released Sammy
Corporation’s “CR Rikidouzan” pachinko machine andRodeo Corporation’s “Gamera High Grade Vision”
pachislot machine. From the start of the fiscal year ending
March 2005, Fields is also implementing aggressive sales
activities by releasing a pachinko machine utilising thecharacter of Linda Yamamoto, a professional singer, and apachislot machine based on the second edition of the“Ume-Matsu” series.

Market research
Product planning
Grant of copyrights

Product development

Product development

Security Electronics and Communications
Technology Association (Type test)

Pachinko/pachislot
machineCollaboration with Bisty Co., Ltd. of
the SANKYO GroupIn the fiscal year ended March 2004, we formed abusiness alliance with Bisty Co., Ltd. (formerly Daido Co.,
Ltd.), a subsidiary of the SANKYO Group, a leading
pachinko machine maker in Japan. Based on this alliance,
we released, in the same fiscal year, the “Kaizoku(Pirates)” pachislot machine and the “CR Fever Kung-Fu
Gal” pachinko machine, and in May 2004, the “Fever
Natsu Matsuri (Summer festival)” pachislot machine,
nationwide.
SANKYO Group enjoys perhaps the industry’s most solid
brand equity, and develops the capabilities ofpachinko/pachislot machines and highly sophisticated
LCD process technologies across the industry. In years tocome, we will further pursue collaborations in which
Fields’ planning and development skills are integrated
with the strength of the SANKYO Group and usage rights
for well-known characters. By working together, the twogroups will create highly attractive, creative andentertainment-quality pachinko/pachislot machines to fully
exploit potential market demand.

Pachinko/pachislot
machineAdvertisement &Sales promotion activities■ Gamera High Grade Vision pachislot machine
cKadokawa Daieic1999 Kadokawa Daiei TNHN

■ CR Fever Kung-Fu Gal pachinko machine■ CR Rikidouzan pachinko machine

cBistycRiki Enterprise cSammy■ Fever Natsu Matsuri (Summer festival)
pachislot machine
cBistyPachinko halls■ CR Linda no Do-Ni-Mo Tomaranai pachinko■ Ume-Matsu Dynamite Wave pachislot machine
cNP/GD/PKL cPC/BP cSammymachinecLMO/GD cSammy

Fans■ CR Fever Twins pachinko machine
cBisty■ CR Neon Genesis Evangelion pachinko machinecGAINAX/PROJECT EVA., TV TOKYO

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Special Feature

Evolving Business Scheme

III : Reinforcing merchandising

We will effectively apply the acquired rights to use famous characters in a wide variety of media
Fields strives to develop content that makes best use of the attractiveness of well-known characters.
To that end, we bring together creators and designers who are capable of materialising strategic merchandising (MD) and highly creative designs.
By introducing the developed content to a variety of media, including pachinko/pachislot machines, CDs and DVDs, we attract users of various
merchandise products to the pachinko/pachislot entertainment world, thereby increasing the number of fans.

Exerting highly sophisticatedcreative and producing prowess

Business and capital agreements
concluded with D3PUBLISHER INC.,
from the perspective of the global
game market

Character goods

Fields Group possesses outstanding personnel
resources capable of highly creative management.
For example, Shigesato Itoi maintains extensive
connections across mass media circles and is ahighly regarded game creator. He now serves as an
outside director for the Company. Similarly, Koji
Kawaguchi is the representative director andpresident of Digital Lord Corporation, one of ouraffiliate companies. Mr. Kawaguchi has accomplishedoutstanding achievements in the game industry,´
including the “Pokemon”
project, and has earned thetrust of the industry. Making full use of this human
network, typified by our relationships with these twomen, we have entered into partnerships withadvertisement planners, game designers and otherindustry participants, in Japan and overseas, and wehave effectively and efficiently implemented projects
ranging from strategic merchandising planning tocontent development.

CDs & DVDs
Publishing, movies and TV

To the global
marketPachinko/pachislot machines
Content planning
Copyrights

To the domestic
marketSupply ofsoftware

Pachinko/pachislot
machine makers

On-line mobile
communications

Shigesato Itoi

D3PUBLISHER INC., is a game publisher thatprovides home-use game software centred on the“SIMPLE series,” drawing upon its outstanding
development capability and sales network. In thefiscal year ending March 2005, D3PUBLISHER INC.,
plans to release a game version of popular movies
such as “SHREK 2” and “THE INCREDIBLES” In
January 2004, Fields concluded a joint business andcapital agreement with D3PUBLISHER INC., Fields
acquired 36.10% of the shares of D3PUBLISHER
INC., making Fields the largest shareholder of thecompany. Fields will capitalise on D3PUBLISHER’s
know-how in the development and sales of games,
applying character-related content to a wide
assortment of products and services in the gameindustry both inside and outside Japan.

To the global
marketGame software

Outside Director

Shrek is a registered trademark ofDreamWorks L.L.C. Shrek 2, Shrek Ear
Design, Shrek "S," Puss in Boots andPrincess Fiona TM & c2004
DreamWorks L.L.C. Published anddistributed by D3 Publisher Inc. inJapan under license from Activision
Publishing, Inc. Game code c2004
Activision, Inc. and its affiliates.
Activision is a registeredtrademark of Activision, Inc. anditsaffiliates. "PlayStation" and the"PS" Family logo are registeredtrademarksof Sony ComputerEntertainment Inc. All rights reserved.
All other trademarks and trade names
are the properties of their respective
owners.

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

cDisney/Pixar

Evolving Business Scheme

Special Feature

IV : Enhancing support system for pachinko halls

Through community-based sales activities,
we are advancing enhanced hall features that will win the appreciation of many more fans
Fields is now intensifying activities to create attractive hall spaces for many people.
To build on our ability to propose improvements to hall operators, we have enhanced our sales structure and opened showrooms that
present concepts and ideas for creating attractive hall amenities.
Our proposal-oriented sales activities, which fully utilise all kinds of industry information, will help us fulfil our commitment to contribute to thefurther development of the industry and generate even greater customer satisfaction, while deepening our relationship with hall operators.

Further enhancing our branch
offices and sales force
Since its foundation, Fields has earned the trust of halloperators through hall-based sales activities. Our
sales structure is second-to-none in the industry. In thefiscal year ended March 2004, we further reinforced
our organisational structure in anticipation of
expansion in our scope of business, which was
accompanied by closer business alliances withmakers. During the fiscal year ending March 2005, oursales staff is being increased to 450 members. At thesame time, we are striving to improve our staff training
system to improve the sales skills of our sales staff andrapidly establish new recruits as valuable assets for
the Company. By taking advantage of our established
Knowledge Communication System, we can mosteffectively use information about the market andcustomers, thereby enabling our individual staff
members to successfully implement proposal-oriented
sales activities.

Market research
Product planning
Grant of copyrights

Fukuoka showroom
Kanazawa showroom

Number of branches

Hiroshima

Number of staff

NagoyaUtsunomiya
Tokyo

500

Osaka

31
450

30
25

27

27

26

In order to assist the sales force in making
presentations for pachinko/pachislot halls, we haveactively opened, upgraded and located showrooms at
strategic locations across the country. In addition toconventional facilities for helping visitors selectappropriate models, try out machines, and compare
performance, these showrooms incorporate innovative
features that enable us to offer visitors a wide variety ofbusiness plans and concepts for attracting customers.
The showrooms feature new pachinko/pachislot
machines and provide detailed information on theindustry. These facilities also provide operators withideas on how to best utilise their entire hall space, andinclude the Data Field, which offers detailed,quantitative information on halls nationwide; the Brandimage Field, which helps hall operators create uniqueand attractive hall amenities; and the Entertainment
Field, which offers proposals for advertisement andsales promotions taking advantage of usage rights forfamous characters. Through these showrooms, Fields
helps hall operators incorporate outside-the-box
thinking.

400
367

23

300

20
15

15

173

10

0

Sendai showroom

Utsunomiya showroom

Nagano35

5Sapporo showroom

Kobe showroom

Branches and sales staff

Opening showrooms nationwide todeliver precisely tailored solutions

Nationwide
sales network

222

200

82

FY2000

Shizuoka showroom

100

72

FY2001

FY2002

FY2003

FY2004

FY20050(estimate)

Okayama showroom

Mie showroom

Nagano showroom

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Board of Directors, Auditors

Board of Directors & Corporate Auditors (As of September 2004)
Senior Managing Director

Directors

Hirofumi Inokuma
General Manager,
Sales & Marketing Division
Shigetoshi Kitano
General Manager,
Marketing Office
Hiroyuki Yamanaka
General Manager,
Administration Division
Shigemi Shimada
General Manager,
Product Development Division

President & CEO
Hidetoshi Yamamoto

Toru Suenaga
General Manager,
Corporate Planning OfficeOutside Director

Corporate Auditors

Shigesato Itoi

Contents
Shigeru Matsushita(Standing Auditor)
Tadao Koike
Yoshika Furuta

Executive Officers
Deputy General Manager, Sales & Marketing Division,and General Manager, Sales Planning Department

Financial Section

General Manager,
Product Promotion Department

Akira Fujii

Consolidated Financial Results

27

Consolidated Balance Sheets

31

Consolidated Statements of Income

33

Consolidated Statements of Shareholders’ Equity

34

Consolidated Statements of Cash Flows35

Notes to the Consolidated Financial Statements

36

INDEPENDENT AUDITORS’ REPORT

42

Stock Information

43

Corporate Data

44

Teruo Fujishima
General Manager, Japan West Area

Deputy General Manager, Sales & Marketing Division,and General Manager, Japan East Area

Hideo Wakazono
General Manager,
Product Planning Department

General Manager,
Sales & Marketing Division

Yosuke Ozawa

Kiyoharu Akiyama

Shouichi Kido

Fundamental corporate governance policy and implementation
In order to consistently enhance our corporate value andrealize our corporate philosophy, “The Greatest Leisure for
All People,” we fully recognise the vital importance ofimproving our organisational structure and management
system, and we are implementing the required operational
strategies. In terms of our commitment to improve
management efficiency, we have made it our practice tothoroughly oversee risk management. And we introduced an
executive officer system to enable the Board of Directors toquickly make decisions and to efficiently carry out businessactivities, under the principle that the Board of Directors
represents shareholders’ interests. We will continue
discussing whether this system should be transferred to a
management advisory and whether an administrative
company should be established. For now, however, we aredetermined to intensify our efforts to improve ourorganisational structure and executive officer system within
the existing framework of directors and auditors.

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Consolidated Financial Results
FINANCIAL HIGHLIGHT

Overview

Year ended March 31，
Non-Consolidated

Consolidated

2001

2002

2003

2004

2003

2004

¥ 11,496¥ 34,560¥ 61,041¥ 65,141¥ 61,889¥ 66,212$ 626

Cost of sales

6,127

21,85745,40643,97645,89644,633422

Gross profit

5,369

12,704

15,635

21,165

15,993

21,578204

Selling, general and administrative expenses

3,668

6,973

8,399

9,213

9,212

9,712

92

Operating income

1,701

5,731

7,237

11,952

6,781

11,867

112

Income before income taxes

1,166

5,783

7,415

12,0407,148

12,189

115

583

3,041

3,786

6,520

3,524

6,620

63

¥ 3,347¥ 14,824¥ 11,342¥ 27,233¥ 11,977¥ 28,153

$ 266

6,212

18,631

17,31037,11517,09037,116

351

446

3,265

―

3,000

―

3,000

28

2004

Results of Operations (in millions):
Sales

Net income

The Company's principal business is the distribution and agency
sale of pachinko and pachislot machines in Japan. In the year ended
March 31，2004, the Company's pachinko/pachislot businessaccounted for approximately 98% of the Company's revenues on aconsolidated basis. It is anticipated that in fiscal 2005,
pachinko/pachislot will account for a similar proportion of revenues.
The Company also engages in other businesses, including providing
personal management services for entertainers, athletes and othercelebrities in Japan, operating fitness gyms, and manufacturing andselling a specialty brand line of accessories.
The following table shows for the periods indicated the number ofunits of pachinko and pachislot machines sold by the Company (withrespect to pachislot machines, classified by the method of sale):Year ended March 31，

Pachinko
Pachislot:
Distribution model
Agency model
Total

2001

2002

2003

2004

95,63162,80978,699145,031

1,634
69,07470,708166,339

71,237
88,614
159,851
222,660

176,404
4,710
181,114259,813

172,327 (1)6,579
178,906 (1)323,937 (1)Note:(1) 15,040 units were included in fiscal 2004 sales as a result of the Company's change in its
revenue recognition policy (effective at April 1,2003), pursuant to which the Company
recognises pachislot sales under its distribution model upon shipment of machines bymakers instead of upon delivery and instalment at the hall customers' facilities.

Financial Position (in millions):
Total current assets
Total assets
Short-term borrowings (including current
portion of long-term borrowings)―

Long-term borrowings(excluding current portion)

2,198

627

―

―

―

―

Shareholders' equity

1,070

3,883

9,044

14,702

8,753

14,508Gross profit margin

46.70%

36.80%

25.60%

32.50%

25.80%

32.60%

Operating margin14.80%

16.60%

11.90%

18.30%

11.00%

17.90%

Earnings per share (Notes 1and 2)¥ 38,883¥ 25,069¥ 25,229¥ 39,846¥ 23,447¥ 40,466

2,320

2,930

32,300161,500

32,300161,500

137

Other Data:$ 383

Number of shares issued and outstanding at
period end (Note 1)

Notes:(1) Earnings per share were calculated using the weighted average number of shares outstanding through the year, retroactively adjusted for the ten-for-one stock split effective on October 10, 2002
and the five-for-one stock split effective on November 20, 2003.
(2) From the year ended March 31, 2003, the Company adopted the new Japanese accounting standards “Accounting Standard for Earnins per Share” and “Implementation Guidance for Applicationof Accounting Standard for Earnings per Share” , which are effective for periods beginning on or after April l, 2002. In accordance with the new accounting standards, the amount of earnings,
which is used for the computation of EPS, is net income for the year, excluding income to be appropriated as bonuses to directors and statutory auditors to be approved at the shareholders'meeting. Earnings per share were calculated with the retroactive application of the new accounting standards.

Comparison of fiscal 2004 and 2003 (consolidate)
Sales.
Sales totaled ￥66,212 million in fiscal 2004, an increase of
7.0% from sales of￥61,889 million in fiscal 2003. 0n a unit basis,
total sales of pachinko/pachislot machines increased 24.7%, from259,813 units in fiscal 2003 to 323,937 units in fiscal 2004.
The Company's sales performance for fiscal 2004 was affectedby its change in revenue recognition policy for pachislot sales under
the distribution model, which became effective as of April 1，2003.
Under the changed policy, revenue is recognised upon shipment ofpachislot machines from makers, rather than upon delivery andinstalment of machines at hall customers' facilities. The revised policy
resulted in the recognition of an additional￥5,956 million in sales(representing an additional 15,040 pachislot unit sales) in fiscal 2004
rather than in fiscal 2005.
This rise in total unit sales was driven by an 84.3% increase inunit sales of pachinko machines (145,031 machines in fiscal 2004 ascompared to 78,699 machines in fiscal 2003). Pachinko sales growth
was led by the Company's sales on an exclusive basis of selected
Sammy pachinko machines, including the CR City Hunter, CR Sonic
and CR Gokujo! Umematsu Paradise models.
The significant increase in pachinko unit sales in fiscal 2004
was offset in part by a 1.2% decrease in unit sales of pachislot
machines (178,906 machines in fiscal 2004 as compared to 181,114
machines in fiscal 2003)despite the change in revenue recognition
policy described above. This decrease in pachislot sales resulted
largely from adverse regulatory developments and uncertainties
generally affecting pachislot makers in the second half of fiscal 2004,
due to the announcement in October 2003 of stricter regulations (tobecome effective in July 2004) governing large payouts on pachislot
machines. This resulted in Rodeo's inability to obtain regulatory
approval for the planned launch in fiscal 2004 of new pachislot
models that were to be distributed by the Company. See“Regulations Relating to the Pachinko/Pachislot Industry” for morediscussion of these regulatory developments and uncertainties in thepachislot machine industry. The Company's launch of Rodeo's
Camera model in March 2004 and its commencement of sales of
Bisty and Olympia pachislot machines in fiscal
2004 helped to stabilise pachislot sales.
The Company's commission revenues from pachinko sales
increased 115.2%, from￥1,840 million in fiscal 2003 to￥3,959
million in fiscal 2004. Overall, the Company's increase in sales infiscal 2004 (7.0%) was relatively modest as compared to the increasein overall unit sales (24.7%). Because pachinko machines are soldunder the agency model and the Company only recognises its
commission on these sales as revenue rather than the full price tohall owners (as is true for distribution sales), the increased proportionof pachinko machines in the Company's unit sales (from 30.3% of
total machine sales in fiscal 2003 to 44.8% in fiscal 2004) contributed
to lowering the Company's revenue growth during this period.

Cost of sales.
Despite the increase in sales, the Company's cost of sales
decreased by 2.8%, from￥45,896 million in fiscal 2003 to￥44,633
million in fiscal 2004. The increased proportion of pachinko machinesales in the Company's overall unit sales contributed to this result the Company sells pachinko machines on an agency basis, so (unlike
pachislot sales) the cost of pachinko machines are not included in the
Company's cost of sales.
The Company's commissions paid to independent sales
agents (a component of cost of sales) were lower in fiscal 2004, as
the Company relied increasingly on its expanded internal sales force
in selling machines.
An additional￥3,916 million was recognised in cost of sales infiscal 2004 due to the change in the Company's revenue recognition
policy for pachislot sales under the distribution model, as describedabove.
The Company's gross profit increased 34.9%, from￥15,993
million in fiscal 2003 to￥21,578 million in fiscal 2004.

27

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Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Pachinko/Pachislot Business Models

Cash flows (consolidated)

Selling, general and administrative expenses.
Selling, general and administrative expenses increased 5.4%,
from￥9,212 million in fiscal 2003 to ￥9,712 million in fiscal 2004.
Higher compensation expense and other costs associated with the
expansion of the Company's sale force in fiscal 2004 were theprincipal drivers for the SG&A expense increase. These factors werepartially offset by the Company's decreased use of television
advertising and product exhibitions to market its machines, as theCompany increasingly marketed its machines to hall customers
directly through its expanded sales force.
Operating income increased 75.0%, from￥6,781 million in
fiscal 2003 to ￥11,867 million in fiscal 2004.
Net Income. As a result of the foregoing, net income
increased 87.9%, from￥3,524 million in fiscal 2003 to￥6,620 million
in fiscal 2004.

In summary, the Company's consolidated cash flows for fiscal
2003 and 2004 were as follows:Year ended
March 31,

2003

2004

Millions of Yen

Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities

3,316
851
(2,253) (3,190)(2,455)
2,030

Cash provided by operating activities.
Net cash provided by operating activities in fiscal 2004 was ￥851 million, from net income of￥6,620 million. The adjustment to net
income resulted largely from a significant build-up in accounts
receivable - trade near the end of fiscal 2004 as a result of theCompany's sales of Rodeo's
Gamera pachislot machines in March 2004, offset in part by anincrease in accounts payable − trade relating to these sales. The
Company's merchandise right advances also increased by￥1,458
million during fiscal 2004. The Company usually makes an upfront
payment to acquire rights to content. When the Company holds rights
without sublicensing to a third party at period end, the upfront
payment is accounted for as a merchandise right advance.

Liquidity and Capital Resources
The Company's principal source of liquidity is cash generated
from operations. The Company also enjoys liquidity benefits from its
typical trade terms with pachislot makers and hall customers,
because the Company receives payment from halls for machines
before the Company is required to make payment to its makers for
the Machines.

Net cash generated by operating activities in fiscal 2003 was￥
3,316 million, from net income of￥3,524 million.

As an additional source of liquidity, the Company has obtained
credit facilities from six banks in an aggregate amount of￥6.0 billion,
consisting of￥2.0 billion in commitment lines and ￥4.0 billion in
over-draft facilities. In fiscal 2004, the Company made aggregate
short-term borrowings of￥3.0 billion under the over-draft facilities,
principally to finance the acquisition of rights to entertainment content
for use in the Company's business and to refurbish its nationwide
sales offices. In fiscal 2004, the borrowings were subject to interest at
a weighted average annual rate of 0.83%. Of the total principal
amount of the borrowings, ￥1.0 billion will mature in August 2004
and￥2.0 billion will mature in March 2005.

Net cash used in investing activities.
Net cash used in investing activities was￥3,190 million in
fiscal 2004. Significant investing activities included the Company's
acquisition of its Hiroshima sales office, its acquisition of land for its
Fukuoka sales office and the construction of that office,enhancements to some of its other sales offices, and the Company's
equity investments in D3PUBLISHER INC., (￥883 million) andCommonwealth Entertainment & Co. (￥200 million).

In fiscal 2004, the Company made significant cash expenditures
for enhancements to its sales offices (￥907 million), up-front
payments for the acquisition of rights to content (￥1,458 million), andstrategic equity investments in other companies, such as theCompany's investment in D3PUBLISHER INC., (￥883 million). Overthe two year period of fiscal 2005 and 2006, the Company expects tomake aggregate capital expenditures of approximately ￥5.0 billion
for enhancements to its nationwide sales offices, including renewing
and establishing showroom facilities for pachinko/pachislot machines
and investment in internal sales and administrative systems. The
Company also expects that it will make expenditures for content,
subsidiary investments and strategic transactions during this period.
The Company believes that cash on hand, cash from operations,future bank and other debt financings and the net proceeds from thisoffering will provide sufficient financial resources to meet theCompany's currently anticipated capital expenditures, working capitalrequirements and other liquidity needs and financial commitments.

Net cash used in investing activities was ￥2,253 million in
fiscal 2003. This was mainly due to an expenditure for the acquisitionof property in Tokyo, and-a payment to obtain the rights to Korean
professional soccer player Ahn Jung Hwan.

Net cash (used in)provided by financing activities.
Net cash provided by financing activities was￥2,030 million in
fiscal 2004. This cash resulted from the Company's bank borrowingsof￥3,000 million to finance the Company's investing activities
described above, offset in part by the Company's ￥966 million
dividend payment on its common stock.
Net cash used in financing activities was ￥2,455 million in
fiscal 2003. This was mainly due to the net decrease in short-termborrowings of￥3,07 1 million, the repayment of long-term borrowingsof￥1,062 million, and proceeds of￥1,678 million from theCompany's IPO.

The Company conducts its pachinko/pachislot business through a
distribution model and an agency model. The Company typically acts as a
distributor in its pachislot business with Rodeo Corporation and othermakers. Due to industry convention and other factors, the Company has
been conducting its pachinko business exclusively through the agency
model. The Company also acts as an agent in its dealings with certain
pachislot machine makers.

Under its typical payment terms with pachislot makers and hall customers, theCompany receives payment from halls for machines before the Company is required
to make payment to its makers for the machines. This arrangement effectively
provides the Company with financing for its distribution activities on an interest-freebasis.

Distribution
Under its distribution model, the Company purchases pachislot machines frommakers and sells the machines to halls. The Company believes that its distribution
model provides it with the following advantages.
The Company does not order pachislot machines from makers until the Company
has received binding purchase orders from its hall customers. Additionally, makers
ship their pachislot machines directly to halls. As a result, the Company does not
maintain machine inventory, and thus is not required to commit investment funds toinventory and is not subject to obsolescence or other inventory-related risks. The
Company also is not required to maintain warehouses or other physical infrastructure
to carry out its distribution activities.

AgencyUnder its agency model, the Company obtains orders for machines frompachinko/pachislot halls, and presents the orders to makers for their acceptance.
The Company receives a commission from makers at negotiated rates on machinesthat are purchased by halls.
The Company guarantees the hall customer's payment to the maker for
pachinko/pachislot machines sold under the agency model. The Company's
aggregate contingent liability under its outstanding payment guarantees was ¥744
million at March 31, 2004. See note 9 to the Company's consolidated financial
statements contained in this offering circular. To date, the Company has not beenrequired to make material payments to makers under these guarantees; in the year
ended March 31, 2004, the Company made no payments under its sales agent
guarantees to makers.

Revenues

Cost of Sales

The Company principally generates revenues from its sales ofpachislot machines under its distribution model, and from commissions
received from sales of pachinko and pachislot machines under the agency
model. In the year ended March 31，2004, the Company's
pachinko/pachislot business accounted for approximately 98％ of theCompany's revenues on a consolidated basis.
The distribution model generally results in higher revenue amounts to
the Company than the agency model for an equivalent unit volume ofpachinko/pachislot machines sold. This is true because under the
distribution model, the Company recognises the entire sales price of amachine to its hall customer as revenue, while under the agency model
the Company only recognises its sales commission as revenue.
This difference means that the Company's revenues for a period will
depend in part on the relative mix of machines sold under the distribution
versus the agency model during that period. In November 2001, theCompany changed the model for its pachislot business with Rodeo
Corporation from the agency model to the distribution model. This change
in business model contributed to a significant increase in the Company's
revenues in the years ended March 31，2002 and 2003 as compared toprior periods.
Effective April 1，2003, as a result of revisions to the terms of theCompany's sales arrangements with its hall customers, the Company
changed its revenue recognition policy for pachislot sales under the
distribution model. Under the new policy, revenue is recognised upon
shipment of pachislot machines from makers, rather
than upon delivery and instalment of machines at the hall customer's
facility. The revised policy resulted in the recognition of an additional ￥5,956 million in sales and￥3,916 million in cost of sales in fiscal 2004
rather than in fiscal 2005.

The Company's cost of sales arises principally from the Company'spurchase of pachislot machines under the distribution model. Together
with its revenues from pachislot machine sales, the Company's cost of
sales represented by pachislot machine purchases increased significantly
following the Company's change in November 2001 to the distribution
model for its pachislot business with Rodeo Corporation. Additional costof sales arises from the Company's payment of commissions to
independent sales agents that the Company works with in marketing
pachinko/pachislot machines.

Selling, General and Administrative Expenses
The Company's selling, general and administrative expenses
principally consist of compensation and benefits for sales representatives
and other employees, and real property rental and other miscellaneous
expenses.
The largest component in the miscellaneous category is advertisingand marketing costs, which totaled ￥2,042 million in fiscal 2002 on a
non-consolidated basis, and￥3,011 million in fiscal 2003 and￥1,423
million in fiscal 2004 on a consolidated basis. These costs principally
comprise the costs of hosting industry exhibitions, andtelevision and newspaper marketing costs.

Spin-Off of Non-Core Businesses
In October 2001, the Company completed a spin-off of its video
rental, cafe, insurance agency, and steel businesses as part of theCompany's efforts to increase its focus on its core pachinko/pachislot
machine marketing business in preparation for the Company's initialpublic offering in 2003. These businesses represented approximately
8.5% of the Company's total revenues and 4.4% of the Company's total
gross profit during fiscal 2001.

Pachinko/Pachislot Business Models
Distribution Model

For pachislot business (Applied to some makers)

Payment ofcommission

Sales through independent sales agent

Cost of sales

Purchase

Maker

Cost of sales

Transfer of payment(Sole distributor)
Direct sales

Final sales

Independent
sales agent
Sales

Sales revenue

Payment collection

Hall

Payment collection

Hall

Sales revenue
Delivery of machines

Agency Model

For pachinko/pachislot businessCommission from maker

Payment ofcommission

Sales through subagent

Cost of sales
Sales revenue

Subagent

Transfer of payment

Maker(As agent)Transfer of payment

Direct sales

Payment collection
Delivery of machines29

30

Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

FIELDS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets
Thousands of
U.S. Dollars(Note 1)

Thousands of Yen

2004

Thousands of
U.S. Dollars(Note 1)

Thousands of Yen

2003

2004

Cash and cash equivalents ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥¥ 5,739,061¥ 5,437,758$ 51,450

Accounts payable−trade ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

Notes and accounts receivable−trade ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

4,379,791

18,865,138

178,495

Short-term borrowings ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

Inventories ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

260,261

256,541

2,427

Merchandising right advances ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

262,125

1,720,076

Deferred tax assets ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

268,667

Other current assets ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

2004

2004

¥ 2,746,670¥11,645,579$110,186―

3,000,000

28,385

Accrued income taxes ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

2,605,440

3,960,019

37,468

16,275

Accrued bonuses ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

18,00018,600176

371,033

3,511

Other current liabilities ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

1,352,405

1,930,638

18,267

1,105,243

1,589,009

15,035

Total current liabilities ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

6,722,516

20,554,837

194,482

Allowance for doubtful accounts ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥(38,378)(86,953)(823)

Total current assets‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

11,976,772

28,152,604

266,370ASSETS

2003

LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:

Current assets:

Property and equipment:

Long-term liabilities:
Retirement benefits ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

674,998

820,615

7,764

Deposits received ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

863,808

1,161,922

10,994

Land‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

945,931

1,547,993

14,647

Excess of net assets acquired over cost‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

3,083

1,602

15

Buildings and structures‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

801,830

1,227,337

11,613

Other liabilities ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

73,23151,065483

Equipment ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

554,249

850,804

8,050

Total long-term liabilities ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

1,615,121

2,035,204

19,256

Vehicles ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

71,76571,385675

Construction in progress ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

22,547335,744

3,177

Minority interest in consolidated subsidiaries ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥―

17,976170

2,396,322

4,033,263

38,161

Less: Accumulated depreciation ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥(503,509)(681,909)(6,452)

Shareholders equity:

Total property and equipment ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

1,892,814

3,351,355

31,709Common stock
Authorised; March 31, 2003―117,200 shares
March 31, 2004―586,000 shares

Investments and other assets:

Issued; March 31, 2003―32,300 shares

Investment securities ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

1,096,809

2,824,195

26,721

Deposits ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

1,198,017

1,661,745

15,723

March 31, 2004―161,500 shares ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

1,295,500

1,295,500

12,258Intangible assets ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

163,074

384,585

3,639

Additional paid-in capital ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

1,342,429

1,342,429

12,702

Deferred tax assets ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

240,596

222,7792,108Retained earnings ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

6,060,735

11,631,695

110,055

Other assets ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

522,351

518,574

4,907

Unrealised holding gain on available-for-sale securities ‥‥‥‥‥‥‥‥‥‥‥‥

54,133

238,194

2,254

Total investments and other assets‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

3,220,849

5,611,879

53,098

Total shareholders equity ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

8,752,797

14,507,820

137,268

Total assets ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥¥17,090,435¥37,115,839$351,176¥17,090,435¥37,115,839$351,176

See accompanying notes to the consolidated financial statements.

Total liabilities and shareholders equity‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

See accompanying notes to the consolidated financial statements.

31

32

Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

FIELDS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

Consolidated Statements of Shareholders’ Equity

For the fiscal years ended March 31, 2003 and 2004

For the fiscal years ended March 31, 2003 and 2004
Thousands of
U.S. Dollars(Note 1)

Thousands of Yen

2003

2004

2004

Number of
Shares ofCommon Stock
IssuedThousands of Yen
CommonStock

Additional
Paid-in
CapitalRetained
Earnings

Unrealized
Holding Gain on
Securities

Total
Shareholders'EquitySales ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥¥61,888,832¥66,211,589$626,470

Balance as of March 31, 2002 ‥‥‥‥‥

2,930¥ 530,500¥ 415,429¥ 2,826,872¥81,582¥3,854,383

Cost of Sales ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

45,895,906

44,633,469

422,306

Ten-for-one stock split ‥‥‥‥‥‥‥‥

26,370

―

―

―

―

―

with initial public offering ‥‥‥‥‥‥

3,000

765,000

927,000――

1,692,000

Net income ‥‥‥‥‥‥‥‥‥‥‥‥‥

―

―

―

3,524,372―

3,524,372

Cash dividends paid ‥‥‥‥‥‥‥‥

―

―

―

（238,509）―（238,509）―――（52,000）―（52,000）

Gross profit ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

15,992,925

21,578,120

204,164

Selling, general and administrative expenses ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

9,211,728

9,711,541

91,887

Operating income ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

6,781,196

11,866,578

112,277

Common stock issued under
the spread-method in connection

Bonuses to directors andOther income (expenses):
Interest and dividend income ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

5,628

12,340117

Interest expenses ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥（49,303）（2,197）（21）

Equity in earnings of affiliates ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

255,645

292,330

2,766

Loss on disposal of property and equipment, net ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥（50,547）（17,288）

Loss on devaluation of investment securities and capital investments（65,248）（42,587）‥‥‥‥‥‥―

statutory auditors ‥‥‥‥‥‥‥‥‥
Change in net unrealized
holding gain on securities ‥‥‥‥‥‥

―

―

―

―

Balance as of March 31, 2003 ‥‥‥‥‥

32,3001,295,500

1,342,429

6,060,735

54,1338,752,797（164）

Five-for-one stock split ‥‥‥‥‥‥‥‥

129,200

―

―

―

―

―

（403）

Retained earnings decreased due to（3,293）――Gain on cancellation of life insurance‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

185,872

Other, net ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

85,11280,023757

Other income, net ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

367,159

322,623

3,053

Income before income taxes and minority interest ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

7,148,355

12,189,200

115,330（27,449）（27,449）

change of consolidation scope ‥‥‥

―

―

―

Net income ‥‥‥‥‥‥‥‥‥‥‥‥‥

―

―

―

6,620,253―

6,620,253（3,293）

Cash dividends paid ‥‥‥‥‥‥‥‥

―

―

―

（969,000）―（969,000）―――（77,000）―（77,000）

holding gain on securities ‥‥‥‥‥‥

―

―

―

―

184,061

184,061

Balance as of March 31, 2004 ‥‥‥‥‥

161,500¥ 1,295,500¥ 1,342,429¥ 11,631,695¥238,194¥14,507,820

CommonStock

Additional
Paid-in
CapitalBonuses to directors andstatutory auditors ‥‥‥‥‥‥‥‥‥
Change in net unrealized

Income taxes:
Current ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

3,749,518

5,768,861

54,583

Deferred ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥（125,535）（211,184）（1,998）3,623,983

5,557,676

52,585―

11,269107

Minority interest ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥Net income ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

6,620,253¥ 3,524,372

Thousands of U.S. Dollars (Note 1)$ 62,638

Retained
Earnings

Unrealized
Holding Gain on
Securities

Total
Shareholders'Equity$512$82,816$12,258$12,702

consolidation scope ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥Net income ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

―

―

―

―

62,638―62,638Cash dividends paid ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥――（9,168）―（9,168）Bonuses to directors and statutory auditors ‥‥‥‥‥‥

―

―

（729）

―

（729）

Balance as of March 31, 2003 ‥‥‥‥‥‥‥‥‥‥‥‥‥$57,344

Retained earnings decreased due to change of
U.S. Dollars(Note 1)

Yen

Earnings per share:
Basic and diluted ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

See accompanying notes to the consolidated financial statements.

¥ 23,446.73¥ 40,465.97$ 382.87

（31）

―

（31）

Change in net unrealized holding gain on securities ‥‥

―

―

―

1,742

1,742

Balance as of March 31, 2004 ‥‥‥‥‥‥‥‥‥‥‥‥‥$12,258$12,702$110,055$2,254$137,268

See accompanying notes to the consolidated financial statements.

33

34

Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

FIELDS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Notes To The Consolidated Financial Statements

For the fiscal years ended March 31, 2003 and 2004
Thousands of Yen

Operating activities:
Income before income taxes and minority interest ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Adjustments to reconcile income before income taxes and minority interest to net
cash provided by operating activities:
Depreciation and amortization ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Amortization of excess of net assets acquired over cost ‥‥‥‥‥‥‥‥‥‥‥‥
Allowance for doubtful accounts ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Reserve for retirement benefits ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Accrued bonuses ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Interest and dividend income ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Gain on cancellation of life insurance ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Equity in earnings of affiliates ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Interest expenses ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Loss on disposal of property and equipment, net ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Loss on devaluation of investment securities and capital investments ‥‥‥‥‥‥
Notes and accounts receivable - trade ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Inventories ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Merchandising right advances ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Accounts payable - trade ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Deposit received ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Payments of bonuses to directors and statutory auditors ‥‥‥‥‥‥‥‥‥‥‥‥
Other‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Subtotal ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Interest and dividends received ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Interest paid ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Income taxes paid‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥Net cash provided by operating activities‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Investing activities:
Purchases of property and equipment ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Proceeds from sales of disposed property and equipment ‥‥‥‥‥‥‥‥‥‥‥‥
Purchases of intangible assets ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Purchases of investment securities ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Maturity of debt securities ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Cancellation of life insurance policies‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Long-term loans receivable, net ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Payment for deposits, net ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Payment for long-term expenses ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Other ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥Net cash used in investing activities ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Financing activities:(Decrease) increase in short-term borrowings, net‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Proceeds from long-term borrowings ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Repayments of long-term borrowings‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Proceeds from issuance of common stock ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥Cash dividends paid ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Other ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥Net cash (used in) provided by financing activities ‥‥‥‥‥‥‥‥‥‥‥‥‥
Effect of exchange rate changes on cash and cash equivalents ‥‥‥‥‥‥‥‥‥
Decrease in cash and cash equivalents ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥Cash and cash equivalents at beginning of the period ‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Increase in cash and cash equivalents due to change of consolidation scope ‥‥Cash and cash equivalents at end of the period ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

Thousands of
U.S. Dollars(Note 1)

2003

2004

2004

¥7,148,355¥12,189,200$115,330

229,404（1,481）（47,980）
108,845（140）（5,628）（185,872）（255,645）
49,30350,54765,2483,219,859（98,647）（262,125）（4,618,385）
315,754（52,000）（55,170）
5,604,244
40,303（48,214）（2,280,205）
3,316,128

317,565（1,481）64,540145,616600（12,340）―（292,330）
2,197
17,28842,587（14,546,569）
7,919（1,457,951）
8,823,448
298,114（77,000）（286,080）
5,235,325
33,319（3,140）（4,414,311）
851,192

3,005
（14）
611
1,378
6
（117）
―
（2,766）21
164
403（137,634）
75（13,795）
83,484
2,821（729）（2,707）49,535315（30）（41,767）
8,054（1,163,261）―（75,402）（105,291）――（1,260）（335,130）（496,868）（76,003）（2,253,217）（1,520,955）
6,964（287,452）（1,356,059）
200,700
422,076（352,770）（204,258）（65,304）（33,135）（3,190,193）（14,391）66（2,720）（12,831）
1,899
3,994
（3,338）（1,933）（618）（314）（30,184）（3,070,500）
240,000（1,061,935）
1,678,093（238,509）（1,953）（2,454,804）―（1,391,893）
7,130,955―¥5,739,061

3,000,000―――（966,210）（3,790）2,029,999（1,892）（310,893）
5,739,061
9,590¥5,437,758

28,385―――（9,142）（36）
19,207（18）（2,942）54,301
91$51,450

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL
STATEMENTS
FIELDS CORPORATION (the “Company”) and its consolidated
subsidiaries maintain their accounts and records in accordance withthe provisions set forth in the Japanese Commercial Code(the “Code”) and the Securities and Exchange Law and in conformity
with accounting principles and practices generally accepted in Japan,
which are different from the accounting and disclosure requirementsof International Financial Reporting Standards or accounting
standards generally accepted in the United States of America.
Accordingly, the accompanying consolidated financial statements are
not intended to present the consolidated financial position, results ofoperations and cash flows in accordance with accounting principles
and practices generally accepted in countries and jurisdictions otherthan Japan.
The accompanying consolidated financial statements are thetranslation of the consolidated financial statements of the Company
which were prepared in accordance with accounting principles
generally accepted in Japan from the accounts and records
maintained by the Company and its consolidated subsidiaries andwere filed with the Ministry of Finance as required by the Securities
and Exchange Law.
In preparing the accompanying consolidated financial statements,
certain reclassifications and rearrangements have been made in the
consolidated financial statements issued domestically in order topresent them in a form which is more familiar to readers outside
Japan.
The year ended March 31, 2003 was the first year for the Company
to prepare consolidated financial statements as several subsidiaries
have become significant to the Company’s financial position andresults of operations.
The translations of the Japanese yen amounts presented in thefinancial statements as of and for the year ended March 31, 2004 into
U.S. dollars are included solely for the convenience of the readers
outside Japan, using the prevailing exchange rate of ¥105.69 to U.S.
$1 at March 31, 2004. Such translations should not be construed as
representations that the Japanese yen amounts have been, could
have been, or could in the future be converted into U.S. dollars at thator any other rate.
Figures below one thousand yen are rounded off in the
consolidated financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and those of significant subsidiaries(collectively the “Companies”) that are controlled by the Company.
Under the effective control approach, all majority-owned companies
and companies effectively controlled by the parent are consolidated.
Companies in which the parent s ownership share is less than orequal to 50% may be required to be consolidated in case where theparent has effective control through the interests held by a party witha close relationship with the parent. All significant inter-company
transactions and account balances and unrealised inter-company
profits among the Companies, after adjustment for minority interests,
are eliminated upon consolidation.
The difference between the total acquisition cost and underlying fairvalue of the net equity of the acquired company at acquisition isstated as “excess of cost over net assets acquired” or “excess of net
assets acquired over cost” which is amortised on a straight-line basis
over a period of five years. When the difference is insignificant, it ischarged to income as incurred.
An affiliate is defined as a company whose financial and operating
decision-making is influenced to a material degree throughinvestment, personnel, financing, technology or other relationships.
Accordingly, all 20% to 50% owned companies, except for those thatare consolidated, are, in principle, required to be accounted for using
the equity method. An investment of less than 20% of voting rights ofan investee may be required to be accounted for using the equity
method in cases where the investor has the ability to exercise
significant influence over the company.
Scope of Consolidation and Application of Equity Method
Number of consolidated subsidiaries and affiliates accounted forunder the equity method at March 31, 2003 and 2004 are as follows:
Number ofCompanies

Consolidated subsidiaries ‥‥‥‥‥‥‥‥‥‥‥
Unconsolidated subsidiaries accounted forunder the equity method ‥‥‥‥‥‥‥‥‥‥‥‥
Unconsolidated subsidiaries not accounted forunder the equity method ‥‥‥‥‥‥‥‥‥‥‥‥
Affiliates accounted for under the equity method ‥Affiliates not accounted for under the equity
method ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥

2003

2004

4

5

0

0

3
1

2
1

0

1

The names of consolidated subsidiaries and an affiliate accounted forunder the equity method at March 31,2004 are as follows:
Consolidated subsidiaries:
Professional Management Co., Ltd
Fields Jr. Corporation
Total Workout Corporation
White Trash Charms Japan Co., Ltd
Digital Lord Corporation
Digital Lord Corporation, which was unconsolidated subsidiary notaccounted for under the equity method at March 31, 2003, isconsolidated at March 31, 2004 as the company became a significant
subsidiary.
Affiliate:
Rodeo Corporation
Cash Equivalents
Cash equivalents on the statements of cash flows are defined as lowrisk, highly liquid, short-term investments with an initial maturity of
three months or less that are readily convertible to cash.

See accompanying notes to the consolidated financial statements.

35

36

Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

the projected benefit obligation. The obligation is calculated inaccordance with a formula which has, as its variables, the length ofservice and basic pay rate at the end of the fiscal year.
Actuarial differences are amortised under the straight-line method
using the specific number of years (five years) less than the
average remaining service period.

Valuation of Inventories
Merchandise – Used Machine
The Company: At cost determined by the specific identification
methodMerchandise – Others
The Company: At cost determined by the moving-average method
Consolidated subsidiaries: At cost determined by the grossaverage method
Work in process
Consolidated subsidiaries: At cost determined by the specificidentification method
Supplies
The Companies: At cost determined by the last purchase pricemethodFor directors and statutory auditors:
Directors and statutory auditors of the Company are entitled to
lump-sum retirement payments determined in accordance with theCompany’s internal rules. The retirement benefit obligation is
accrued at the amount which would have been required if all
directors and statutory auditors had terminated their services at thebalance sheet date. These amounts are paid subject to approval of
the shareholders in accordance with the Code.

Investment Securities
Under Japanese accounting standards for financial instruments, allmarketable securities held by the Company are classified asavailable-for-sale securities and are reported at fair value, withunrealised gains and losses, net of applicable taxes, reported as aseparate component of shareholders’ equity. Non-marketableavailable-for-sale securities are stated at cost determined by themoving-average method.

Accrued Bonuses
Accrued bonuses for employees are provided for using the estimatedamount which the Company is obligated to pay to employees after the
fiscal year-end, based on services provided during the current period.
Income Taxes
The Companies use the asset and liability method to account forincome taxes. Deferred tax assets and liabilities are recognised forthe future tax consequences attributable to differences between thefinancial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years inwhich those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities from a change
in tax rates is recognised in income in the period the change isenacted. A valuation allowance is established to reduce deferred tax
assets when it is more likely than not that a tax benefit will not berealised.

For other than temporary declines in fair value of investment
securities, impairment losses are recognised and the acquisition costis directly reduced to net realisable value by charging such losses toincome.
The cost of securities sold is determined based on the movingaverage method.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculatedby the declining-balance method while the straight-line method isapplied to buildings acquired after April 1, 1998. The estimated useful
lives of depreciable assets at March 31, 2003 and 2004 are as follows:
Buildings ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
15 - 48 years(6 - 50 years for 2004)
Structures ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
10 - 27 years
Vehicles ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
4 - 6 years
Equipment‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
3 - 20 years

Revenue Recognition
The Company generates revenue from primarily two sources:
merchandise sales and agency services.
For merchandise sales, the Company purchases pachislot machinesfrom manufactures and sells them to pachislot parlours. The
Company recognised revenue when products were delivered to theparlours and installation was completed. Effective April 1, 2003, theCompany changed its accounting policy for revenue recognition, due
to a change in the sales contracts with the parlours. According to the
new recognition policy, the Company recognises revenue when
products are shipped to the parlours. As the result of this change,
sales and cost of sales for the year ended March 31, 2004 increasedby ¥5,956,372 thousand ($56,357 thousand) and ¥3,916,219
thousand ($37,054 thousand), respectively, compared with theamounts which would have been recognised under the previous
recognition policy.

Intangible Assets
Intangible assets primarily consist of internal-use software, which isamortised using the straight-line method over five years.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is reported as an amountdetermined by adding the individually estimated uncollectible
amounts to a general reserve calculated by applying a rate based on
past collection experience.
Retirement Benefits
For employees:
The Company has an unfunded defined benefit retirement plan.
The reserve for retirement benefit obligations is provided based on

For agency services, the Company acts as an agent between
manufactures and pachinko parlours to provide various services
related to the distribution of pachinko and pachislot machines, andreceives commissions from the manufacturers. The services arecompleted when the Company collects sales proceeds from pachinko
parlours, and remits the proceeds to the manufacturers. The
Company recognises revenue when services are completed.
LeasesUnder Japanese accounting standards for leases, financial leases
that are deemed to transfer ownership of the leased property to thelessee are to be capitalised, while other finance leases are permitted
to be accounted for as operating lease transactions if certain as if
capitalised information is disclosed in the notes to the lessee s
financial statements. In compliance with this standard, all leasetransactions of the Company and its consolidated subsidiaries areaccounted for as operating leases.
Stock Issuance Costs
Stock issuance costs are expensed as incurred.

3. INVESTMENT SECURITIES(a) The following table summarises acquisition cost, book values andfair value of available-for-sale securities with available fair values at
March 31, 2003 and 2004:
Thousands of
U.S. Dollars(Note 1)Thousands of Yen

2003
Equity securities
Acquisition cost ‥‥‥‥‥‥‥
Book value ‥‥‥‥‥‥‥‥‥Net unrealised gain ‥‥‥‥‥

2004

2004

¥ 52,312 ¥323,371
143,292
725,048
90,980401,677$3,0606,860
3,801(b) The following table summarises book value of available-for-salesecurities with no available fair values at March 31, 2003 and 2004:

Appropriation of Retained Earnings
Under the Code and the Articles of Incorporation of the Company, theplan for appropriation of retained earnings (primarily for cash dividend
payments and bonuses paid to directors and statutory auditors)
proposed by the Board of Directors should be approved by theshareholders at the shareholders meeting which must be held within
three months after the end of each fiscal year. The appropriation ofretained earnings reflected in the accompanying consolidated
financial statements represents the results of such appropriations
which relate to the immediately preceding fiscal year but wereapproved by the shareholders at the shareholders meeting anddisposed of during that year.
Earnings Per Share ( EPS )Basic EPS is computed based on the average number of shares ofcommon stock outstanding during each period and diluted EPS
assumes the dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock. The Company
and its consolidated subsidiaries had no dilutive securities
outstanding at March 31, 2003 and 2004.
Therefore, there are no differences between basic and diluted EPS.

Stocks ‥‥‥‥‥‥‥‥‥‥‥
Bonds and other ‥‥‥‥‥‥Net earnings per share for the fiscal year ended March 31, 2003 havebeen adjusted for the five-for-one stock split made on November 20,
2003.

2003

2004

¥22,580
5,291¥23,880
5,291

2004
$226
50

(c) Carrying amounts of investments in unconsolidated subsidiaries
and affiliates at March 31, 2003 and 2004 are ¥925,645 thousand and¥2,069,975 thousand ($19,585 thousand), respectively.

4. LEASES
The Companies lease certain equipment, software and vehicles
under several finance lease contracts without ownership transfer tolessees. Assumed amounts of (a) acquisition cost, accumulated
depreciation and net book value and (b) lease obligations at March
31, 2003 and 2004 are as follows:(a) Acquisition cost, accumulated depreciation and net book value
Thousands of Yen
Thousands of Yen

At March 31, 2003
From the fiscal year commencing on April 1, 2002, the Company andits consolidated subsidiaries adopted the new Japanese accounting
standard Accounting Standard for Earnings per Share and
Implementation Guidance for Application of Accounting Standard for
Earnings per Share , which are effective for periods beginning on orafter April 1, 2002. In accordance with the new accounting standard,
the amount of earnings which is used for the computation of EPS is
net income for the year, excluding income to be appropriated as
bonuses to directors and statutory auditors to be approved by theshareholders at the shareholders meeting which must be held within
three months after the end of each fiscal year.

Thousands of
U.S. Dollars(Note 1)Thousands of Yen

Equipment Software Vehicles

Acquisition cost ‥‥‥ ¥290,212
Accumulated depreciation ‥‥ 149,319
Net book value ‥‥‥‥ ¥140,892¥20,779
13,433¥ 7,346

Total¥9,300 ¥320,291
7,750 170,502¥1,550 ¥149,789

Thousands of Yen

At March 31, 2004

Equipment Software Vehicles

Acquisition cost ‥‥‥ ¥219,370
Accumulated depreciation ‥‥ 121,037
Net book value ‥‥‥‥ ¥ 98,333¥18,851
15,275¥ 3,575

Total― ¥238,222― 136,313― ¥101,908

Thousands of U.S. Dollars

At March 31, 2004
Acquisition cost ‥‥‥Accumulated depreciation ‥‥Net book value ‥‥‥‥

37

38

Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Equipment Software Vehicles$ 2,076
1,145
$ 930

$ 178
145
$ 34

$―
―
$―

Total
$ 2,254
1,290
$ 964

(b) Lease obligations
Thousands of Yen

2003

2004

Thousands of
U.S. Dollars(Note 1)Thousands of Yen

2004

Payments due within one year ‥‥ ¥ 58,029 ¥ 52,170
91,75949,738
Payments due after one year ‥‥Total ‥‥‥‥‥‥‥‥‥‥‥‥ ¥149,789 ¥101,908

Total credit lines ‥‥‥‥‥‥‥
Balance of borrowing ‥‥‥‥
Unused credit lines ‥‥‥‥‥

$494
471
$964

Lease payments ‥‥‥‥‥‥
Depreciation expense equivalent ‥2004¥57,924
57,924¥58,378
58,378

Payments due within one year ‥‥Payments due after one year ‥‥‥Total ‥‥‥‥‥‥‥‥‥‥‥‥

2004¥2,184
4,110¥6,294¥1,6442,466¥4,110¥1,000,000―¥1,000,000¥6,000,000
3,000,000¥3,000,000$56,770
28,385$28,385

9. CONTINGENCIES

2003

For employees:
The Company has an unfunded defined benefit retirement plan
covering substantially all of its employees.
This plan provides employees with lump-sum retirement payments,
determined by their basic pay at the time of retirement and benefit
rate based on years of service.

Thousands of
U.S. Dollars(Note 1)

2004
$552
552

2003

2004

Projected benefit obligation ‥ ¥112,330 ¥123,506
Unrecognised actuarial differences ‥ （6,331） （2,691）
Accrued retirement benefits ‥ ¥105,998 ¥120,815

Thousands of
U.S. Dollars(Note 1)

2004

Amounts guaranteed ‥‥‥‥ ¥1,581,073 ¥744,496$7,044For merchandise sales, the Company has contingent liabilities fromnotes delivered with endorsement for payments for purchases ofpachislot machines purchased. Total amount of notes endorsed at
March 31, 2003 and 2004 is as follows:

$ 16
23
$ 39

Thousands of Yen

Service cost‥‥‥‥‥‥‥
Interest cost‥‥‥‥
Amortisation of actuarial differences‥‥‥‥‥
Net periodic costs

5. SHORT-TERM BORROWINGSThe Company s short-term borrowings at March 31, 2004 are¥3,000,000 thousand ($28,385 thousand), and their weighted
average interest rate at March 31, 2004 is 0.83% per annum.
The Company has entered into line of credit and over-draft

2004

2004

2004

$5,598$ 1,169（25）$ 1,143

10. INCOME TAXES

Thousands of
U.S. Dollars(Note 1)

2003

2004

2004

¥14,222
2,337（1,554）¥15,004¥17,166
2,232
851¥20,249

$ 162
21
8
$ 192

Discount rate ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥ 2.0%
Amortisation period of actuarial differences ‥‥‥‥‥‥‥ 5 years

agreements with banks for the purpose of fund management andincreased the amount of the lines of credit in the year ended March
31, 2004. The following is the summary of the lines of credit at March
31, 2003 and 2004:

The estimated amount of employees retirement benefits to be paid in
the future is allocated equally through the estimated service periodsof each employee.
For directors and statutory auditors:
The Company also has a retirement plan for its directors andstatutory auditors. The amounts of accrued retirement liability for
the Company s directors and statutory auditors based on its

2003

Thousands of
U.S. Dollars(Note 1)

Amount of notes endorsed for payments ‥ ¥3,677,050 ¥591,657

The assumptions used for the above plans for the years ended March
31, 2003 and 2004 are as follows:

6. CREDIT LINES

Thousands of Yen

Thousands of
U.S. Dollars(Note 1)

Net periodic costs for the employees retirement benefits for theyears ended March 31, 2003 and 2004 consisted of the following
components:

2004

Thousands of
U.S. Dollars(Note 1)

2004

The liability for employees retirement benefits at March 31, 2003 and2004 is as follows:
Thousands of Yen

Income taxes in Japan applicable to the Companies consist of
corporation tax, inhabitants taxes and enterprise taxes, which in theaggregate resulted in a statutory tax rate of 42.0% for the years
ended March 31, 2003 and 2004.

For agency services, when the Company receives a sales order for
pachinko and pachislot machines from a pachinko parlour(the Customer ), the Company asks the manufacturer of themachines to deliver the machines directly to the Customer, andguarantees payment for the machines delivered on behalf of the
Customer. Those guarantees at March 31, 2003 and 2004 are as
follows:
Thousands of Yen

The Companies lease certain office space, vehicles and equipment
under the operating leases. The following is a schedule by year of
future lease payments under non-cancellable operating leases at
March 31, 2003 and 2004:
Thousands of Yen

2004

internal rules are ¥569,000 thousand and ¥699,800 thousand($6,621 thousand) at March 31, 2003 and 2004, respectively.

8. RETIREMENT BENEFITS

Depreciation expense equivalent is computed by the straight-line
method over the lease period without residual value.

2003

2004

The Companies had no derivative transactions during the years
ended March 31, 2003 and 2004.

Amounts of lease payments and depreciation expense equivalents forthe years ended March 31, 2003 and 2004 are as follows:
Thousands of Yen

2003

7. DERIVATIVE TRANSACTIONS

Due to immateriality of the aggregated amount of lease obligations
compared with the year-end balance of properties, interest expenses
related to lease obligations are included in both the assumed
acquisition cost and lease obligations of the lease properties.

2003

Thousands of
U.S. Dollars(Note 1)The significant components of deferred tax assets and liabilities at
March 31, 2003 and 2004 are as follows:
Thousands of Yen

2003

2004

Thousands of
U.S. Dollars(Note 1)

Effective for years commencing on April 1, 2004 or later, according to
the revised local tax law, income tax rates for enterprise taxes will be
reduced due to the introduction of assessment by estimate based on
the size of the business. Based on the change in income tax rates, forthe calculation of deferred tax assets and liabilities, the Companies
used aggregate statutory income tax rates of 42.0% and 40.5% for
current items and non-current items, respectively, at March 31, 2003.
The change in aggregate statutory income tax rates had the following
effect on accounts at and for the year ended March 31, 2003:
deferred income tax assets decreased by ¥8,910 thousand, andprovision for deferred income taxes and unrealised holding gain on
available-for-sale securities increased by ¥10,275 thousand and¥1,364 thousand, respectively.
Reconciliation of the differences between the statutory tax rate andthe effective income tax rate for the years ended March 31, 2003 and2004 is as follows:

2003

2004

Statutory tax rate ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥ 42.0% 42.0%
Increase (reduction) in taxes resulting from:
Taxation on retained earnings imposed on a
4.0
3.0
family corporation ‥‥‥‥‥‥‥‥‥‥‥‥‥‥
0.4
0.2
Per capita levy ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
1.5
0.5
Expenses not deductible for tax purpose ‥‥‥Income not taxable for tax purpose ‥‥‥‥‥‥ （0.1） （0.1）―（0.2）
Tax exemption ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥
Effect of valuation allowance for deferred tax assets ‥3.3―
Effect of tax rate change‥‥‥‥‥‥‥‥‥‥‥
0.1―
Other ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥ （0.5）
0.2
Effective income tax rate ‥‥‥‥‥‥‥‥‥‥‥ 50.7% 45.6%

2004

Deferred tax assets:
Accrued directors and statutory
auditors retirement benefits ‥‥‥ ¥230,445¥ 284,818$ 2,695
Accrued local taxes ‥‥‥‥ 208,899
323,159
3,058
Accrued employees retirement
benefits‥‥‥‥‥‥‥‥‥‥‥
47,392
33,779448
Allowance for doubtful accounts‥‥
23,35425,721
221
Accrual bonuses ‥‥‥‥‥
7,570
5,881
72
Subsidiaries net operating loss
carryforwards ‥‥‥‥‥‥‥‥
255,026
58,5982,413
Other ‥‥‥‥‥‥‥‥‥‥‥
88,285
14,222835
Gross deferred tax assets ‥‥ 577,547
1,029,607
9,742
Valuation allowances ‥‥‥‥ （31,437）（272,311） （2,576）
Total deferred tax assets ‥‥‥ 546,110
757,295
7,166
Deferred tax liabilities:
Unrealised holding gain on
investment securities ‥‥‥‥
163,482
36,846
1,547
Total deferred tax liabilities ‥‥‥
163,482
36,846
1,547
Net deferred tax assets ‥‥‥ ¥509,263¥ 593,812$ 5,619

11. SHAREHOLDERS EQUITY
Under the Code, the entire amount of the issue price of shares isrequired to be accounted for as capital, although a company may, byresolution of its Board of Directors, account for an amount notexceeding one half of the issue price of new shares as additional
paid-in capital, which is included in capital surplus. The Code also
provides that an amount equal to at least 10% of cash dividends andother cash appropriations shall be appropriated and set aside as alegal earnings reserve until the total amount of the legal earnings
reserve and additional paid-in capital equals 25% of common stock.
The total amount of the legal earnings reserve and additional paid-in
capital has reached 25% of common stock, and, therefore, theCompany is no longer required to provide for the legal earnings
reserve.
The legal earnings reserve and additional paid-in capital may be used
to eliminate or reduce a deficit by resolution of the shareholders at theshareholders meeting or may be capitalised by resolution of theBoard of Directors. On condition that the total amount of the legal
earnings reserve and additional paid-in capital remains
equal to or exceeds 25% of common stock, they are available for39

40

Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

INDEPENDENT AUDITORS’ REPORT
distribution by resolution of the shareholders at the shareholders
meeting. The legal earnings reserve is included in retained earnings
in the accompanying consolidated financial statements. The legal
earnings reserve included in retained earnings at March 31, 2003 and2004 is ¥9,580 thousand ($91 thousand).
Annual dividends are to be approved by the shareholders at ashareholders meeting held subsequent to the fiscal year to which thedividends are applicable. Semi-annual interim dividends may also be
paid upon resolution of the Board of Directors, subject to certain
limitations imposed by the Code. The maximum amount that theCompany can distribute as dividends is calculated based on the nonconsolidated financial statements of the Company in accordance with
the Code.

12. RELATED PARTY TRANSACTIONSTransactions with directors:
At March 31, 2003 and 2004, the Representative Director of theCompany guaranteed the following liabilities on behalf of theCompany without compensation:
Thousands of Yen

Lease obligations ‥‥‥‥‥‥

2003

2004

¥78,033¥36,698

14. SUBSEQUENT EVENTSThe Board of Directors ofFollowing the introduction of a stock option plan in accordance with
Articles 280-20 and 280-21 of the Commercial Code in Japan, which
was approved by the shareholders at the general shareholders
meeting held on June 27, 2003, on April 14, 2004 the Company
granted 681 stock purchase rights at advantageous terms todirectors, statutory auditors and selected employees totalling 115
persons. Under this stock option plan, each stock purchase rightenables its holder to purchase five shares of common stock at an
exercise price of ¥1,520 thousand ($14 thousand) per share, and theexercise period of the stock purchase rights starts on July 1, 2005
and ends on June 30, 2008.

FIELDS CORPORATIONThe Board of Directors of the Company resolved at its meeting heldon May 13, 2004 to propose to its shareholders, at the generalshareholders meeting to be held on June 29, 2004, the payment ofyear-end cash dividends totalling ¥646,000 thousand ($6,112
thousand), or ¥4,000 ($37.85) per share, and the payment of¥85,000 thousand ($804 thousand) in bonuses to directors andstatutory auditors from retained earnings.

statements based on our audits.

Thousands of
U.S. Dollars(Note 1)

We have audited the accompanying consolidated balance sheets of FIELDS CORPORATION
and its consolidated subsidiaries as of March 31, 2003 and 2004, and the related consolidated
statements of income, shareholders equity and cash flows for the years then ended, expressed inJapanese yen. These consolidated financial statements are the responsibility of the Company s
management. Our responsibility is to express an opinion on these consolidated financial

We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant$347

estimates made by management, as well as evaluating the overall financial statement

For the year ended March 31, 2003, the Representative Director of
the Company paid ¥3,060 thousand for company housing.

presentation. We believe that our audits provide a reasonable basis for our opinion.

Transactions in the normal course of business with affiliates:

In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of FIELDS CORPORATION and its

The following table summarises the year-end balances resulting frompurchase transactions in the normal course of business with Rodeo
Corporation, an affiliate:
Thousands of Yen

2003

2004

Account balances¥ ― ¥ 2,479,632
Accounts receivable-trade ‥Accounts payable ‥‥‥‥‥ 1,792,732 7,957,693
500,000
Deposits paid ‥‥‥‥‥‥‥ 500,000
Transactions
Purchase of merchandise ‥ 38,281,476 33,103,396― 2,364,855
Sales of used pachislot machines ‥consolidated subsidiaries as of March 31, 2003 and 2004, and the consolidated results of theiroperations and their cash flows for the years then ended in conformity with accounting principles

Thousands of
U.S. Dollars(Note 1)

generally accepted in Japan as described in Note 1 to the consolidated financial statements.

2004

The consolidated financial statements as of and for the year ended March 31, 2004 have been

$ 23,461
75,293
4,731

translated into United States dollars solely for the convenience of the reader. We have313,21222,375the consolidated financial statements.

recomputed the translation and, in our opinion, the consolidated financial statements expressed inJapanese yen have been translated into United States dollars on the basis set forth in Note 1 to

13. SEGMENT INFORMATION･ Industry Segment:
Revenue and income from the sale of amusement machines areover 90% of the consolidated revenue and income from operations.
Therefore, business segment information is omitted.
･ Geographic Segment:
The Company and its consolidated subsidiaries operate theirbusiness only in Japan and, therefore, geographical informationand information about revenues from overseas are omitted.

BDO Sanyu & Co.
Tokyo, JapanMay 21, 2004

41

42

Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Stock Information (As of September 30, 2004)

Total authorised shares

586,000

Total outstanding shares

347,000

Number of shareholders

8,866

Principal shareholders
Name of shareholder

Number of shares held

Percentage of outstanding
shares owned (%)

Hidetoshi Yamamoto

112,200

32.33

Takashi Yamamoto

40,000

11.53

Yoko Yamamoto

35,000

10.09

Sammy Corporation

27,5007.93

Mint Co.

16,0004.61

Morgan Stanley & Co. International Limited

10,488

3.02

Fields Employee Shareholding Association

9,482

2.73

Yuki Yamamoto

5,000

1.44

The Master Trust Bank of Japan, Ltd. (in trust)

4,761

1.37

Japan Trustee Services Bank, Ltd. (in trust)

3,771

1.09

Number of shareholders by category

Financial institutions

4.33%

Securities companies

0.35%

Corporate Data (As of September 30, 2004)
Company name
Corporate philosophy
Head office address
Branch offices

Established
Paid-in capital
Fiscal year
Number of employees
Main business activities

Other companies 15.07%
Consolidated subsidiaries

Foreign companies and others

8.01%

One share or more

4.12%

Five shares or more

1.72%

Ten shares or more

4.33%

Fifty shares or more

1.46%

One hundred shares or more

4.12%

Five hundred shares or more

2.57%

One thousand shares or more

8.01%

Five thousand shares or more

4.17%

Individuals
and other
72.24%

Distribution of ownership among shareholders

Fiftythousandshares ormore
32.33%

Fields Corporation
The Greatest Leisure for All People
E Space Tower 12F, 3-6, Maruyama-cho, Shibuya-ku, Tokyo 150-0044 Japan
Phone : +81-3-5784-2111 (Trunk line)
Sapporo, Aomori, Sendai, Koriyama, Niigata, Takasaki, Tsukuba, Saitama, Chiba,
Utsunomiya, Tokyo, Western-Tokyo, Yokohama, Shizuoka, Nagano, Nagoya, Aichi, Mie,
Kanazawa, Kyoto, Osaka, Kobe, Hiroshima, Okayama, Yamaguchi, Matsuyama,
Fukuoka, Saga, and Kagoshima (29 bases nationwide)
June 1988¥7.948 billion
April to March
735 (consolidated)
1. Planning and development of amusement machines
2. Purchasing and sales of amusement machines
3. Supporting hall owners with consulting services for space creation and facility
management
4. Planning, development and sales of copyrighted characters and related content
5. Planning, development and sales of image software
Professional Management Co., Ltd.
Fields Jr. Corporation
Digital Lord Corporation
White Trash Charms Japan Co., Ltd.
Total Workout Corporation

Ten thousand
shares or more
37.17%

43

44

Fields Corporation Annual Report 2004

Fields Corporation Annual Report 2004

Fields Cor poration
E·Space Tower-Building 12F, 3-6 Maruyama-cho, Shibuya-ku, Tokyo 150-0044, Japan
Tel: +81-3-5784-2111 Fax: +81-3-5784-2112
http://www.fields.biz