AEON Fantasy Co.,LTD.

Japan's amusement industry has shrunk by approximately 30% from its peak, with demand being pushed down by the diversification of the leisure market, the spread of home video games, and the rise of smartphone game apps. In addition, the declining birthrate poses a structural risk of a decrease in the absolute number of children aged 3 to 7, the Group's main target demographic. Given the high dependence on revenue from the domestic market, these combined factors may directly affect business performance.

In addition to competitors that traditionally operate stores within shopping centers, companies that mainly operate standalone stores are also actively expanding into shopping centers, intensifying the competitive environment. Competitors are developing facilities targeting children and families with larger floor areas than the Group in the same or nearby shopping centers, increasing pressure on both customer-drawing power and store-opening strategy. This may affect the Group's store-opening strategy and business performance.

Due to the nature of the play facility business, which attracts large numbers of children, an outbreak of infectious disease can cause a sharp decline in the number of visitors, and if it spreads, temporary store closures may become unavoidable. During the COVID-19 pandemic in 2020, temporary closures occurred across Domestic operations, China, and the entire ASEAN region, actually affecting business performance. If an infectious disease outbreak becomes prolonged in the future, the impact on business performance could be even greater.

As of February 28, 2025, 780 of the 1,217 directly-operated domestic stores are located within AEON Group shopping centers, meaning approximately 64% of the total depend on AEON Group facilities. If changes in the industry environment surrounding the AEON Group or industry restructuring cause fluctuations in customer-drawing power, the Group's business performance would be affected accordingly, given this structural dependence. As a risk mitigation measure, the Group is accelerating the opening of stores in commercial facilities outside the AEON Group and in bustling areas near train stations.

The Group operates in six countries: China, Malaysia, Thailand, the Philippines, Indonesia, and Vietnam, and is exposed to a wide range of risks including each country's economic growth trends, foreign exchange rate fluctuations, changes in legal regulations regarding investment, foreign currency, taxation, and business licenses, as well as political and social factors. In addition, increased competition is anticipated due to the growing number of similar playground facilities locally, which could expand the impact on business performance. As a countermeasure, the Group comprehensively evaluates the feasibility of overseas expansion after carefully considering profitability, market expansion potential, foreign exchange fluctuation risk, and legal regulations.

Of the Group's 753 directly-operated domestic stores, 116 stores operate with licenses obtained under the "Act on Control and Improvement of Amusement Business, etc.," and are subject to regulations regarding business hours, age of admission, fees for use of facilities, and facility structure, among other matters. Stores not currently subject to such licensing requirements may become subject to them due to changes in legal regulations, and if the number of licensed stores increases, restrictions on business activities may expand and affect business performance. The Group intends to continue establishing and operating facilities in compliance with the regulations under this law.

Achieving "safe and secure store operations" requires the recruitment and development of personnel capable of providing child-friendly customer service, organizing events, and performing operations quickly and accurately; however, the employment environment already makes securing such personnel difficult. If the Group is unable to secure the necessary personnel, store operations may be disrupted, potentially affecting business performance. For the Group, which continues to expand its multi-store network, labor shortages could also become a constraint on business expansion.

The Group holds personal information, such as membership program data, in the course of its business operations, and if such information were to leak externally, it could affect business performance through a decline in corporate trust. The Group strives to raise awareness and ensure appropriate handling through the establishment of internal regulations and employee training, but risks such as cyberattacks and internal misconduct cannot be completely eliminated. Information leakage could also lead to customer attrition and the occurrence of legal liability.

If the consumption tax rate is raised, personal consumption tends to decline temporarily, and spending on leisure and entertainment tends to be curtailed as a top priority; further tax rate increases could lead to long-term suppression of such spending. Since the Group's core amusement facility business is classified as discretionary consumption, it is structurally susceptible to the effects of consumption tax rate changes, which may affect business performance.

The Group is subject to regulation under multiple laws related to its business activities, including the Act against Unjustifiable Premiums and Misleading Representations and the Food Sanitation Act, and changes to these legal regulations could affect store business activities. For the Group, which operates across multiple business formats and multiple countries, continuous monitoring of regulatory trends both domestically and internationally is required. If regulatory tightening occurs across multiple areas simultaneously, it could lead to increased compliance costs and deteriorating business performance due to restrictions on operations.