The Group will advance a new strategy in the Pachislot and Pachinko Machine Business segment to establish a lean system that overcomes tough competitive conditions and generates earnings stably.

Initiating Measures in the Pachislot and
Pachinko Machine Business Aimed at Reaching G30

The pachinko and pachislot machine industry is facing extremely challenging business conditions due to a player population that is declining as leisure activities among the young generation diversify, the industry's reliance on strong gambling elements, and hikes in development costs and other costs. In response, as a stable revenue / maintain business, the Pachislot and Pachinko Machine Business segment strengthened earnings by consolidating development and manufacturing bases and offering voluntary early retirement in fiscal 2016. Having solidified foundations in this way, in fiscal 2017 we introduced a mission pyramid and set reaching an operating margin of at least 30% by fiscal 2020, or G30, as our new target.

The first two levels of the mission pyramid comprise a mission summarizing Sammy's reason for existence and a vision setting out a target profile. The remaining layers are a specific goal for realization of the vision, a strategy for reaching the goal, an organization for implementing the strategy, and tactics for each area. In accordance with the companywide mission pyramid, each division has prepared a mission pyramid. By inculcating the mission pyramids in each employee, we will ensure companywide implementation of measures.

To build mission pyramids, we have formed an organization spanning in-house organizations, the Cross Functional Team, tasked with examining and implementing concrete measures for the enhancement of earning power and the profit margin.

Aiming to Reach G30

With a view to achieving G30, we will improve costs significantly by revising the multibrand strategy so that we can efficiently leverage previously dispersed in-house resources, and by maximizing reuse benefits through a greater emphasis on common components and component reuse in designs. Further, we will increase business efficiency and revitalize the pachinko and pachislot machine industry by forming unprecedented business collaborations with industry peers with which we have had solely competitive relationships. Already, in March 2016 we established a joint venture, ZEEG Co. Ltd., with Universal Entertainment Corporation, which was exclusively a competitor. The joint venture has begun creating synergy benefits and improving cost efficiency through component procurement and exploitation of both companies' hardware know-how.

Initiatives Aimed at Revitalizing the Industry

We aim to revitalize the industry not only through the beginning of operations at ZEEG but also through farsighted measures. To revitalize the industry, it is essential to put a brake on the decline in the player population and attract new players centered on the young generation. Therefore, we intend to step up marketing directly focused on players. We will mobilize inactive players and attract new players to pachinko halls by taking advantage of our unique resources as a comprehensive entertainment corporate group to communicate directly with players. For example, we plan to communicate with them through the joint holding of the Sammy Festival and Universal Carnival fan events; the Sammy 777 Town website of Sammy Networks Co., Ltd.; Pachi Gabu! .website, which provides the latest information on pachislot and pachinko machines; and the MAX BEAT!! event, which features uplifting live performances that enable fans to experience the worlds and visual displays of Sammy's pachislot and pachinko machine content.

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