GMO Payment Gateway, Inc.

Annual Report 23rd Fiscal Year2015.10.1–2016.9.30

GMO Payment Gateway, Inc.
URL https://www.gmo-pg.com/enTokyo Head Office: Humax Shibuya Building 7F, 1-14-6 Dogenzaka, Shibuya-ku, Tokyo 150-0043 Tel: +81-(0)3-3464-2740
Osaka Branch:

Grand Front Osaka Tower B 23F, 3-1 Ofukacho, Kita-ku, Osaka 530-0011 Tel: +81-(0)6-7634-3070

Fukuoka Branch:

Tenjin Miyuki Building 8F, 4-2-20 Tenjin, Chuo-ku, Fukuoka 810-0001 Tel: +81-(0)92-688-9018

Message from the President

Solidifying our foundation asa payment services company,
while maintaining a growth rateof at least 25%

Establish our own ecosystem (the recurringmodel), and achieve robust, organic growth
In addition to steady growth from payment processing

advertisements that aim to boost sales for merchants. These

services, our new business in the areas of financial services

original services are based on scoring models and marketing(Money Service Business- MSB) such as “GMO payment after

data produced by utilizing and analyzing our accumulateddelivery” and lending services grew rapidly in the period ended

payment data, delivering enormous benefits.

September 2016. As a result, we were able to achieve ourExpanding our payment processing services has produced

objective of at least 25% growth in operating income.

an accumulation of diverse data, which we utilize and analyze

There were also many fruitful developments over the course

Card present /online payment
processing

Onlineadvertising
serviceLending
services forbusinesses“GMO payment
after delivery”

to produce new value-added services. While generatingof the year. We newly welcomed GMO Financial Gate, Inc. andincome for our group of companies, these new services also

Macro Kiosk Berhad as group companies, solidifying our foun-establish ecosystems (recurring model) of businesses anddation as an international payment services company. I wish

services that feed back into the growth of our core businessto express my deep gratitude to our stakeholders, includingof payment processing services.

our shareholders, whose support helped make these achievements possible.
The growth in our core business of payment processing

Boosting sales
for merchants

services was a result of our contributions to the business
Boosting sales
for merchants

growth of merchants. This is because sales growth for
Bringing in
new merchantsmerchants means higher numbers of payments processed,
and for larger amounts, which is all directly connected to
profitability.
For that reason, our group of companies has worked toCreating
new services

develop our own value-added services that support the growthof merchants.
Examples include Transaction Lending service, which aims
to provide short term working capital in the form of loans, or“GMO-PG Online Advertising Service” which runs internetwith our “recurring model”
in which payment services

continue to expand.
1

Issei Ainoura
President &Representative Director

2

Message from the President

Boost operating income by at least 25%
by growing our core business andtaking on new businesssolidifying our foundation for stable income growth.

Our accelerated growth over the past year shows in the

We will develop into the undisputed number
one payment services company, and deliver
continuous improvements to corporate value
In payment processing services we generated a new modelOverseas, we were able to reinforce our operating base in the

results from our core business of payment processing services.

As for new business, our assets related to financial servicesof providing services that are part of everyday life by integrating

ASEAN region by bringing Macro Kiosk Berhad into our group

We now have 77,000 merchants, an increase of 30% from the(Money Service Business- MSB) have increased in excess of ourour payment services into what we offer to financial institutionsof companies. We will look to expand profitability in the ASEAN

previous year. Over the same period, the number of payments

plan. Growth has been particularly consistent for “GMO payment

which demand differentiation. With a growing list of clients thatmarkets, where we expect to see robust growth going forward.

we processed rose 12% to roughly 900 million, and our total

after delivery”, a payment method which is in high demand byincludes Hokkoku Bank and Bank of Yokohama, we will continue

amount processed grew 21% to roughly 2 trillion yen.

consumers.

to bring in more business with the goal of increasing income.

Having boosted both sales and income margin, our “GMO-PG

We also made progress in developing and expanding themarket for monthly credit card payments of public dues such as

Online Advertising Service” has helped achieve income growthutility bills and taxes, as well as other expenses that are part ofof 5% or more through expansion of new business.
This period we were able to exceed our initial target of 25%

daily life. During this period in particular, we started up our large-

For more details, please see page 8.
Thus, we will develop into the undisputed number one

For more details, please see page 5.

payment services company by strategically developing ourCard present payment services are an area in particularwhere we plan on getting stronger. This period we made GMO

business in a number of different fields and locations and being

Financial Gate into a group company, with our sights set on

the largest-scale provider of payment processing services for all

scale business aimed at financial institutions. Despite having just

operating income growth. In order to maintain a high rate of

the business opportunities presented by larger quantities of

payment methods, while also offering a full range of new finan-gotten started, we already expect this business to be integrated

growth in the future, we believe it is important to develop our

paperless card present payments as inbound tourism to Japancial and other such services. Look for us to keep on growing.

by several banks. We believe that with this we have establishedbusiness strategically.

increases and the 2020 Tokyo Olympics and Paralympics draw

To our shareholders, we ask for your continued guidance

an income growth base of 20% or higher in our core business,closer.

and encouragement.

For more details, please see page 6.

For financial services (Money Service BusinessMSB) we will accumulate even more related assets

As opposed to our commitment(continued operating income growth of 25%),
we are currently growing at a pace of 30%

and work to increase incomes. In particular, we
also began offering “GMO payment after delivery”
on the biggest fashion retail website in Japan“ZOZOTOWN” on November 1st of this year. Thisbusiness involves extending credit to individuals,
and we will aim to use enhanced data analysis
Growth of new business (growth of 5% or more)
Growth of FinTech / Money Service Business
Providing “GMO-PG Online Advertising Service”

capabilities to boost incomes while mitigating risk.
For more details, please see page 7.

Growth of overseas business by bringing in
Macro Kiosk Berhad as a group company

Growth of existing businesses (growth base of 20%)Growth in online payments

25% growth line

Acquire financial institution clients and large
contracts
Work on fast-growing areas of the card present
payment market (Creating GMO Financial Gate,
Inc. group company)
Work on the C to C and B to B Markets

Operatingincome¥190 million¥3.8 Billion¥10 Billion¥25 Billion¥100 Billion*Consolidated operating income
figures for 2020 onwards aremanagement goals

2005

2016

(approx.) 20203

(approx.) 2025

(approx.) 2030

4

Highlights by segment* In order to reflect the most recent information, we are also including events from October 2016 onward.

Efforts in the card present payment market, and toward monetizing the IoT

Payment Processing Business
Consumer

Sales

Shops andfacilities

Bank of Yokohama

Operating income(Thousand yen)(Thousand yen)

Smartphone

The number of payments and total

Tablet, etc.

8,632,192

5,066,667+22.9%

7,332,349

4,123,998Payment by

application

e-commerce market grew and its scope
expanded. Performance was further

BUSINESS HIGHLIGHTS

boosted by strong numbers fromlarge-scale orders, etc.
FY2015FY2016FY2015Bank
account

Collaboration with banks utilizing FinTech

FY2016

Instant
withdrawalBankaccount

Next-dayremittance*EMV Standard: The unified international standard determined in the “specifications for IC cards and devices” agreed
on between EuroPay, MasterCard International, and Visa International. International credit card brands including theJapan Credit Card Association and Japanese Bankers Association determine technical requirements in accordancewith this standard. The card-issuing companies they control then make implementations to the system based oneach of the services they offer and their risk management policies.

Using FinTech services to support the efforts of Hokkoku Bank to energize the community
Our “GMO SmartPay” service (launched in 2014 as “GMO
Pallet”) completes card payments over a smartphone application.
Providing this service as OEM and combining it with the Hokkoku
Visa Debit instant payment card, we rolled out the smartphone app“Hokkoku Osaifu (wallet)” which aims to build stronger connections
between local residents and stores.
Starting there, we will go on providing “GMO SmartPay” as
OEM to financial institutions, as well as the real estate and insurance industries.

External-type EMV reader

Changes in the market environment
and new growth areas
Changes in the market environment
Need for enhanced security for payments
as the number of inbound customers toJapan increases
Greater need for cashless as the Tokyo
Olympics and Paralympics approach
Arrival of IoT devices and technology

Not only payments; monetization using thevarious functions present in IoT devices
Growth areas for card present payment

Offer various advantages
in energizing the community
SHOP

Push
notifications

Merchant
lists

Community
pointsStore
coupons

Payments bysmartphone

For residents

For store owners

Provide debit cards
and apps

Provide card payment
devices and apps

Payments
X
IoT
Monetization
Enabled

5G base station
SurveillancecameraDisplay ofcommercials anddigital content
Sales of foodand beverage
products<Biz Data
Database>

Fee

Advertisement andcontent display business

Fee

Telecommunications
business

Fee

Crime prevention,
public safety

Fee

Beverages

Content management
Data storage, analysis, communication
Various types of payment processing, etc.

BANK

Hokkoku Bank

Demand for switching to EMV-enabled
devicesMore installations of new types ofcashless payment instruments
Payments x IoT monetization

Action we are taking
Forming a group with GMO Financial
Gate and GCS
Building a system to ensure engagementwith growth areas in the card present
payment market

Growing services for credit card payment of taxes

Collaborating with Bank of Yokohama on
developing an account-linked smartphone
payment service, a first for Japanese banks

Consumer

Utilizing expertise from our “GMO SmartPay” services, we arecollaborating with Bank of Yokohama on the development of “HamaPay”, a smartphone-based payment service which the bank plansto roll out in March 2017. This service will be linked with accounts
at Bank of Yokohama, and will enable customers to make instant
payments from their accounts through smartphone apps. It willbe the first time a Japanese bank offers such a service.
(Currently applying for patent jointly with Bank of Yokohama;
2016-109869)

5Bank of Yokohama

Smartphone

Shops andfacilities
Tablet, etc.

Payment by
applicationBankaccount

Instant
withdrawal

Next-dayremittanceBank
account

We offer services for processing credit card
payments of taxes, and operating payment
websites, which can handle everything local
governments need for enabling credit card
payments of taxes.
Several local governments implemented ourservices for credit card payments of taxes infiscal 2016. These included the city of Fukuoka
for city taxes, Fukushima Prefecture for automobile taxes, Oita Prefecture for automobile taxes,
Aichi Prefecture for prefectural taxes, and more.
We plan to produce, operate, and provide thepayment processing services for the “National
Tax Credit Card Payment Site” (https://kokuzei.
noufu.jp/) scheduled for launch on January 4,2017 by the National Tax Agency.

2017“National Tax Credit Card Payment Site”
service scheduled to start

2016
More implementations,at more public institutions

amounts processed rose as the+17.7%As inbound tourism to Japan is forecasted to rise, needs for stronger security will likely boost
demand for a switch to devices that can handle IC chip credit cards that comply with the internationally-recognized EMV standard*.
We see this change as a growth opportunity. Aiming to capture the demand for switching to
new payment devices, we have raised our equity interest in GMO Financial Gate (GMO-FG) to
65%, making it into a group company. GMO-FG focuses on card present in-store credit card
payments. At the same time, through GMO-FG we have also added Global Card System (GCS)
as a group company. GCS has its strength in smaller payments, for restaurants and the like.
To also cater to the needs that are expected to rise in conjunction with the 2020 Tokyo
Olympics and Paralympics, we are working actively on the spread of vending machines andother such equipment enabled for small cashless payments. In addition to payments, we arealso working on being able to monetize (produce income from) IoT devices.

Japan National
Pension Service: pension premiums
Tokyo City: Automobile tax
Various taxes
Water bills
Osaka Prefecture: Automobile tax
Fukuoka City: Water bills
Sapporo City: Water bills

6

Fukuoka city tax, Oita Pref. automobile tax
Fukushima Pref. automobile tax, Aichi Pref. tax

2015

zei.tokyo (all city taxes)

2011

In addition to payment services, started
production and operation of payments websites

2007

Began offering credit card payment services
for local governments and public institutions

Highlights by segment* In order to reflect the most recent information, we are also including events from October 2016 onward.

Money Service Business (MSB)
Sales(Thousand yen)

Others Online Advertising Service, Global Expansion, etc.
Operating income

2,242,795

Growth of Money Service Business (MSB)
that supports growth of merchants with

216,883(Thousand yen)merchants, has performed well. It is

Turnedinto
gains

delivery” and “Early payment service”

Operating income(Thousand yen)

1,239,088“GMO-PG Online Advertising Service”,

159,485+46.0%

which boosts sales revenues for+163.5%services such as “GMO payment after

Sales(Thousand yen)+89.5%

847,469
84,151making inroads to expanding globally.

(21,838)
FY2015FY2016FY2015FY2015FY2016

Our Money Service Business (MSB) and FinTech
Consumers

Global expansion

Businesses (merchants)

Our group

Payments companies

Online market

3 “GMO-PG Remittance service”

Card present
payment market

BUSINESS HIGHLIGHTS

851,073

1 Transaction lending

Repayments &remittances

Deposit
Daily transaction processing
2 “Early payment service”

Credit card companies,
convenience stores,
electronic moneycompanies, mobile
phone companies, etc.
GMO payment
4 after delivery

5 “GMO SmartPay”
1 Transaction lending
Service that uses payment data to make our own credit
decisions, and provides loans that give merchants theshort-term funding they need to boost sales
2 “Early payment service”
Service that helps set up payment cycles that cater to theneeds of merchants and improve their cash flow

What is FinTech?

3 “GMO-PG Remittance Service”
Service that makes automated systems for the repayments and remittancesthat take place when operating e-commerce sites, and executes them efficiently
and affordably
4 “GMO payment after delivery”
An after-the-fact payment service for consumers to pay for items after receiving
them, using convenience stores or other such means to send the payments

5 “GMO SmartPay”
A smartphone-based payment service for which
you do not need a wallet. Completes credit card
payments at restaurants and other such places
through a smartphone app

FY2016FY2015FY2016

State of growth in the China and ASEAN regions

Having established entities in five countries; Singapore,
Hong Kong, Taiwan, Malaysia, and Thailand, we are
expanding “Z.com Payment”, a payment service geared
towards Japanese e-commerce companies that are setting
up business in these countries and neighboring areas. At thesame time, we are forming business and capital allianceswith promising payment services companies in the region
with the payments-specialized “GMO Global Payment Fund”.
With the combination of these two initiatives, we are tapping
synergies while fueling business growth in the Asia region.

Taiwan

NEWEB

India

Mobikwik
RazorpayHong Kong
Thailand

2C2P

VietnamPhilippines

Dragonpay
Malaysia

MACRO KIOSKSingapore

Red Dot Payment
Capital:about 3.6 billion yen

The first Japanese FinTech fundfor investing in Asian paymentsrelated venture companies(total 2 billion yen)

Our overseas offices
Countries where
investment recipientsare locatedIndonesia

CODAPAY

It is a word created by combining finance (Fin) and technology (Tech), which refers to revolutionary IT-savvy finance services and companies“GMO payment after delivery” now available on ZOZOTOWN,
the largest fashion shopping website in Japan“GMO payment after delivery” is a service offered by our groupcompany GMO Payment Service (GMO-PS) which allows customers
who purchase items on e-commerce sites to make the payments
at places such as convenience stores, banks and post offices after
receiving the items.
Those without credit cards can use it to make purchases, while
it also allows consumers to inspect items before paying for them,and it differs from cash-on-delivery in that the person does not need
to be home to receive delivery of their items. Since it offers theseadvantages, use of payment after delivery is growing. The market
for this service recorded average growth of 40.4% between 2010
and 2014, and is expected to reach 550 billion yen in value by the1
year 2020 .
1. GMO-PS calculation based on “Online Payment/Settlement Service Providers
2016” report by Yano Research Institute7

On November 1, 2016, “GMO payment after delivery” began to
be offered as a payment after delivery option on ZOZOTOWN, the2largest online shopping site in Japan which is operated by Start
Today Co., Ltd.
2. From the top online fashion and apparel companies in terms of sales volume(in FY2014) listed in the “White Paper on Online Shopping 2016” by Yano
Research InstituteMacro Kiosk Berhad joins our group of companies,
growing our business scope with a focus on the ASEAN region
Bank accounts are a critical part of payments infrastructure, butthey have still not become widespread among the population in
many ASEAN countries. However, over the last 10 years in Malaysia
the percentage of citizens who own bank accounts has jumped
from 20% to 80%. Macro Kiosk Berhad is a company in particularthat has taken hold of this change as a business opportunity.
Macro Kiosk Berhad is one of Asia’s leading providers of
SMS mobile messaging solutions for banks and enterprises, andmobile payment services.
The company has offices in 12 countries across Asia and the
Middle East, and comprehensively offers mobile payment, verification, and notification* services to over 2,000 clients from 18 industries, from 37 countries across the globe.
Harnessing synergies with Macro Kiosk Berhad, our group ofcompanies will be expanding our business internationally, with afocus on the ASEAN region. This includes supporting Japanese
e-commerce companies in their international expansions, andalso providing payment services among other things to banks
and leading companies locally.
8*Notification: Service that informs users via their mobile devices when actions occur
such as deposits and withdrawals for their internet banking, or when they accumulatetransaction records on e-commerce sites.

Business overview

We provide payment services to companies
The presence of ourservices in everyday life
Public dues and utilities payments
Regular payments for things such as electricity,gas, and water services

Public dues, taxes
Payments of pension premiums, and taxes
including for property, automobiles, etc.

that consumers can use safely and securely.
Online shopping
Supporting online advertising operations forbusinesses that handle payments for purchasesof everyday goods, perishables, etc.

Payments of fixedmonthly expenses
Regular payments for things suchas water delivery, newspapers,
magazines, etc.

Selling content
Payments when purchasing
music, interactive games,
e-books, etc.

Shopping by smartphone
Payments for goods and services when visiting placesof business

Usage fees for eachtype of service
Payments for travel tickets, delivery
services, etc.

Paying for things at physical stores
Use payment devices and smartphone apps to pay
service charges and purchase amounts

910

23rd fiscal year in review

Financial Highlights (consolidated)

Books
Automobile Apparels
tax

CDs

Water
bills

Transactions & amount processed

FY2012 FY2013 FY2014 FY2015 FY2016

milliontransactions

Net income per share/ROE(Return on equity)
49.0% increase(Yen)
from previous period¥2.00

billion(Net income per share)

trillion

Number of subsidiaries
FY2016

FY2004FY2016

20.9

35.38

Number of employees

23.0

employees

600
employees0companies

24companies(+4 companies
by equity method)

11

18.00
15.00
12.25

24.4

9.75
16.1

40

(Yen)

27.00

Net income per share
ROE (%)

Dividends

78.36

900

¥120.0FY2004FY2012 FY2013 FY2014 FY2015 FY2016

52.60

transactions(Thousand yen)

FY201643.92

FY200437.0 million

4,708,097

merchants

merchants(Thousand yen)

1,753,759

77,256

Taxes
5,764,085

6,837

7,205,542

FY2016Perishables

28.01

FINANCIAL HIGHLIGHTS

FY20049,030,892

TAX

Ordinary income
28.3% increase
from previous period

3,819,506

Net sales
34.1% increase
from previous period

2,977,270

Interactive
games, music

E-books

2,476,408

Tickets

2,048,865

Number of merchants

15th consecutive term with increased revenue and income, and increased dividend

12,113,864

GMO Payment Gateway By the Numbers

17.0

FY2012 FY2013 FY2014 FY2015 FY2016

FY2012 FY2013 FY2014 FY2015 FY2016

On July 1, 2012 the Company executed a 200-for-1 stock split of common
stock. On October 1, 2014 the Company executed a 2-for-1 stock split ofcommon stock.
To make it easier to compare “net income per share” for the period
to other periods, we show the value resulting from adding the effect of
the applicable stock splits, and adjusting retroactively. ROE was lower
in the period ended September, 2015, but this was a result of increased
equity due to the allocation of new shares to third parties carried out inJune 2015.

Dividends in the period ended September 2016 increased by 9 yen to 27
yen, based on fundamental policy of “35% of consolidated net income” asa target for dividend payout.
On July 1, 2012 the Company executed a 200-for-1 stock split of common stock, and later a 2-for-1 stock split of common stock on October 1,
2014. To make it easier to compare to other periods, we show the value
resulting from adding the effect of the applicable stock splits, and adjusting retroactively.

12

Consolidated financial statements

Consolidated balance sheet

Consolidated balance sheet: Points to consider(Thousand yen)

22nd fiscal year
As of
September 30, 2015

(Thousand yen)

23rd fiscal year

22nd fiscal year

As of
September 30, 2016

(Assets)
45,549,162

Cash and deposits 1

30,152,630

25,231,522

Accounts receivable-trade

2,117,007

3,924,904

Lease receivables 2

2,293,947

7,291,439

1,062

38,377617

972

Merchandise
Supplies

2,303,428

6,388,955

Prepaid expenses

67,830118,723

Deferred tax assets

220,805

300,169

1,156,824

1,742,612

Advance payments-trade 2

Accounts receivable-other 2

As ofSeptember 30, 2016

25,448,186

35,330,748

Accounts payable-trade985,850

2,726,492

Lease obligations

45,26764,846

1,911,844

2,784,175

Current liabilities

Accounts payable-other
Income taxes payable

795,544901,767

Accrued consumption taxes

73,10878,482

Advances received

48,698447,442

21,184,305

27,634,302

Deposits received 4
Unearned revenue

1,573

62

Other 2

341,591

839,372

Allowance for doubtful accounts(186,253)(327,887)

Provision for bonuses

337,334

478,808

3,362,243

9,222,381

Provision for directors’ bonuses

58,700125,000

Noncurrent assets
Tangible assets

215,497352,280

Buildings

73,55983,143Tools, furniture and fixtures

49,373

122,782

Leased assets

92,564

146,354

Intangible assets

934,811

Goodwill 3
Leased assets
Rights on trademark

5,959

89,369Noncurrent liabilities

197,198

332,626

Lease obligations

67,060115,984

3,698,215

Long-term lease and guarantee deposits

10,138

7,397

24,7072,271,697

Provision for directors’ remuneration
Board Incentive Plan Trust

120,000

170,000

12,217

17,450119

212

25,645,385

35,663,374

Software751,499

1,079,334

Other146,267

329,521

Investments and other assets

2,211,935

5,171,884

Investment securities 3

1,437,144

2,251,124

Shares of subsidiaries and affiliates 3

139,047

2,203,234

Investments in other securities ofsubsidiaries and affiliates

343,047

309,174

Other

Total liabilities(Net assets)
Shareholders’ equity
Capital stock

16,067,842

18,305,926

4,711,021

4,712,900

2,126

1,066

—

946,344

Total net assets

16,186,351

19,108,169

Total liabilities and net assets

41,831,736

54,771,544—

80,437(25,545)(31,468)

41,831,736

54,771,544

Allowance for doubtful accounts
Total assets

Subscription rights to shares
Non-controlling interests

13

shares of subsidiaries and affiliates
Goodwill, investment securities, shares of subsidiaries and affiliates
increased substantially as GMO-FG, GCS, and Macro Kiosk Berhad
became group companies, and we became more active in our investment activities.

Intangible assets

Investments andother assets

Investments andother assets

352

934

3,698

2,211

5,171

22nd fiscal year 23rd fiscal year
(As of Sept. 30, 2015)

Liabilities

Liabilities and net assets

4 Deposits received(Million yen)

Deposits received increased due to higher sales from contracts
related to representative merchants. For deposits received, it should
be noted that the sales amounts (amounts remitted to merchantsfrom credit card companies that pass through our company) paid
to merchants with representative merchant contracts are reported
at the end of every month.

(As of Sept. 30, 2016)

54,771

41,831

Current
liabilities
35,3304

Current
liabilities

25,448

Noncurrent
liabilities

Noncurrent
liabilities(145,167)(97,162)

87,629Intangible assets

9,222

215

3 Goodwill, investment securities,

116,382(18,578)

64,863

Tangible assets

3,362

Net assets

Foreign currency translation adjustment

Deferred tax assets

Tangible assets(265,236)(48,004)

8,285

Noncurrent 3
assets(265,236)

134,960

231,035

Noncurrent
assetsTreasury stock

Valuation difference on available-for-salesecurities

45,5491 2

38,469197

31,4682,570

accounts receivable-other, otherAs our Money Service Business (MSB: “Early payment service”,“GMO payment after delivery”, transaction lending, finance lease, etc.)
has grown, each of our current assets has increased substantiallysince the previous period.

8,893,549

25,545Current assets

Current assets

2 Lease receivables, advance payments-trade,

6,651,114

Accumulated other comprehensive income

223,818

41,831Retained earnings

962

Lease and guarantee deposits

While deposits received within liabilities increased, cash and deposits
fell due to increases in lease receivables and advance payments-tradethat accompany the expansion of money service business.

4,964,712

1,443

54,771

1 Cash and deposits

4,970,942

Claims provable in bankruptcy, claims
provable in rehabilitation and other
Long-term prepaid expenses

Assets (Million yen)

AssetsCapital surplus

Long-term loans receivable from directors
and employees

Other

The progress of our activities during this period has resulted in 54.771 billion yen in total assets
at the end of the period, an increase of 12.939 billion yen from the end of the previous period.

(Liabilities)
38,469,492

Current assets

23rd fiscal year

As of
September 30, 2015

332

Net assets
19,10816,186

22nd fiscal year 23rd fiscal year
(As of Sept. 30, 2015)(As of Sept. 30, 2016)(Thousand yen)

Consolidated statement of cash flows

22nd fiscal year 23rd fiscal year
from Oct. 1, 2014 toSept. 30, 2015

As a result of advancements made in business activities
during this period, which included increases in assets
related to Money Service Business and becoming more
active in our investment activities, cash and cash
equivalents for the period ended September 2016
dropped to 25,187,536,000 yen, a decrease of
4,926,069,000 yen from the end of the previous period.
14

from Oct. 1, 2015 toSept. 30, 2016

Net cash provided by (used in) operating activities

3,709,772(748,659)

Net cash provided by (used in) investing activities(1,374,094)(3,415,138)

Net cash provided by (used in) financing activities

7,398,573(654,646)Translation differences of cash and cash equivalents

30,044(107,624)

Increase (decrease) in cash and cash equivalents

9,764,296(4,926,069)

Balance of cash and cash equivalents at the beginningof the period

20,349,309

30,113,605

Balance of cash and cash equivalents at the end of the period

30,113,605

25,187,536

Consolidated financial statements

Management system

Consolidated statement of income(Thousand yen)

22nd fiscal year

23rd fiscal year

from Oct. 1, 2014 toSept. 30, 2015

from Oct. 1, 2015 toSept. 30, 2016

Net sales 5

9,030,892

12,113,864

Cost of sales

1,919,836

2,769,578

Gross income

7,111,055

9,344,285

Selling, general and administrative
expenses

4,133,784

5,524,779

Operating income 6

2,977,270

3,819,506

Non-operating income

91,96175,056

Interest income

7,716

5,088

Dividends income

5,271

6,719

Equity income of affiliates

20,724—

Earning on investment in silent partnership

1,218

—

—

12,425

Earnings on reversal of dividends payable

1,050

933

Rent income

13,97818,363

Commissions received

15,586

21,842

Exchange earnings

22,030

—

Other

4,385

9,683

Earning on investment in partnership

Total non-operating expenses
Interest expenses

68,777

4,986—

15,375

Loss on investment in partnership

3,541

—

Rent expenses

13,674

18,035

Stock issue expenses

45,317——72,010

4,441

3,274

Ordinary income 7

3,000,455

3,780,880

Extraordinary income

56,962589,884

Income from securities sold

30,766

194,057

Gain on change in equity

26,196—

Exchange losses
Other

Earnings from phased acquisitions—

395,827

2,148

33,121—

21,906

2,148

9,407

—

1,807

Income before income taxes

3,055,268

4,337,643

Corporate, inhabitant and enterprise taxes

1,295,625

1,492,877(91,075)(66,160)

1,850,718

2,910,926(2,730)—1,853,449

2,910,926

Extraordinary expense
Losses from changes in equity
Loss on retirement of noncurrent assets
Loss on disaster

Income taxes-deferred
Net income
Loss attributable to non-controllinginterests (loss)
Profit attributable to owners of parent 8

Corporate governance

Information security

Our fundamental approachto corporate governance

5 Net sales

We consider this to be one of the most important issues in management. It is important to devise and implement governance systems
necessary for healthy business development, while simultaneously
ensuring both the efficiency and legitimacy of management. In orderto achieve these objectives, our intention is to execute an even moretransparent style of management through timely disclosures ofmanagement information for shareholders and investors.

Aiming to establish the infrastructure of payment processing inJapan, our group of companies makes it our mission to help deliver
payment systems that are secure and convenient for both consumers
and for businesses. In addition to utilizing our own unique information assets, for the business practices we employ in pursuing thismission many stakeholders entrust us with their information assets,
including personal information. As a company that creates added
value through payments by credit cards and other such means,
protecting these information assets from external threats is the mostcritical management issue we face as we set our sights on further
growth. Understanding this, we are building and operating information security systems, ensuring that the necessary level of protection
is in place, and taking the appropriate security measures for the
information assets of our company and those of our stakeholders.

Our efforts to spearhead growth of the e-commerce market have produced growth that exceeded our target for Money Service Business(MSB) such as “GMO payment after delivery” and “GMO-PG Remittance Service”, in addition to growth in payment services. As a result,net sales were 12,113,864,000 yen (34.1% higher than the same term
the previous year).
6 Operating income

While we enjoyed the benefits of economies of scale that go along withhigher net sales, strong performance for services such as “GMO-PG
Remittance Service” and “GMO payment after delivery” raised our net
sales cost ratio. At the same time, growth of some Money Service Businesses (MSB) brought about higher selling costs and more staff meant
higher labor costs.
As a result, operating income margin was 31.5%. Moreover, we
exceeded our initially planned income growth rate, a metric that ourcompany particularly emphasizes, by 2.1%. Operating income totaled
3,819,506,000 yen (an increase of 28.3% from the same period theprevious year).
7 Ordinary income

While we did receive commissions, we also recorded exchange
losses of 72,010,000 yen and an ordinary income margin of 31.2%.
We exceeded our initially planned income growth rate, a metric that
our company particularly emphasizes, by 0.8%, and ordinary income
totaled 3,780,880,000 yen (an increase of 26.0% from the same
period the previous year).

113,682

1,802

Investment losses from equity method

Consolidated statement of income:Points to consider

8 Profit attributable to owners of parent

For extraordinary income, earnings from phased acquisition wererecorded when additional acquisition of GMO-FG shares was completed. Income from securities sold was also recorded when we soldpart of our investments in securities. As a result, profit attributable toowners of parent was 2,910,926,000 yen (57.1% increase from thesame period the previous year).

Overview of corporate governance system
We have implemented a structure which includes the appointmentof two external directors, who offer advice and opinions from aneutral perspective, while overseeing the full-time directors.
Our four-member board of auditors also includes two external
auditors, and is working together with the internal audit office andaccounting auditors while building an audit structure. Additionally,
the board of directors makes all decisions on important matterssuch as the execution of critical operations and the remunerationof directors, in addition to important decision items for strengthening governance.

Certified ISO27001 compliant
With a scope that encompasses all ofour business locations, we have beencertified as compliant with the ISO/IEC 27001: 2013 global information
security standard (within Japan,
the JIS Q27001:2014 standard).

ComplianceFully PCI DSS compliant

In our group of companies, we consider the scope of complianceto include a) ordinances, b) ethics and social norms, c) rules,
regulations, and procedures, and d) management vision. With anawareness of “adapting to the demands of society” (known as fullset compliance) which includes observance of ordinances, we are
actively boosting the compliance mentality of all our employees. In
its yearly audit plan, our internal audit office also reviews our stateof compliance with ordinances, articles of incorporation, company
rules, and other such regulations. When the circumstances arefound to require improvements, we take corrective measures,and follow up to ensure the corrections are being made.
In addition to the normal reporting systems based on chainsof command, we are building and operating an internal notification
system for incidents where compliance violations are thought
to have occurred within our company.

The services we provide are in fullcompliance with version 3.1 of the PCI
DSS global security standard for thecredit card industry, which was jointly
formulated by the five global credit card
brands JCB, American Express, Discover, MasterCard, and Visa.
As such, we are delivering peace of mind to all of our customers,in addition to secure credit card payments.

Privacy Mark certified
As recognition that we are taking the appropriate
measures to safeguard personal information, we
have received Privacy Mark certification whichsignifies compliance with the Japanese Industrial
Standard “JIS Q 15001: 2006 personal information protection
management systems requirements” for the handling of
personal information.

Introducing our IR pageOn our company website, you can find information for all of our shareholders and investors
about our business activities and movements,
including company and financial information.
We urge you to take a look, and gain adeeper understanding of what our company
is all about.
https://corp.gmo-pg.com/ir/
Company page

15

Services page

16

Company information

Company overview

Members of the Board(As of September 30, 2016)(As of December 18, 2016)

Name
Established
Head office
Capital stock
Capital reserve
Number of employees
Business outline
Memberships

Major subsidiaries

GMO Payment Gateway, Inc.
(3769; Tokyo Stock Exchange, First Section)
March 1995
Humax Shibuya Bldg. 7F
1-14-6 Dogenzaka, Shibuya-ku, Tokyo, Japan
4,712 million yen
4,964 million yen
600 (consolidated)
Integrated payment related services and financial services
Japan Consumer Credit Association (JCA)
Japan Multi-Payment Network Promotion Association (JAMPA)EC Payment Forum
Japan E-Commerce Consultant Association (JECCICA)
GMO Epsilon, Inc.
GMO Payment Service, Inc.
GMO Financial Gate, Inc.
GMO Payment Gateway Pte Ltd.
Macro Kiosk Berhad

Stock information (As of September 30, 2016)

Major shareholders

Total number of authorized shares: 102,400,000

Chairman & Director
President & Representative Director
Executive Vice President
Executive Vice PresidentManaging Director
Director
Director
Director
Director
Director
Director
External Director
External Director
Auditor (Full-time)
AuditorExternal Auditor
External Auditor

Masatoshi Kumagai
Issei Ainoura
Ryu Muramatsu
Satoru Isozaki
Yuichi Hisada
Yasuhiko Kimura
Tomoyuki Murakami
Shinichi Sugiyama
Yusuke Arai
Masashi Yasuda
Masaru Yoshioka
Masaya Onagi
Akio Sato
Yasuhiro Kanda
Takashi Iinuma
Kazuo Ikeda
Kazutaka YoshidaTotal number of issued shares:

37,150,500

Number of shareholders:

4,641

Shareholders and numbers of shares
Financial institutions

20.84%

Other institutions

Individuals, others(19,313,100 shares)(3,499,505 shares)

51.99%(7,741,700 shares)

9.42%

Financial instruments
Foreign institutions, etc.
business operators
17.16%
0.58% (216,874 shares)(6,376,821 shares)

Treasury shares

0.01%

Stock ownership
ratio (%)

Name of shareholder

Shares owned

GMO Internet, Inc.

19,186,100

51.64

Japan Trustee Services Bank, Ltd. (Trust account)

2,072,500

5.57

The Master Trust Bank of Japan, Ltd. (Trust account)

1,509,700

4.06

Sumitomo Mitsui Banking Corporation

1,250,800

3.36

Issei Ainoura

1,000,100

2.69

J.P. Morgan Bank Luxembourg S.A. 380578

568,500

1.53

Northern Trust Co. (AVFC) RE IEDU UCITS
CLIENTS NON LENDING 15 PCT Treaty Account509,000

1.37

State Street Client Omnibus Account OM02

493,778

1.32

State Street Bank and Trust Co. 505019

365,400

0.98

The Dai-Ichi Life Insurance Company, Ltd.

346,000

0.93

Note: We calculate stock ownership ratio after deducting treasury shares(2,500 shares) from total number of issued shares.

(2,500 shares)

Stock price movement (By month, Sept. 2008 through Nov. 2016)
(Yen)

8,000

7,000

Company directors (excluding external directors)
and presidents of consolidated subsidiaries within Japan

6,000

5,000

4,000

3,000

3

2,000

Masatoshi Kumagai

Issei Ainoura

Ryu Muramatsu

Satoru Isozaki

Yuichi Hisada

Chairman & Director

President & Representative
Director

Executive Vice President
General Manager of Corporate
Value Creation Strategy
Division, Director of GMO
Payment Gateway Pte Ltd

Executive Vice President
General Manager of System
DivisionManaging Director
General Manager of
Innovation Partners Division

1,000

2
1
9

12

2008

3

6

2009

9

12

3

6

2010

9

12

3

6

2011

9

12

3

6

2012

9

12

3

6

2013

9

12

3

6

2014

9

12

3

6

2015

9

12

3

6

9

2016

1. Moved stock listing to the first section of the Tokyo Stock Exchange on September 17, 2008.
2. On July 1, 2012 the Company executed a 200-for-1 stock split of common stock. We have adjusted the stock price retroactively taking the stock split into account.
3. On October 1, 2014 the Company executed a 2-for-1 stock split of common stock. We have adjusted the stock price retroactively taking the stock split into account.

Yasuhiko Kimura

Tomoyuki Murakami

Shinichi Sugiyama

Yusuke Arai

Masashi Yasuda

Director
General Manager ofCorporate Support Division

Directorand President &Representative Director and
COO of SMBC GMO
Payment, Inc.

Director
General Manager of IT
Service Department, System
Division and Manager of
IT Service Department

Directorand President &Representative Director of
GMO Epsilon, Inc.

Director

Masaru Yoshioka

Katsunari Mukai

Akira Takano

Director
Senior Executive Officer,
Management Departmentof Strategic Business,
Innovation Partners Division

GMO Payment Service, Inc.
President & Representative
Director

GMO Financial Gate, Inc.
President & Chief Executive
Officer

17

Notes for shareholders
Business year

[Announcements]
1. Points of note
(1) In principle, procedures such as change of shareholder address, bank remittance specifications for
dividends, and purchase requests, are handled by the account management institution (securities
company, etc.) where the account was opened. Please contact the securities company or other suchinstitution at which you opened your account. Please note that the shareholder registry administrator(Mitsubishi UFJ Trust and Banking Corp.) does not handle such matters.
(2) Unpaid dividends can be received at the main branch, or other branch offices of Mitsubishi UFJ Trustand Banking Corp.
2. Dividend calculation statements
The enclosed “Dividend Calculation Statement” also serves as the “Notice of Payment” created basedon regulations specified in the Act on Special Measures Concerning Taxation. After receiving paymentof the dividend, it can serve as confirmation of the dividend amount and as information used when filingincome taxes. Shareholders who receive dividends through their securities accounts (pro-rated method
for number of shares) should contact the securities company that performs the transactions for details.
3. For procedures pertaining to shares registered in special accounts, please contact the institution thatadministers special accounts, Tokyo Securities Transfer Agent Co., Ltd.
Mailing address and phone number
2-8-4 Izumi, Suginami-ku, Tokyo 168-8522 Tokyo Securities Transfer Agent Co., Ltd. Business Center
0120-49-7009 (toll-free)

October 1 through September 30 of the following year

Base dates for dividends of surplus December 31, March 31, June 30, September 30
Annual meeting of shareholders

Annually in December

Shareholder registry administrator

Mitsubishi UFJ Trust and Banking Corp.

Administrator contact information

Mitsubishi UFJ Trust and Banking Corp.
Stock Transfer Agency Department
10-11, 7-chome, Higashisuna, Koto-ku, Tokyo 137-8081
0120-232-711 (toll-free)

Stock listing

Tokyo Stock Exchange

Method of public notices

Through electronic public notices

Notices published at

http://corp.gmo-pg.com/ir/(However, when electronic public notices cannot be published due to an accident or any otherinevitable circumstances, we will publish them in the Nihon Keizai Shimbun newspaper).

*At the annual meeting of shareholders held on December 20, 2015, it was decided that the board of directors would be the decision-making body for dividends of surplus, and that the record
dates for these dividends would be December 31, March 31, June 30, and September 30. As a result, we are able to distribute dividends of surplus on four occasions throughout the year.
However, in order to ensure the retained earnings that our business structure requires, our plan calls for the year-end dividend to be the single dividend of surplus distributed during the year.

18