25TH ANNIV
since 1995 TOMIGAYA

In 2020,
we are celebrating
our 25th anniversary

DIGITAL GARAGE

ANNUAL REPORT 2020

MISSION

CONTEXTCOMPANYCONTENTS

REAL
LOCAL
MARKETINGPRESENT&CYBER
INTERNATIONALTECHNOLOGY
FUTUREMISSION

02

Financial Results Highlights and New Mid-term Plan

03

Consolidated Financial Highlights

05

BUSINESS OVERVIEW

07

Since its establishment in 1995, Digital Garage has put itself forward as

Financial Technology Segment

09

Marketing Technology Segment10

a company that creates contexts for the internet era. In using the word,“context,” we mean shared understanding based on relationships,

Incubation Technology Segment

11

environments, culture, and ideas. We established DG as a company that

Long-term Incubation Segment

12

would explore ways for creating internet contexts incorporating realManagement System

13

space and cyberspace which is set to expand by leaps and bounds andCorporate Governance15

linking Japan with the rest of the world, marketing with technology, andFinancial Information

19

the present with the future. We also established DG to be a company that

Non-Financial Information

25

would create contexts useful for the world. And, indeed, DG has built a

GROUP BUSINESS ACTIVITIES

27

Company & Stock Information

29

Cautionary Statement
Discussions of Digital Garageʼs current plans and strategies,
and outlooks for future performance, included in this annual
report are based on information available as of the preparationof this report. Digital Garage believes the views expressed arereasonable as of the time this report was prepared.
Nevertheless, risk and uncertainty are inherent in discussionsof the future. Users of this report should bear in mind thatvarious factors may cause actual results to differ fromexpectations or outlooks expressed in this annual report.

solid track record of constantly being at the cutting edge of internet
development, and taking on “first-in-Japan” projects.
We are proud that the history of DG is the history of the internet in Japan.
Looking to the future, we will remain steadfast in our efforts to add a newpage to the histor y of the inter net by creating new ser vices that
contr ibute to s ociet y. We aim to accomplish much and welcome
anticipation of our results.

DIGITAL GARAGE

02

ANNUALREPORT

Financial Results Highlights
and New Mid-term Plan

Revenue increased 4% YoY to 36.9 billion JPY and profit before tax decreased 25% YoY to 10 billion JPY
In recurring businesses, double-digit growth was recorded again in both revenue and profit, and the fair value of investee companies also increased
In FY2020, revenue was 36,936 million JPY (+3.5%
YoY), profit before tax was 10,008 million JPY(-25.4% YoY), and profit attributable to owners ofparent was 7,420 million JPY (-24.1% YoY).
“Revenue in recurring business,” which is gained fromthe stable enabling platforms including the Financial
Technology Segment (FT Segment) and the MarketingTechnology Segment (MT Segment), enjoyed a strong
growth by 17.5% YoY. In the Long-term Incubation
Segment (LTI Segment), the performance of equitymethod affiliate Kakaku.com, Inc. contributed toposting “share of profit of investments accounted forusing equity method” of 3,702 million JPY(+9.3% YoY).
In the Incubation Technology Segment (IT Segment),
the balance of operational investment securities
increased by 9,851 million JPY from the end of theprevious fiscal year to 36,546 million JPY mainly due toa rise in the fair value of securities held.

JPY in Millions
Revenue

Revenue in recurring business
Revenue in operational investment securities
Other income
Finance income
Share of proﬁt of investments accounted for using equity method

Expenses

Cost of sales
Selling, general and administrative expenses
Other expenses
Finance costs

Proﬁt before tax

Proﬁt attributable to owners of parent

JPY in Millions
Revenue

FT Financial Technology
MT Marketing Technology
IT

Incubation Technology

LTI Long-term Incubation

On the other hand, in addition to the effects of theappreciation of the yen in foreign exchange rates,“ revenue in operational investment securities ”
decreased YoY, and selling, general and administrative
expenses temporarily rose mainly due to equipment
costs incurred for the expansion of the head office,resulting in a decrease in profit before tax.

The financial position at the end of FY2020 was as follows:
Assets: Total assets at the end of the current fiscal year increased by
15,406 million JPY from the end of the previous fiscal year to 162,296
million JPY. This is mainly because of an increase of 11,946 million JPY
in property, plant and equipment primarily due to new acquisition andthe recognition of right-of-use assets through lease transactions relating
to the expansion of the head office, 9,851 million JPY in operational
investment securities primarily through new investments in investment
businesses and fair value valuation of investee companies, 3,403 million
JPY in trade and other receivables on the payment business, etc., and2,336 million JPY in investments accounted for using equity method,
despite a decrease of 15,452 million JPY in cash and cash equivalents.
Liabilities: Total liabilities at the end of the current fiscal year increased by
9,956 million JPY from the end of the previous fiscal year to 109,501 million
JPY. This is mainly because of an increase of 8,123 million JPY in otherfinancial liabilities (non-current liabilities) primarily due to the recognitionof lease liabilities related to the expansion of the head office, and 5,005
million JPY in bonds and borrowings (current and non-current liabilities)
related to the expansion of the head office, despite a decrease of 4,595
million JPY in trade and other payables on the payment business, etc.
Equity: Total equity at the end of the current fiscal year increased by
5,450 million JPY from the end of the previous fiscal year to 52,795
million JPY. This is mainly because of an increase of 6,127 million JPY in
retained earnings due to the addition of profit attributable to owners ofparent, etc., despite a decrease of 874 million JPY in net change in fairvalue of equity instruments.
03

DIGITAL GARAGE

Others/Adjustments and Eliminations
Proﬁt before tax

FT Financial Technology
MT Marketing Technology
IT

Incubation Technology

LTI Long-term Incubation
Others/Adjustments and Eliminations

FY19.3

FY20.3

YoY%
Amount+1,249+3.5

35,68736,936+17.5+3,974

6,090

4,020

‒34.0

‒2,070

1,933

2,416

+25.0

+483

117

93

‒20.2

‒24

4,835

3,720

‒23.1

‒1,11522,26426,929+21.0+4,665

11,296

14,022+24.1+2,726

332

492

+48.2

+160

26,68722,713

12,036

10,401+15.7+1,635

235

379

+61.1

+144

13,42410,008‒25.4‒3,416

7,420

9,771

‒24.1

‒2,35135,68736,936

YoY%
Amount+1,249+3.5+15.6+1,162

12,922

15,375+19.0+2,454

8,022

4,868

‒39.3

‒3,154

7,133

7,929

+11.2

+796

164

155

‒5.2

‒8

13,42410,008‒25.4‒3,416

1,215

1,853

+52.4

+637

6,889

3,563

‒48.3

‒3,326

4,378

4,701

+7.4

+323

‒2,408‒4,158-‒1,750FY19.3

FY20.3
8,609

7,447

4,049

3,349

+20.9

+700

Note) Revenues here shows revenue from are external revenues. Segment profit before tax is before
elimination of intersegment transaction and corporate revenue and expenses.

JPY in Millions

End of FY19.3

End of FY20.3

Current assets

Difference

99,18698,852‒334

Cash and cash equivalents

48,15432,702‒15,452

Trade and other receivables

23,25426,657+3,403Operational investment securities

26,69536,546+9,85147,70463,444+15,740

Property, plant and equipment

9,421

21,367+11,946

Goodwill

6,575

7,689

+1,114

Investments accounted for using equity method

19,13921,475+2,336

146,890

162,296+15,406

52,42050,838‒1,582

2,211

4,927

+2,717

Non-current assets

Total assets
Current liabilities
Borrowings
Trade and other payables

45,79941,203‒4,595

Non-current liabilities

47,12558,663+11,538

Bonds and borrowings

35,95938,247+2,288Other ﬁnancial liabilities

5,430

13,553+8,123

Deferred tax liabilities

4,744

5,426

+682

Total liabilities

99,545109,501+9,956

Total equity

47,34552,795+5,45046,60952,033+5,424Equity attributable to owners of parent
Share capital

7,504

7,591

+88

Capital surplus

4,235

4,409

+174

Treasury shares‒5,026‒5,012+14

Other components of equity

1,303

324

‒979

Retained earnings

38,59344,721+6,127

Non-controlling interests

736

762

+26

Total liabilities and equity

146,890

162,296+15,4062020

Financial Results Highlights and New Mid-term Plan

Reviewing the 3-year Mid-term Plan (FY2018.3 – FY2020.3)
In FY2020, DG terminated its three-year Mid-term Plan under the slogan
of “Open Incubation toward 2020.” Over the three-year period of the Midterm Plan, we continued to promote “Open Incubation,” which is the next
step for “Open Innovation,” the advancement of technological innovationin collaboration with a variety of companies, and nurturing the germ of apromising business in an open ecosystem together with group companies
and third-party companies.
In the FT Segment, we provided a variety of payment solutions and madeexpansions in both EC payments and face-to-face payments, resulting
in the achievement of 20% annual profit growth. In the MT Segment,
we achieved our target at 16% average annual growth in recurringbusinesses mainly due to the success of our strategy aimed at improving
profitability in our mainstay digital advertising business. In the IT and LTI
Segments, the investment hurdle rate was 2.2 times over the three-year
period, and the target was almost achieved. ROE (capital efficiency) was
17%, and the dividend payout ratio (shareholder return) was 18%.

Formulating the Mid-term Plan for the Next Five Years
Creating the Next-Generation DX (Digital Transformation) Context in a New OrderIn FY2021, which marks the 25th anniversary of the founding, DG has launched
its Mid-term Business Plan for the next five years under the concept of“Designing our New Normal Context.”
In the new Mid-term Plan, as in the previous plan, numeric targets were set as
growth indicators for the recurring business and investment hurdle rates for theinvestment business.
Under the previous Mid-term Plan, we were able to surpass the 15%
average annual growth rate in profit before tax, which was set as the target
in the recurring businesses, the FT and MT Segments. Taking this point into
consideration, we will aim for 20% growth in profit before tax for the next five
years. The LTI Segment also targets an average annual growth rate of 15% in

profit before tax. In the IT Segment, we aim to achieve ROI of 2.5 times and willcontinue to make investment and recovery.
For capital efficiency indicators, we continue to set the return on equity ratio at
20%. The DG Group will promote management with the focus of capital efficiency.
With regard to shareholder return indicators, we have newly set a target of adividend payout ratio of 20% for the actual cash flow (business cash flow before
income taxes) generated from the businesses. Taking into account the increase ingains and losses on fair value valuation not associated with cash flows in the IT
Segment due to the voluntary application of the International Financial ReportingStandards (IFRS), we aim to achieve a more stable shareholder return by setting
a dividend policy that reflects the DG Groupʼs actual cash flow.

Previous Mid-term Plan (FY2018.3 – FY2020.3)
Growth Indicators
FY17.3 (Full year conversion)

FT 2.1 billion JPY
MT 1.4 billion JPY

Proﬁt before tax
CAGR

+15 %
+15 %

(Reference) Total in recurring businesses

CAGR

Results(JGAAP)

2.5× ROI

FY20.3

+20%
+ 9%
+16%

4.0 billion JPY
MT 1.9 billion JPY
LTI 4.7billion JPY
FT

2.2×

20 %

17%

※

20 %

IT

ROI

2.5 ×

ROE

20 %

Shareholder
株主還元 指標
ReturnShareholder Return

Dividend payout ratio+ 20 %+ 20 %+ 15 %

Capital Efﬁciency

Capital Efﬁciency

ROE

CAGR

Investment Indicators in the Incubation Business

Hurdle Rate for Investment

IT LTI

New Mid-term Plan (FY2021.3 – FY2025.3)

18%※

Dividend payout ratio to businesscash flow before income taxes

20 %*Results of ROE and dividend payout ratio are calculated based on the weighted average for FY2018.3 to FY2020.3.

DIGITAL GARAGE

04

ANNUALREPORT

Consolidated
Financial Highlights

Revenue

Ratio of equity attributable to owners of parent to total assets (equity ratio)(JPY in Millions)60,16943,76336,45235,68736,936

FY19.3

FY20.325,503

FY16.62020

Key Performance Indicators

FY17.3

FY18.3

FY18.3

IFRS

JGAAP

Revenue rose 3.5% YoY, to 36.9 billion JPY in
FY2020. “Revenue in recurring business,” which isgained from the stable enabling platforms including
the FT Segment and the MT Segment, enjoyed astrong growth by 17.5% YoY. In addition, in the LTI
Segment, the performance of equity-method affiliate
Kakaku.com, Inc. remained strong. Meanwhile, in
the IT Segment, “revenue in operational investment
securities” fell 34.0% YoY, primarily due to the impactof the reactional drop after recording revenue gainedwith a large-scale exit case in FY2019 and the effectsof the appreciation of the yen in foreign exchange
rates.

Profit before tax

38.9%

36.6%
34.7%

FY16.6

FY17.335.7%

FY18.3

FY18.3

JGAAP

31.7%

32.1%

FY19.3

FY20.3IFRS

The ratio of equity attributable to owners of parent to total
assets rose 0.4 percentage points YoY, to 32.1% in FY2020.
Lease liabilities (non-current assets) relating to office leases
was recognized due to the expansion of the head office. In
addition, borrowing mainly associated with investments inhead office facilities rose, and the total liabilities increasedby 10 billion JPY (+10.0% from the end of the previous fiscal
year). Meanwhile, other factor includes an increase inretained earnings due to the addition of the profit, resulting
in an increase in total equity by 5.5 billion JPY (+11.5% fromthe end of the previous fiscal year).
The DG Group strives to achieve an optimal capital
structure with the focus on the balance between equity andinterest-bearing liabilities. Going forward, we will maintainfinancial health while conducting the financial and IR
strategy utilizing some level of asset/equity ratio.

ROE(JPY in Millions)

13,42410,008
7,619

7,575

8,376

5,819

FY16.6

FY17.3

FY18.3

FY18.3

JGAAP

FY19.3

FY20.3

Profit before tax fell 25.4% YoY, to 10.0 billion JPY in
FY2020. In addition to stable revenues in both the FT
and MT Segments, profitability improved owing to thesuccess of cost control and other related measures,
resulting in double-digit profit growth in bothsegments. However, profit before tax dropped due toprofit decrease in the IT Segment and a temporary
increase in selling, general and administrative
expenses in the corporate division due to equipment
costs incurred for the expansion of the head office.

26,695
16,745

FY17.3

JGAAP

FY16.6

12,365

FY18.3

FY18.3

FY19.3

IFRS

FY17.3

FY18.3

FY18.3

FY19.315.0%

FY20.3IFRS

Per-Share Dividends

36,546

FY16.6

13.5%

16.1%

15.3%

JGAAP

(JPY in Millions)

11,857

17.6%

IFRS

Operational investment securities

11,16421.9%

In FY 2020, ROE fell 6.9 percentage points YoY, to15.0%. This was mainly because of a decrease inprofit attributable to owners of parent compared tothe previous fiscal year, and an increase in total equity
primarily due to an increase in retained earnings.
In the new Mid-term Plan that will commence in
FY2021, the DG Group continues to set the return on
equity ratio at 20% as an indicator of capital efficiency.
Going forward, we will continue to make effort into
achieving the ROE at 20% level through managementwith the focus on profitability and capital efficiency.

FY20.3

With the voluntary application of IFRS from FY2019,
the equity value of the investee companies in the IT
Segment is valuated at fair value as of the end of
the fiscal year and reflected on the balance sheet as
operational investment securities.
The balance of operational investment securities for
FY2020 increased YoY by 9.9 billion JPY to 36.5 billion
JPY. Because about two-thirds of the investment
portfolio is dollar-denominated assets, the trendof the strong yen in foreign exchange rates had an
impact on the value through the conversion into
the yen. Meanwhile, the fair value of DGʼs equity inexisting investee companies rose with an increase by
4 billion JPY from the end of the previous fiscal year.
In addition, new investment progressed smoothly andequitably in various areas including the US, Asia andJapan.

(JPY)

38
30

10

25
15
20
15
5

5

FY14.6

FY15.6

FY16.620

FY17.3

Commemorative dividend

24

FY18.328

28

FY19.3

FY20.3

The DG Group views shareholder returns as one of its
principal management concerns. We make decisions
on shareholder returns based on considerations offactors such as DGʼs financial condition, businessperformance outlook, and future capital needs.
With regard to the FY2020 year-end dividend, we
paid a commemorative dividend of 10 JPY per shareto celebrate our 25th anniversary of the founding in
FY2021, in addition to an ordinary dividend of 28 JPY
per share based on the above policy.

Ordinary dividend*FY2017 has a nine-month irregular account settlement period as a result of the change of closing date.
*IFRS have been voluntarily applied since FY2019.

05

DIGITAL GARAGE

DIGITAL GARAGE

06

ANNUALREPORT

BUSINESSOVERVIEWKEY FIGURES FY2020

FT

FINANCIAL TECHNOLOGYSEGMENT2020

BUSINESS OVERVIEW
Segment Revenue Ratio

Profit before tax - Result

4,049(JPY in Millions)

Revenue

Profit before tax

8.6 billion JPY 4.0 billion JPY 2.6 trillion JPY
YoY +15.6%

YoY +20.9%

3,349

Transaction
volumeNumber of Transaction

YoY +24.0%

2,539

FY2020

1,758

23.3%

2,809

1,479

FY16.6

FY17.3

FY18.3

FY18.3

JGAAP

Segment Revenue Ratio

KEY FIGURES FY2020

MT

MARKETING TECHNOLOGYSEGMENT

Profit before tax

Advertisement volume

15.4 billion JPY 1.9 billion JPY 34.9 billion JPY
YoY +19.0%

YoY +52.4%

1,960

41.6%

(TSE Mothers 7069)

YoY - 4.6%

KEY FIGURES FY2020

IT

INCUBATION TECHNOLOGYSEGMENT

Segment Revenue Ratio

FY17.3

FY18.3

FY18.3

Profit before tax - Result

FY2020

13.2%

3,563
766

1,325

1,321

FY18.3

FY18.3

YoY +36.9%

FY17.3JGAAP

KEY FIGURES FY2020

LTI

LONG-TERM
INCUBATION SEGMENT

Segment Revenue Ratio

FY19.3

Principal Companies

Profit before tax - Result

Monthly traffic for all sites of Kakaku.com

7.9 billion JPY 4.7 billion JPY 255.87 million
YoY +11.2%

4,378

FY2020FY20.3IFRS(JPY in Millions)

Profit before tax

Principal Companies

6,889

3,105

FY16.6

Revenue

FY20.3Operational investment securities

4.9 billion JPY 3.6 billion JPY 36.5 billion JPY
YoY - 48.3%

FY19.3IFRS(JPY in Millions)

YoY - 39.3%

Principal Companies

1,215

JGAAP

Profit before tax

1,853

1,856

1,075

FY2020FY20.3

IFRS

1,396

FY16.6

Revenue

FY19.3

Profit before tax - Result(JPY in Millions)

RevenuePrincipal Companies

3,053

2,899

3,177

4,701
(TSE First Section 2371)

3,621

21.5%

YoY +7.4%

FY16.6

FY17.3JGAAP

FY18.3

FY18.3

FY19.3

FY20.3IFRS*FY2017 has a nine-month irregular account settlement period as a result of the change of closing date.
*IFRS have been voluntarily applied since FY2019.
*The value of segment profit before tax for FY2019 has been revised retroactively following the segment change (from MT to FT) of Naviplus Co., Ltd., which was implemented in FY2020.

07

DIGITAL GARAGE

DIGITAL GARAGE

08

FT

FINANCIAL TECHNOLOGY SEGMENT

Business Model

Business Model

As one of Japanʼs largest payment system providers, we provide a diversity of comprehensive payment
platforms including credit card payment, convenience store payment, and QR code payment systems, etc.
As a payment service provider, the Financial Technology Segment
collectively provides EC businesses and face-to-face retail stores with anever-increasing number of diverse payment methods, including mobile
carrier payments, ID payments, QR code payment services, international
QR code payment services that are available to foreign visitors to Japansuch as Alipay and WeChat Pay, various electronic money such as Suica,
in addition to credit card payments and convenience store payments.
The business model for the payment business, which is the mainstay of

the FT Segment, is to subtract the commissions paid to the credit cardcompanies and convenience store chains from the payment commissions
resulting from multiplying the amount of payments handled by retailbusinesses by the commission rate and record it as revenue. Additionally,transaction types are diversifying, as commissions are being collectedaccording to the number of payments handled through the provisionof capabilities such as fraud detection systems and QR code issuingsystems.

Business model and stakeholders
Credit card payments

Bank payments

International payments

Carrier payments

QR Code payments

ID payments

Cryptocurrency payments

Post-settlement payments

OnlineThe Marketing Technology Segment is responsible for “marketing”, one
of Digital Garageʼs enabling platforms. Specifically, we provide optimal
solutions for our clientsʼ needs and challenges in a range of industries
including financial and payment service provision, contents service provisionsuch as apps and games, EC site operation, real estate development, andmanufacturing in order to maximize our clientsʼ marketing ROI (costeffectiveness).
We are providing a one-stop service ranging from streamlining advertising
using agency functions, affiliate and targeted marketing, analysis and the like,and providing creative output to app development, CRM for improved customer
engagement and planning consultation. At BI. Garage, Inc., a consolidated
subsidiary, we are providing a large number of national clients with solutions
based on data analytics utilizing the various big data owned by the DG Groupand data provided by collaboration partners. BI. Garage, Inc. announced inJune 2020 that it would jointly establish the Content Media Consortium with28 major Japanese media companies with the intent to jointly promote thevalue of content and explore the value of advertising. While societies facehuge issues on ad fraud and brand safety, we will develop a joint ad platformbusiness and other related solutions that realize a safe, secure and reliable
advertising environment on internet media and provide higher-value online
ads that reflects synergies with contents, etc.
By providing this kind of variety of marketing solutions, we are monetizing
a wide range of business models, including pay-per-performance, profit
sharing, and development on a contract basis. In addition, by utilizing various
marketing data and payment and purchase data in cooperation with the FT
Segment, we will create the Groupʼs comprehensive power.

We provided businesses in a variety of industries with end-to-end marketing scenariosand solutions that integrate the digital and the real world

Overseas

Electronic money/point payments

Providing clients in a variety of industries with end-to-end marketing solutions that integrate the digital and real

Structure of the MT Segment

Japan

Convenience store payments

MT

MARKETING TECHNOLOGY SEGMENT

Clients

MT Segment

Contact point

Banks/credit card/
securities/payments/
financial in general

Digital field

Web media

Multi-QR code payments

Real

Cosmetics/
consumer goods
manufacturers

Data analysis DMP
Utilizingnext-generation
technologies

Web/appdevelopment

Advertising for
capturing new customers.
Brand advertising
Data-driven advertising

Influencer marketing
SNS accountmanagement

Attracting
EC customers
Sales promotion

SNS

Mail order/EC

EC businesses

Member stores

Face-to-face retail stores

Alliance strategy
・Recruit

Apps/games/
content services suchas e-books(mobile POS)

・TOSHIBA TEC
(POS)

App
Real estate developers

OMO* field

・ANA Group

Users

Distribution/retailMarket Environment and Business Overview
Growth continues far beyond the rate of the EC market, total amount of payments handled was approximately
2.6 trillion JPY and the number of payments handled was approximately 490 million
In calendar year 2019, EC market of Japanʼs BtoC grew by a solid 7.7% YoY to19.3609 trillion JPY, according to “FY2019 Global Economy Survey for Formulatingan Integrated Domestic and External Economic Growth Strategy (E-CommerceMarket Survey)” of the Ministry of Economy, Trade and Industry (METI).
Also, Japanʼs ratio of cashless payments is low among developed countries,
at 19.8% in 2016, and in order to respond to inbound demand ahead of the 2021
Tokyo Olympics and Paralympic Games, and EXPO 2025 Osaka, METI released its“Cashless Vision” in April 2018, which aims to achieve a cashless payment ratio of
40% by June 2025. The Japanese government is promoting cashless payments
in Japan through the implementation of the “Point Reward Project for Consumers
using Cashless Payment” from October 2019 to June 2020. We predict that
progression toward a cashless society will expand the market.
For FY2020, revenue was 8,609 million JPY (+15.6% YoY) and profit before tax was

4,049 million JPY (+20.9% YoY). In addition to continuous growth of the EC market
and steady expansion of business of existing merchants, regarding face-to-facepayments, we are providing multi-payment solutions packaged with TOSHIBATEC CORPORATIONʼs POS registers, primarily for large-scale retail stores. Also,in collaboration with Recruit Group and ANA Group, we are providing a payment
solution using mobile POS and mPOS terminals. Additionally, we started in
May 2019 to provide “Cloud Pay” that enables multiple QR code payments to be
introduced at the same time in a simple manner by just setting up a single QR codein a store. By providing this and other payment services we are covering the retailstore market comprehensively, thereby leading to the operational expansion.
Based on longstanding knowledge and technological capabilities, we will
accelerate the growth of payment systems which have become an extremely
important part of social infrastructure, as a new FinTech platform.

Search engine

Consumer

Digital marketingand formulating
strategy of digitaltransformation

Other/human resources/
transportation/
hotels/travel/etc.

Mass media

OMO marketing
Formulating
overall strategy

Attracting retailcustomers using apps/
Web/payment
services CRM

Store design/VMD
Event planning
Sampling

Real store*“Online Merges with Offline” A marketing philosophy that merges online and offline to remove the border between the two and have the starting point for everything begin online

Market Environment and Business Overview
Profit margin improved due to the selection and enhanced efficiency of profitability-oriented projects, profit
before tax for FY2020 increased 52% YoY
In terms of the market environment, internet advertising expenditures inJapan* grew by 19.7% YoY to 2.1048 trillion JPY in calendar year 2019, which
was double-digit growth for six consecutive years. This is the first time thatthe amount exceeds 2 trillion JPY over TV media advertising expenditures.
In addition, actively managed ads, which account for about 60% of internet
advertising expenditures, have been a driver of market growth, raising
expectation for continuous market expansion.

For FY2020, revenue was 15,375 million JPY (+19.0% YoY) and profit before
tax was 1,853 million JPY (+52.4% YoY). In the Marketing Technology Company,
the payment app development business linked to the payment business in
the FT Segment performed well. Also, the amount of ad handling on credit
card issuance increased against the backdrop of the Japanese governmentʼs
reward project for cashless payment. In addition, profit margin improved
thanks to cost control and other strategies to improve profitability.

*Dentsu Inc., 2019 Advertising Expenditures in Japan09

DIGITAL GARAGE

DIGITAL GARAGE

10

IT

INCUBATION TECHNOLOGY SEGMENT

Business Model

LTI

LONG-TERM INCUBATION SEGMENT

Business Model

Aiming for investment and recovery based on the criteria of achieving ROI of 2.5 times and continuous increase of the fair value
In the Incubation Technology segment we are proceeding to invest in
next-generation technologies in global areas including the US, Asia andJapan, targeting unlisted companies at a wide range of growth stages,
from seed and early-stage startups through to later-stage businesses.
By supporting the acceleration of business expansion throughcollaborations in payment and marketing, fields in which the DG Group
operates, and collaborations in new fields of technological development

being worked on by DG Lab, we will aim to increase the value of thecompanies we invest in. Also, by advancing a cycle in which the funds
raised through exits are invested in new startups based on the criteriaof achieving ROI of 2.5 times, we are aiming to continuously enhance
the fair value. Fair value valuations, which represent the equity valueof those investee companies, are recorded in the balance sheet as thebalance of operational investment securities.

We aim to create medium- to long-term, continuous cash inflow by collaborating with companies receiving DGGroup investment, as well as initiatives such as establishing joint ventures with other collaboration partners.
In the Long-term Incubation Segment, we strive to create
medium- to long-term, continuous cash inflow by utilizing theknowhow of investment cultivation and business development thatthe DG Group has been nurturing until today.
The DG Group is known as an internet incubator, and to realize

Investment results and track record

one of its missions of creating new businesses, we believe it isimportant to create not only short-term incubation results (gains
on sales of shares), but also long-term, continuous cash inflow
as represented by our investment and business development at
Kakaku.com, Inc.

LTI Segment Business ModelJapan

Overseas

Main exited investments (IPO, M&A, sale)

Main exited investments (IPO, M&A, sale)

Bengo4.com (TSE Mothers: 6027)

Giftee (TSE Mothers: 4449)

Twitter (NYSE: TWTR)

Facebook (NASDAQ: FB)

MEDIA DO (TSE First Section: 3678)

CrowdWorks (TSE Mothers: 3900)

LinkedIn (NYSE: LNKD)

Gojek

Linkage of FT/
MT businesses

ReturnBusinessdevelopment
SmartHR

Twilio (NYSE: TWLO)

Main current investments
Welby (TSE Mothers: 4438)

Main current investments
Tokopedia

Sen do Technologies

QD Laser

WHILL

Droom

Expedient Healthcare Marketing

Moneytree

Repro

NoBroker Technologies Solutions

MX Technologies

NOIN

Stmn, inc.

GrubMarket

Game Closure

Kakaku.com, Inc. Group

Business
investment

Hold formedium- tolong-term
period・・・Goodpatch (TSE Mothers: 7351)

Foundation of
JV company

ContextLogic

Business value

Aucfan (TSE Mothers: 3674)

Sell

Strategic business group

LTI

For the creation of
medium- to longterm, continuous
cash inflow

IT

Short-term
incubation
results

Business growth
Time*Include some stocks of non-IT Segment

Market Environment and Business Overview

Business Overview

The balance of operational investment securities for FY2020 increased by 9.9 billion JPY from the end of the previous fiscal year to 36.5 billion JPY

Investment profit on equity method of Kakaku.com, Inc. contributed to strong performance and profit before tax was 4.7 billion JPY

In FY2020, the year-end balance of operational investment securities
increased by 9,851 million JPY from the end of the previous fiscal year
to 36,546 million JPY due to the smooth progress in new investments
in Japan and overseas, in addition to an increase in fair value valuationsof investees mainly in the Asian region. The operations also progressedsmoothly, such as nearly achieving ROI of 2.5 times, which was set as
the target for FY2020, the final year of the Mid-term Plan.
In terms of the market environment of venture investment in 2019
(January-December 2019), the amount of annual investment by
Japanese VCs/CVCs continued to increase by 10% YoY to 276.5 billion

In FY2020, although up-front expenses for the businesses underinvestment cultivation were incurred, the performance of Kakaku.
com, Inc., which were accounted for using equity method, remained
steady. Such factors contributed to the DGʼs results and profit before
tax amounted to 4,701 million JPY (+ 7.4% YoY).
Crypto Garage Inc., which is a consolidated subsidiary established asa joint venture with Tokyo Tanshi Co., Ltd., intends to commercialize
advanced financial services utilizing the blockchain technology incooperation with Blockstream Corporation Inc., which is a strategic
investee company of the DG Group and a developer of the blockchain

JPY.* On the other hand, the said amount started to decrease YoY in
January-March 2020, when COVID-19 began to spread globally. The
environment surrounding venture enterprises is currently changing
drastically. While some companies are being forced to change
businesses due to the rapid acceleration of shift to digital, some startup
companies are standing out and making a great leap forward, thus
generating the likelihood of further divergence in the future trend.
Under such environment, we aim to realize a strategic investment
portfolio that accords with the new investment environment throughthe Global Incubation Stream in U.S. Silicon Valley and other areas.

technology. The firm commenced service verifications in January
2019 in collaboration with market participants and regulators
under the Government of Japanʼs Regulatory Sandbox System, andcompleted trial experiments for service in January 2020. We will
promote the activities to launch full-scale operations in FY2021 andcontribute to earnings over the medium- to long-term period.
In addition, BrainscanTechnologies, Inc., a consolidated subsidiary,is promoting the creation of new businesses by utilizing healthcare
data and AI, such as the brain MRI screening business for driving
operators.

* Venture Enterprise Center “Quarterly Trend”

11

DIGITAL GARAGE

DIGITAL GARAGE

12

ANNUALREPORT

Management
SystemDirectors

joi
ito

MakotoSoda

Representative Director

Member, Board of Directors and Co-Founder

JOICHI ITO

MAKOTO SODA

Apr 1983

Aug 1995

Jun 1994

KAORU HAYASHI
Aug 1995

Representative Director,
From Garage, Inc.
Founded Digital Garage, Inc.
Representative Director,
Digital Garage, Inc.

Jun 2003

Chairman and Director,
Kakaku. com, Inc. (current)

Nov 2004

Representative Director,
President and Group CEO,
Digital Garage, Inc.

Jul 2016

Director Chairman andCEO, Digital Garage US, Inc.
(current)

Sep 2016

Representative Director,
President Executive Officer
and Group CEO, Digital
Garage, Inc. (current)

May 2017

Representative Director,
Chairman and President,
DG Incubation, Inc. (now DG
Ventures, Inc.) (current)

Aug 2018

Chairman CEO, DG
Communications Co., Ltd.
(current)

Sep 2018

Founded Digital Garage, Inc.
Representative Director,
Digital Garage, Inc.

Member, Board of Directors

Jun 1997

Director, Digital Garage, Inc.
(current)

Apr 2011

Director, MIT Media Lab

Jun 2012

Board Member, The New
York Times Company

Jun 2013

Director, Sony Corporation

Sep 2009

May 2015

Board Member, Chairman,
PureTech Health plc

Director, Head of the GroupCEO Office, Digital Garage, Inc.

Jan 2012

Director, in charge of the
Corporate Strategy Division,
Digital Garage, Inc.

Apr 2000

Joined Monex Securities Inc.

Mar 2007

Joined Digital Garage, Inc.
Executive Officer, in charge of
the Corporate Strategy DivisionSep 2016

Jun 2017
Apr 2019

Jun 2019

Apr 2020

Kenji
Fujiwara

Emi
Omura

Director, Senior Executive
Officer, in charge of the
Corporate Strategy Divisionand the Media Incubation
Technology Segment, Digital
Garage, Inc.
Director, econtext Asia
Limited (current)
Director, Senior Executive
Officer, in charge of the
Corporate Strategy Divisionand the Long-term Incubation
Segment, Digital Garage, Inc.
Director, Senior Executive
Officer, in charge of the
Corporate Strategy Division,
Digital Garage, Inc.
Director, Senior Managing
Executive Officer, in charge of
the Corporate Strategy Division,
Digital Garage, Inc. (current)

Member, Board of Directors

KEIZO ODORIMasashiTanakaMember, Board of Directors

MASASHI TANAKA

Masahito
Okuma

Member, Board of Directors

HIROSHI SHINO
Apr 2000

Joined Softbank FinanceCorporation

Nov 2011

Director and Executive
Officer, VeriTrans Inc.

Apr 2013

Representative Director,
Executive Officer and CEO,NaviPlus Co., Ltd. (current)

Apr 2000

Joined Faith, Inc.

Aug 2001

Joined Digital Garage, Inc.

Apr 1999

Joined Mitsubishi Corporation

Director, Faith, Inc.

Jul 2006

Mar 2011

Joined FAST RETAILING CO., LTD.

Sep 2010

Director, Digital Garage, Inc.

Director, DG&Ibex Company (nowMarketing Technology Company)

Sep 2012

Director, in charge of the Payment
Segment (now the Financial Technology
Segment), Digital Garage, Inc.

Jan 2011

Senior Operating Officer, Digital Garage, Inc.
Executive Vice President, DG&Ibex Company(now Marketing Technology Company)

Representative Director andPresident, Econtext, Inc. (current)

Oct 2015

Director, iRidge, Inc. (current)

Sep 2016

Director, Senior Executive Officer, incharge of the Financial Technology
Segment, Digital Garage, Inc.

Jun 2017

Representative Director andPresident, DK Gate, Inc. (current)

Jun 2018

Director, DG MARKETING DESIGN, Inc.

Oct 2018

Director, Senior Executive Officer, incharge of the Financial Technology
Segment, and the Marketing Technology
Segment, Digital Garage, Inc.

Jan 2019

Director, TD Payment
Corporation (current)

Feb 2019

Director, CyberBuzz, Inc. (current)

Jun 2019

Director, DG Daiwa Ventures,Inc. (current)

Mar 2020

Director, BI. Garage, Inc. (current)

Apr 2020

Director, Senior Managing Executive
Officer, in charge of the MarketingTechnology Segment and the Longterm Incubation Segment, Digital
Garage, Inc. (current）

Jun 2020

YasuyukiRokuyata

Director, Crypto Garage, Inc. (current)

Sep 2012

Director, Head of Corporate Strategy
Division, Digital Garage, Inc., and Executive
Vice President of DG&Ibex Company (nowMarketing Technology Company)

Sep 2016

Representative Director, DG
Technologies, Inc. (current)

Apr 2017

Director, Senior Executive Officer, in chargeof DG Lab, in charge of the Incubation
Technology Segment, and Head of Corporate
Strategy Division, Digital Garage, Inc.

May 2017

Director, Vice President and
COO, DG Incubation, Inc. (nowDG Ventures, Inc.) (current)

Jun 2017

Director, DK Gate, Inc. (current)

May 2018

Director, Senior Executive Officer,
in charge of DG Lab, the Incubation
Technology Segment, and GroupCEO Division, Digital Garage, Inc.

Sep 2018

Director, Crypto Garage, Inc.

Jun 2019

Director, Senior Executive Officer, incharge of DG Lab, in charge of the
Incubation Technology Segment, and
the Group CEO Division Executive
Director, Digital Garage, Inc.

Dec 2019

Director, Digital Garage US, Inc. (current)

Apr 2020

Director, Senior Executive Officer, incharge of the Incubation Technology
Segment, Digital Garage, Inc. (current)

MakotoSakai

Member, Board of Directors

MASAHITO OKUMA

Jun 2005

Oct 2013

hiroshishino

Dec 2015

Vice President, UNIQLO USA LLC

Nov 2016

Joined Digital Garage, Inc.

Apr 2017

Corporate Officer and COO of
DG Lab, Digital Garage, Inc.

May 2017

Director, DG Incubation, Inc.
(now DG Ventures, Inc.) (current)

Oct 2013

Director, Executive Officer
and COO, VeriTrans Inc.

Dec 2017

Director COO, Digital Garage
US, Inc. (current)

July 2015

Corporate Officer, Digital
Garage, Inc.

Apr 2018

Senior Corporate Officer and COO
of DG Lab, Digital Garage, Inc.

Sep 2015

Director, ECONTEXT, INC.
(current)

Jun 2018

Director, Senior Executive Officer,
COO of DG Lab, Head of GroupCEO Division, Digital Garage, Inc.

Sep 2015

Representative Director,
Executive Officer andPresident, VeriTrans Inc.
(current)

Sep 2016

Senior Corporate Officer,
Digital Garage, Inc.

Oct 2016

Director and COO, ANA
Digital Gate, Inc. (current)

Oct 2018

Director, SCORE.Co., Ltd.
(current)

Jan 2019

Director, TD Payment
Corporation (current)

Apr 2020

Senior Corporate Officer andin charge of the Financial
Technologies Segment,
Digital Garage, Inc.

Jun 2020

Director, Senior Executive
Officer, in charge of the
Financial Technology
Segment, Digital Garage, Inc.
(current)

Sep 2018

President, Crypto Garage, Inc.

Apr 2019

President and CEO, Crypto
Garage, Inc. (current)

Jun 2019

Representative Director, DG
Daiwa Ventures, Inc. (current)

Jun 2019

Director, Senior Executive Officer, incharge of Group CEO Division, in chargeof the Long-term Incubation Segment,
and COO of DG Lab, Digital Garage, Inc.

Aug 2019

Director, Dentsu ScienceJam
Inc. (current)

Nov 2019

Representative Director,
BrainscanTechnologies, Inc. (current)

Apr 2020

Director, Senior Executive Officer,
in charge of DG Lab Division, and in
charge of other related business,
Digital Garage, Inc. (current)

Junji
Inoue

Koji
MakinoEMI OMURA

Outside Director

Director (Audit and Supervisory Committee Chairperson)

YASUYUKI ROKUYATA

MAKOTO SAKAI

Outside Director, Audit and Supervisory Committee Member

Outside Director, Audit and Supervisory Committee Member

JUNJI INOUE

KOJI MAKINOMINORU OHNO

Apr 1969

Oct 2002

Dec 1995

Director, Digital Garage, Inc.

Apr 1986

Joined Mitsubishi
Corporation

Oct 1988

Established Labor
Consultants Ohno OfficeApr 1988

Registered to the Tokyo Bar
Association

Apr 2003

Executive Officer, Mitsubishi
Corporation

Joined KPMG Minato Audit
Firm (now KPMG AZSA LLC)
Tokyo Office

Jan 1977

Representative Director andPresident, DG Incubation,
Inc. (now DG Ventures, Inc.)

Admitted to practice law
in Japan (Nagoya Bar
Association)

Apr 1974

Mar 2011

Aug 1992

Apr 2003

Representative Member, Labor
Consultants Ohno Office (current)

Aug 2000

Established the Sakai
Makoto Law OfficeJun 2003

Representative Director,
Executive Officer &President, IT Frontier Corp.

Became a Certified Public
Accountant

Jan 2006

Mar 2005

Partner, the Sirius Law
OfficeEstablished andRepresentative, Makino Koji
Certified Public Accountant
Office (current)

Feb 2009

Director, BE1 Accounting
Office (current)

Sep 2012

Outside Auditor, Digital
Garage, Inc.

Jun 2013

Outside Auditor, Inageya Co.,
Ltd. (current)

Sep 2016

Outside Director, Audit andSupervisory Committee
Member, Digital Garage, Inc.
(current)

Dec 2017

Outside Director, Obara
Group Inc. (current)

Jun 2003

Joined Shufu-no-mise Daiei,
Inc. (now The Daiei, Inc.)
Representative Director &President, Daiei Convenience
Systems, Co. Ltd. (nowLawson, Inc.)
President, Representative
Director, FANCLCORPORATION

Sep 2008

Outside Director, Digital
Garage, Inc. (current)

Jun 2009

Director, Kakaku.com, Inc.

Admitted to practicelaw in Japan (Tokyo Bar
Association)

Jul 2008

Partner, Athena Law Office

Sep 2010

Associate Expert,
International Labour Officein Geneva, the International
Labour Organization (ILO)

Jan 2014

Sep 2014
Jun 2019

Director, the Office ofInternational Affairs,
Japan Federation of Bar
Associations
Outside Director, Digital
Garage, Inc. (current)Counsel, Kamiyacho
International Law Office(current)

Jul 2011

Director and COO, Digital Garage, Inc.

Sep 2012

Director and Vice President, incharge of the Incubation Segment(now the Incubation Technology
Segment), Digital Garage, Inc.

Jul 2013

Director, Digital Garage US, Inc.

Sep 2010

Sep 2016

Director, Vice President Executive Officer,
in charge of the Incubation Technology
Segment, Digital Garage, Inc.

Outside Auditor, Digital
Garage, Inc.

Sep 2016

Outside Director, Audit andSupervisory Committee
Member, Digital Garage, Inc.
(current)

Apr 2017
Jun 2018

Director, Audit and Supervisory
Committee Chairperson, Digital
Garage, Inc. (current)

Sep 2018

Auditor, Crypto Garage, Inc. (current)

Jan 2019

Auditor, TD Payment
Corporation (current)

Jun 2019

Auditor, BrainscanTechnologies,
Inc. (current)

Jan 2020

DIGITAL GARAGE

Director, Vice President Executive
Officer, Digital Garage, Inc.

Auditor, ACADEMIE DU VIN (current)

Mar 2019

Representative, the Sakai
Makoto Law Office (current)

Jun 2007

Director, eAccess Ltd.

Apr 2012

Adviser, Bewith, Inc.
(current)

Jun 2012

Executive Managing Director,
Remote Sensing Technology
Center of Japan (current)

Sep 2012

Outside Auditor, Digital
Garage, Inc.

Jul 2016

Adviser, Takasago ThermalEngineering Co., Ltd.
(current)

Sep 2016

Outside Director, Audit andSupervisory Committee
Member, Digital Garage, Inc.
(current)

Outside Director, Audit and Supervisory Committee Member

minoruohno

KENJI FUJIWARA
Jun 1994

13

Joined Daiwa Institute of
Research Ltd.

Sep 2006

Director, Crypto Garage, Inc.
(current)

Outside Director

Joined Dresdner Kleinwort
Benson Securities, Ltd.

Keizo
Odori

2020

Kaoru
Hayashi

Outside Director, Audit and Supervisory Committee Member

Sep 2003

Auditor, Digital Garage, Inc.

Apr 2009

Part-time lecturer, Graduate Schoolof Law, Aoyama Gakuin University

May 2013

Chairman, Tokyo Labor and Social
Security Attorney Association

Jun 2013

Vice Chairman, Japan Federation of Laborand Social Security Attorneyʼs Associations

Dec 2013

Council Member, Japan Pension
Service Management Council

Jun 2015

Advisor, Japan Federation of Labor andSocial Security Attorneyʼs Associations

Jun 2017

Chairman, Tokyo Labor and Social
Security Attorney Association

Jun 2017

Outside Director, Audit and Supervisory
Committee Member, Digital Garage, Inc.

Jun 2019

Chairman, Japan Federationof Labor and Social Security
Attorneyʼs Associations (current)

Jun 2020

Outside Director, Audit andSupervisory Committee Member,
Digital Garage, Inc. (current)(as of June 23, 2020)
DIGITAL GARAGE

14

ANNUALREPORT

Corporate
Governance

2020

Corporate Governance
Basic Concepts
medium- to long-term increases in corporate value, byenhancing and strengthening corporate governance thatemphasizes transparency, fairness, and speedy, resolutedecision-making.

Consistent with our philosophy and credo, as described
below, Digital Garage, Inc. (DG) is committed to living
up to the faith of our shareholders and all otherstakeholders, and to achieving ongoing growth and＜Philosophy＞＜Credo＞

With the First Penguin Spirit mindset, Digital
Garage strives to contribute to make a sustainable
society by connecting internet business to various
fields, shaping contexts, and creating new
businesses.

TENACITYTENACITYOPENNESSOPENNESSINTEGRITY

INTEGRITY

AGILITY

AGILITY

COURAGECOURAGE

Corporate Governancethe decision making and supervisory functions with the aimof bringing greater speed and efficiency to the executionof business. Moreover, with the aim of strengthening
the independence and objectivity in the functions of thenomination and remuneration of Directors within the Boardof Directors and bolstering the corporate governance further,
DG established the Nomination and Remuneration Advisory
Committee consisting of three or more members of the
Directors and whose majority is comprised of independent
Outside Directors in February 2020.

DG has always viewed corporate governance as a criticalmanagement concern and striven to take the steps necessary
to ensure strong governance. Given the adoption of Japanʼs
Corporate Governance Code, we switched to the “company
with audit and supervisory committee” form of organizationto achieve the “growth-oriented governance” called for by thecode. This organizational change was formalized following theapproval of a resolution to that effect at the 21st Shareholdersʼ
General Meeting, convened on September 29, 2016. Under
the “company with audit and supervisory committee” formof organization, directors who are Audit and Supervisory
Committee members perform oversight for management
decision making and the performance of duties by directors inmeetings of the Board of Directors. The Audit and Supervisory
Committee, meanwhile, oversees the performance of
duties by directors more broadly. While realizing a greater
strengthening of corporate governance through ensuring
no less than a 1-to-3 ratio of outside directors in the Boardof Directors, DG has introduced an executive officer system
to clearly separate the business execution function from

Corporate Governance Organization Chart

Board of Directors
The Board of Directors of Digital Garage, Inc. consists of
14 members. Five of the 14 members are also Audit andSupervisory Committee members, and four of these fivemembers are outside directors. Of the nine members who
are not Audit and Supervisory Committee members, two are
outside directors. In addition to its regular monthly meetings,
the Board of Directors meets at other times, as necessary.
In FY2020, meetings of the Board of Directors were held atotal of 16 times. The Board of Directors makes decisions
on important matters set forth in laws and regulations, theArticles of Incorporation, and Board of Directors Provisions. It
also oversees the activities of board members as they performtheir duties. Outside directors perform governance functions
by drawing on their individual expertise, management
experience and insight, to oversee board activities andcontribute advice, from an independent perspective. Morethan one third of the total 14 members of the Board of
Directors or six members are Outside Directors, and all of
the six Outside Directors have been reported as independent
directors in accordance with the regulations of the Tokyo Stock
Exchange. In this way, we believe a system is in place at theBoard of Directors to conduct highly effective oversight.
Audit and Supervisory Committee
DG ʼ s Audit and Supervisory Committee consists of fivemembers - one director and four outside directors. Audit
and Supervisory Committee members attend Audit andSupervisory Committee meetings held after regular monthly
meetings of the Board of Directors. They attend otherimportant meetings, including those of the Board of Directors,
as well, and are free to express their opinions and contributein other ways to enhance the effectiveness of corporate
governance.

During FY2020, we addressed the following points by taking steps to strengthen our governance in accordance with thefundamental principles of the Corporate Governance Code established by the Tokyo Stock Exchange.
Outline of initiatives based on the fundamental principles of the Corporate Governance Code

Exercise Shareholder
Rights at General
Shareholder Meetings

To provide shareholders enough time to consider the general meeting agenda, the following decisions were made at the 25th Ordinary Shareholders ʼ General
Meeting. (Supplementary principle 1-2 (2))
・Convening notices will be sent promptly by postal mail 20 days prior to the general meeting date.
・Convening notices will be posted on the web 22 days prior to the general meeting date.
Scheduling the general meeting to avoid the peak day (Supplementary principle 1-2 (3))
・The 25th Ordinary Shareholdersʼ General Meeting was scheduled to be held on June 23, 2020 to avoid the so-called general meeting peak day.
Promoting disclosure and provision of information in English in consideration of the share of overseas investors, etc. (Supplementary principle 3-1 (2))
・Operation of an English language version of the Companyʼs website.
・Disclosure of English language versions of convocation notices, financial results and important press releases.

Nomination andRemuneration of Directors

Establishment of the independent and optional Nomination and Remuneration Advisory Committees (Supplementary principle 4-10 (1))
・With the aim of strengthening the independence and objectivity in the functions of the nomination and remuneration of Directors within the Board of
Directors and bolstering the corporate governance further, DG passed a resolution, at the meeting of the Board of Directors held on February 21, 2020, of theestablishment of the Nomination and Remuneration Advisory Committee, which serves as the optional Advisory Committee of the Board of Directors, consistingof three or more members of the Directors and whose majority is comprised of independent Outside Directors.
To enhance the transparency of the remuneration determination process, the following actions were taken.
・Evaluating directors on the performance of their duties and contributions to the company based on a director grading system.
・Implementation of reporting by an advisory committee consisting of the representative director(s) and at least one outside director on proposed remuneration
for the representative director(s).
The following steps were taken as measures related to provision of incentives to Directors.
・Performance-based remuneration plan
・Stock option plan

Evaluation, Analysis,
and Disclosure of
Board Effectiveness

The Board of Directors implemented the evaluation and analysis of overall board effectiveness. The evaluations and analyses are made based on self-evaluations
conducted by individual Directors for matters such as the composition and the operation of the board, matters concerning board deliberations, the role and dutiesof the board, the role and duties of the Nomination and Remuneration Advisory Committee, and items of respective principles of the corporate governance code thatare not exercised.
The evaluation results for FY2020 confirmed that the overall board effectiveness has been sufficiently ensured. In particular, the evaluation indicated DG maintains
a framework that facilitates swift decision-making related to important operational matters, lively discussions on medium-to-long term strategy and planning,and proactive information disclosure to promote dialogue with shareholders. With respect to the establishment of the independent and optional committee, by the
resolution of the Board of Directors meeting held on February 21, 2020, DG has established the Nomination and Remuneration Advisory Committee, which consistsof three or more members of the Directors and whose majority is comprised of independent Outside Directors. DG executes solid initiatives focused on PDCA cycle.
The DG Group continue to work on the enhancement of its management aimed at enriching corporate value and push through the improvement of functions within
the Board of Directors and the Nomination and Remuneration Advisory Committee, with reflecting the evaluation result on the effectiveness, and various opinions
and the likes raised by each member of the Board of Directors through the effectiveness evaluation processes.
The evaluation recognized succession planning, human resource development, etc., as issues to consider to further enhance overall board effectiveness. Further,
the DG Group will bolster its PDCA cycle for the enhancement of corporate value by putting in place management focused on cost of capital and will have ample time
to discuss matters concerning ESG and SDGs (Sustainable Development Goals.)(Supplementary principle 4-11(3))(as of June 24, 2020)

Propose/Report

Select/Oversee
Delegate decision-making
for important operational
matters

Establish
Submit forconsideration/
ReportAudit/Report

Audit and Supervisory Committee

ReportElect/Dismiss

Cooperate

DirectReportNomination and Remuneration
Advisory Committee
Consult

Report/Express opinions

ReportInternal Audit Office
Audit

Audit

Cooperate

Independent Auditor

Board of Directors

Elect/Dismiss

Independently Audit

President, Executive Officer
Delegate certain management
authority and responsibility

ReportReportExecutive Officers

15

DIGITAL GARAGE

Deliberate

Management
Committee

DG segments, departments, offices, and group companies

Consult

Cooperate

Compliance Committee
Information Security Committee, etc.

Internal Control System
To provide an environment that supports appropriate risktaking by directors and others, the Board of Directors has
acted to build and maintain proper internal control and risk
management systems. The Board of Directors supervises
these systems to ensure their effective operation. It has
also approved resolutions for the formulation of the Basic
Policies on the Construction of an Internal Control System,in accordance with Japanʼs Companies Act, Ordinance for
Enforcement of the Companies Act, and Financial Instruments
and Exchange Act.

Stronger Governance from Compliance with the Corporate Governance CodeShareholdersʼ General Meeting
Elect/Dismiss

Nomination and Remuneration Advisory Committee
DG has established the Nomination and Remuneration
Advisory Committee, which consists of three or moremembers of the Directors and whose majority is comprisedof independent Outside Directors. The Nomination andRemuneration Advisory Committee is made up of threemembers: Representative Director, Kaoru Hayashi,
independent Outside Director Kenji Fujiwara (Chairman),and independent Outside Director Makoto Sakai. Upon the
consultation with the President, Executive Officer, the electionof the Board of Directors and remuneration thereof (excluding
Audit and Supervisory Committee Member) are deliberated
and reported.

DIGITAL GARAGE

16

ANNUALREPORT

Corporate
GovernanceCompliance Statement
The corporate philosophy of Digital Garage is as follows:“With the First Penguin Spirit mindset, Digital Garage

strives to contribute to make a sustainable society byconnecting internet business to various fields, shaping
contexts, and creating new businesses.”In order to achieve this and ensure our sustainable
development, each and every employee is called upon
to understand changes in society and ensure that ouractions resonate with our environment, in the spirit of the“first penguin.” We recognize the irreplaceable roles that
our employees play in our efforts and the importance of2020

Compliance and Risk Management

Basic Information Security Policy
providing them with a rewarding working environmentthat they are proud to be a part of. In addition, individuals
must also commit to regulatory compliance.
DG has established a compliance program outlining
standards for individual business conduct with integrityand efficiency based on our shared ethical values.
In order to exercise the aforementioned corporate
philosophy, every staff member at DG is committed
to adhering to the compliance program guidelines asdetailed in the following seven articles in our code of
conduct.

DG regards the information we possess and our
information systems (computers, networks, etc.) for
executing business by DG and our subsidiaries ( “DGGroup”) as “information assets.” We make best efforts
for information security to safely handle these assets.

Operational structure for information security
CEO and directors in charge of information security appoint a
chief information security officer (CISO), who serves as a central
information hub in security management throughout the overall
DG Group. Because the DG Group implements different businessformats in each segment and different security risks must be
dealt with in each company, the group is taking required security

measures and acquires external certifications. CISO also conducts
reviews for multifaceted confirmation of the security structure. A
structure is set up in which, if a serious security incident occurs
in the DG Group, CISO serves a central role to promptly work with
DG ʼs management and respond appropriately to the problem.

Certifications＜Code of Conduct＞
1. Hold high ethical standards and conduct business in compliance with laws
2. Respect fundamental individual rights and diversity and maintain a healthy work environment free fromdiscrimination and harassment
3. Promote harmonious co-existence with society and conduct environmentally-responsible businessactivities
4. Foster transparency of business and fair and free competition
5. Maintain fair and healthy relationships with government and other public offices
6. Disclose necessary corporate information to stakeholders fairly and openly
7. Manage and utilize corporate assets and information appropriately and effectively

The DG Group is qualified to obtain third-par ty cer tifications
according to the special characteristics of our businesses.
DG has received Privac yMark cer tification for our per sonal
information protection management system complying to JIS Q 15001.
DG and our subsidiaries have received certification as a groupfor ISO/IEC 27001:2013, an international standard for information

security management systems (ISMS), and JIS Q 27001:2014,
a Japanese standard. Our subsidiaries that handle credit card
information have al so received Payment Card Industr y Data
Secur it y Standard (P CI DS S) cer tification, the inter national
security standard of credit card industry for the safe handling ofcredit card information.

Measures against cyber attacks
The DG Group recognizes the threat of increasingly diverse,
sophisticated cyber attacks, and is taking continual measuresagainst such attacks. These include incorporating multilayer

defense and the latest defense technologies into our systems.
We also educate officers and employees about threats to guard
against attacks involving internal parties (targeted attacks, etc.).

Business continuity
DGʼs Compliance Statement can be viewed on the following webpage.
https://www.garage.co.jp/en/company/corporate-governance/compliance

DG believes our social mission is to provide a range of online
ser vices. In the event of a disaster, cyber terrorism, system
failure, or other serious danger, we will first ensure securely andaccurately safekeeping customer information and continuing ourser vices to the maximum level possible, at the same time thesafety of our officers and employees and their family members.

Setting and promoting understanding of information security rules

Personal Information Protection Policy
In operating its businesses, DG receives and/or collects
personal information from customers, business partners,
employees, etc. DG recognizes the importance of

personal information and pays utmost care in protectingit.

For information on the Personal Information Protection Policy, please refer to the webpage below.
https://www.garage.co.jp/en/policy/

DG establishes infor mation secur it y r ules and continuallypromotes thorough understanding of them among officers andemployees by conducting security training for new hires, as wellas annual security training.

A n e m p l o y e e w h o b r e a c h e s l a w s , o r di n a n ce s , t h i s B a s i c
Information Security Policy, information security-related rules, orinternal regulations will be subject to penalties in compliance withthe company regulation manual, etc.

Code of Conduct
・DG employees strictly adhere to all information security provisions and practice stringent compliance management in accordance with theprotocols of applicable regulations, industry business norms and our code of conduct, as well as contractual security obligations.
・We set information security objectives to maintain an appropriate level of information security and work to reliably achieve them.
・We conduct ongoing activities related to the Basic Information Security Policy and have established a risk management cycle to counternew threats. We work to constantly review and continuously improve this policy.

List of certifications obtained by DG and our subsidiaries

Disclosure Policy
Emphasizing transparency, fairness, and continuity, DG
endeavors to provide information in a timely manner toall of its shareholders, investors and other stakeholders.
Our basic policy is to disclose information in compliancewith the regulations on timely disclosure establishedunder the Financial Instruments and Exchange Act andby Tokyo Stock Exchange, Inc. DG also strives to disclose
as proactively and quickly as possible even information
to which the timely disclosure regulations do not apply, if
we consider it useful in promoting understanding of DG.

For information on the Disclosure Policy, please refer to the webpage below.
https://www.garage.co.jp/en/ir/disclosurepolicy/

17

DIGITAL GARAGE

PrivacyMark

ISMS

Digital Garage, Inc.

○○

econtext Inc.

○

○

○

VeriTrans Inc.

○

○

○

DG Communications Co., Ltd.

○○

BI.Garage, Inc.
NaviPlus Co., Ltd.

○○DG Ventures, Inc.
Academie du Vin Co., Ltd.

PCIDSS○For information on the Basic Information Security Policy, please refer to the webpage below.
https://www.garage.co.jp/ja/compliance/security/

DIGITAL GARAGE

18

ANNUALREPORT

Financial
Information

2020

Summary of Consolidated Business Performance Indicators
Key Performance Indicators (JPY in Millions)
JGAAP

IFRS
FY14.6

FY15.6

FY16.6

FY17.3 (9 months)

FY18.3

FY18.3

FY19.3

FY20.333,751

38,08743,76336,45260,16925,50335,68736,936

Profit before income taxes

5,035

9,249

7,575

5,819

7,619

Profit before tax

8,376

13,42410,008Net profit

3,148

5,394

5,189

4,294

5,486

Profit

6,337

9,790

7,331

Profit attributable to owners of parent

2,847

5,081

5,165

4,289

5,461

Profit attributable to owners of parent

6,412

9,771

7,420

Total assets

71,00986,49577,336

91,687

108,596

Total assets

119,545

146,890

162,296

Net assets

36,48929,06530,66434,37139,017

Total equity

43,19947,34552,795

Cash flows from operating activities

–34

5,040

–2,6194,149

14,294

Cash flows from operating activities

12,316

2,580–12,322

Cash flows from investing activities–5,155509–1,072–1,453

1,009

Cash flows from investing activities

2,883–2,397–5,473

Cash flows from financial activities

11,2601,390–11,638

4,176–2,307

Cash flows from financing activities

174

8,509

2,363

Cash and cash equivalents at end of year

25,18334,07718,32225,33538,249Cash and cash equivalents at end of period

39,45048,15432,702

Net sales

Revenue

May 11,
2018

Trends in Share PriceIFRS Voluntary
Adoption Release
Date

（yen）

5,000

April 26,
2012
June 23,
2005

4,000

Made SBI VeriTrans Co.,
Ltd. (now VeriTrans Inc.)a subsidiary

Listing of
econtext Inc.

3,000

May 9,
2016
Changed listing to
the TSE First
SectionOctober 9,
2003

Dec. 14,
2000

Listing of
Kakaku.com,
Inc.

Listing ofDigital Garage,
Inc.

2,000

1,000

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

*On February 20, 2004, Digital Garage, Inc. conducted a 5 for 1 share split for its shareholders as of December 31, 2003.
On October 1, 2013, Digital Garage, Inc. conducted a 200 for 1 share split for its shareholders as of September 30, 2013.
This table is stated retrospectively and is based on the share split-adjusted share price.

19

DIGITAL GARAGE

DIGITAL GARAGE

20

ANNUALREPORT

Financial
Information

JGAAP
Current assets

IFRS
FY11.6

FY12.6

FY13.6

FY14.6

FY15.6

FY16.6

FY17.3 (9 months)

FY18.3Current assets

FY18.3

FY19.3

FY20.3
98,852

14,34528,00533,83745,45557,74348,324

59,62475,49678,77699,186

Cash and deposits

4,784

12,30815,32924,29430,956

15,70323,02932,922

Cash and cash equivalents

39,45048,15432,702

Notes and accounts receivable

1,466

2,479

2,688

3,658

3,824

5,441

7,056

7,741

Trade and other receivables

21,33023,25426,657

Money held in trust

2,501

3,404

3,768

889

3,120

2,592

2,264

5,307

Inventories

912

1,904

2,641

8,063

8,208

11,164

11,857

12,365

Operational investment securities

4,351

7,577

9,037

8,596

11,646

13,946

15,422

16,889

329

329

372

–48

–11

–524

–5

270

6,075

21,333

22,17325,55428,75229,011

32,06133,295

377

912

2,038

2,158

2,250

2,279

2,245

2,338

Operational investment securities
Receivables
Other
Non-current assets
Tangible fixed assets
Intangible assets

283

232

319

16,745

26,69536,546

Other financial assets

442

451

1,323

Income taxes receivable

44

6

324

Other current assets

482

394

980

40,76947,70463,444
21,367

Non-current assets

2,102

13,08011,093

8,587

7,574

7,455

7,224

9,869

Property, plant and equipment

8,495

9,421

Software

316

959

1,106

1,210

1,314

1,664

1,784

2,019

Goodwill

7,959

6,575

7,689

Goodwill

1,768

12,104

9,968

7,354

6,237

5,765

5,411

7,822

Intangible assets

2,104

2,575

3,496

Other
Investments and other assets
Investment securities
Other
Total assets

17

16

18

23

22

25

27

28

Investment property

2,966

3,046

2,932

3,595

7,340

9,041

14,80818,927

19,276

22,592

21,087

Investments accounted for using equity method

13,915

19,13921,475

3,305

4,299

5,521

10,644

14,22014,844

18,357

16,552Other financial assets

5,010

6,662

6,319

290

3,040

3,519

4,163

4,706

4,432

4,235

4,535

Deferred tax assets

195

137

45

Other non-current assets

124

148

120

20,42149,33856,01071,00986,49577,336

91,687

108,596
119,545

146,890

162,296

Total assets
Current liabilities
Notes and accounts payable
Short-term borrowing
Income taxes payable
Deposits
Other
Non-current liabilities
Bonds payable
Long-term borrowing

9,933

28,50521,801

25,461

50,62430,18738,815

540

1,154

1,232

1,629

2,039

2,728

3,713

49,5405,018

48,04452,42050,8382,519

10,740305

3,690

23,533

3,200

6,937

4,137

Borrowings

4,623

2,211

4,927

Current liabilities

46

740

810

1,241

2,147

720

435

1,008

Trade and other payables

39,40745,79941,203

6,168

14,956

18,22916,43420,99821,87625,12736,499Other financial liabilities

760

853

1,783

658

914

1,224

2,464

1,904

1,660

2,601

2,876

Income taxes payable

1,010

1,076

207

Other current liabilities

2,244

2,482

2,717

592

355

6,950

9,058

6,806

16,484

18,499

-

-

-

-

-

-

-

20,233-

Non-current liabilities

28,302

47,12558,663

351

183

6,799

8,841

5,546

15,37017,207

18,890Bonds and borrowings

19,24335,95938,247

Deferred tax liabilities

30

-

20

43

938

596

488

551

Other financial liabilities

5,244

5,430

13,553

Other

210

172

129

174

321

517

803

792

Retirement benefit liability

544

565

571

Provisions

326

321

589

Deferred tax liabilities

2,754

4,744

5,426

Other non-current liabilities

191

106

278

Total liabilities

76,34699,545109,501

Share capital

7,465

7,504

7,591

Capital surplus

3,748

4,235

4,409

Retained earnings

29,95538,59344,721–26–5,026–5,012Other components of equity

1,575

1,303

324

Total equity attributable to owners of parent

42,71746,60952,033

Non-controlling interests

483

736

762

43,19947,34552,795

119,545

146,890

162,296

Total liabilities
Shareholders’ equity

10,52528,861

28,752

34,51957,43046,671

57,31569,774

9,759

20,15525,27927,762

24,641

28,61031,63336,363

Common stock

1,872

6,017

7,330

7,399

7,426

7,435

7,437

7,464

Capital surplus

5,558

9,703

11,016

10,817

2,854

2,825

2,946

3,104

Retained earnings

2,398

4,505

7,003

9,615

14,43018,41921,30025,819

–69

–69

–69

–69

–70

–69

–50

–26

Accumulated other comprehensive income

64

115

426

2,679

4,003

1,502

1,956

1,440

Valuation difference on available-for-sale securities

64

–76

31

2,193

2,585

138

644

339

Foreign currency translation adjustment

-

191

394

485

1,416

1,363

1,312

1,100

71

174

1,468

5,906

126

119

132

369

-

31

84

141

295

431

648

844

9,895

20,47627,25836,48929,06530,66434,37139,017

20,42149,33856,01071,00986,49577,336

91,687

108,596

Treasury stock

Minority interests
Share acquisition rights
Total net assets
Total liabilities/net assets

21

2020

Consolidated Balance Sheet and Consolidated Statement of Financial Position (JPY in Millions)

DIGITAL GARAGE

Treasury shares

Total equity
Total liabilities and equity

DIGITAL GARAGE

22

ANNUALREPORT

Financial
Information

JGAAP
FY12.6

FY13.6

FY14.6

FY15.6

FY16.6 FY17.3 (9 months)

FY18.3

11,067
8,282

14,903
10,64427,964
21,53333,751
25,53438,087
25,84743,76332,27336,452
29,83860,16948,524Gross profit
Selling, general and administrative expenses
Directors’ compensation
Salaries
Bonuses
Legal welfare expenses
Welfare expenses
Retirement benefit expenses
Advertising expenses
Travel and transportation expenses
Taxes and dues
Commission fees
Business consignment expenses
Research and development expenses
Rent expenses
Depreciation
Amortization of goodwill
Other

2,784
2,649
286
851
40
128
21
6
31
52
34
137
75
29
269
66
177
439

4,258
2,637
287
825
77
128
25
9
39
84
58
124
76
52
274
39
188
343

6,431
5,109
403
1,319
65
162
48
33
95
157
111
203
291
38
404
99
940
731

8,216
5,608
458
1,428
85
199
82
34
190
200
91
277
241
59
430
107
756
962

12,240
7,431
524
2,440
152
349
102
65
101
212
128
286
288
79
654
136
754
1,161

11,490
7,288
466
2,599
171
381
99
66
194
167
143
317
306
56
644
140
471
1,062

6,613
5,889
330
1,998
181
306
74
49
127
125
131
228
258
114
447
120
353
1,039

11,644
9,333
481
3,178
276
496
105
72
180
212
217
478
416
252
658
153
570
1,581

Operating profit
Operating profit rate

135
1.2%

1,621
10.9%

1,322
4.7%

2,608
7.7%

4,810
12.6%

4,201
9.6%

723
2.0%

2,310
3.8%

Non-operating income
Interest income
Dividends income
Investment profit on equity method
Foreign exchange gains
Rent expenses on real estates
Other
Non-operating expenses
Interest expenses
Commission fees
Foreign exchange losses
Rent cost of real estate
Listed expenses
Investment loss on equity method
Other

925
17
11
866
30
88
43
6
30
0

1,215
8
42
1,004
112
32
15
128
49
1
13
62

2,179
14
43
1,361
499
222
38
423
102
50
127
94
48

2,307
7
30
1,741
143
278
105
472
88
0
189
191
3

3,737
18
0
2,081
1,091
337
210
936
98
554
275
9

3,031
18
0
2,406
371
236
1,040
85
689
248
16

3,246
5
29
2,528
331
352
292
56
0
223
10

3,305
9
0
2,768
359
167
597
79
66
160
259
31

Ordinary profit
Ordinary profit rate

972
8.8%

2,708
18.2%

3,078
11.0%

4,442
13.2%

7,610
20.0%

6,193
14.2%

3,679
10.1%

5,018
8.3%

58
46
0
0
71
9
22
0

63
20
42
0
236
3
222
8
2

1,304
18
153
1,131
1
168
22
88
33
23

630
374
220
35
38
7
0
30

2,463
2,364
99
824
27
77
658
62

1,392
157
521
713
10
8
1

2,265
47
1,829
386
2
124
16
104
3

2,669
33
1,032
1,471
131
67
31
25
10
0

958
8.7%

2,535
17.0%

4,215
15.1%

5,035
14.9%

9,249
24.3%

7,575
17.3%

5,819
16.0%

7,619
12.7%

47
911
9

409
2,126
19

1,520
–9
2,705
–11

1,919
–32
3,148
300

3,699
155
5,394
312

2,241
143
5,189
24

1,647
–121
4,294
4

2,028
104
5,486
25

Extraordinary income
Gain on change in equity
Gain on sales of investment securities
Gain on sales of shares of subsidiaries and associates
Other
Extraordinary losses
Loss on retirement of non-current assets
Loss on liquidation of subsidiaries and associates
Impairment loss
Loss on valuation of investment securities
Other
Profit before income taxes
Profit before income taxes rate
Income taxes–current
Income taxes–deferred
Net profit
Profit attributable to non-controlling interests
Profit attributable to owners of parent
Profit rate
23

IFRS
FY11.6

Net sales
Cost of sales

DIGITAL GARAGE

2020

Consolidated Statements of Income (JPY in Millions)

901
8.1%

2,106
14.1%

2,715
9.7%

2,847
8.4%

5,081
13.3%

5,165
11.8%

4,289
11.8%

5,461
9.1%

FY18.3

FY19.3

FY20.3

Revenue in recurring business
Revenuein operational‌18,141

22,713

26,687

investment securities

1,007

6,090

4,020

Other income

2,111

1,933

2,416

Finance income

764

117

93

Continuing operations

‌
Share
of profit of investments
accounted for using equity method

3,481

4,835

3,720

25,50335,68736,936

Cost of sales
Selling,
general and
‌

7,187

10,401

12,036

9,095

11,296

14,022Other expenses

542

332

492

Finance costs

303

235

379

17,12722,26426,929Profit before tax

8,376

13,42410,008

Income tac expense

1,857

4,088

2,677

Profit from continuing operations

6,518

9,336

7,331

Revenue

3,260

1,261

-

Expenses‌Profit (loss) before tax from

3,403

1,655

-

–143

–394

-

Income tax expense
Profit(loss) after tax from
‌

38

–225

-

–181

–169

-

-

898

-

Total

administrative expenses

Total

Discontinued operations

discontinued operations

discontinued operations
‌Loss (gain) on sales on
discontinued operations
‌Income tax expense from saleof discontinued operations
‌Profit (loss) fromdiscontinued operations

Profit

-

275

-

–181

454

-

6,337

9,790

7,331

6,412

9,771

7,420

–75

19

–89

139.66199.93161.37

Profit (loss) attributable to
Owners of parent
Non-controlling interests
Earnings (loss) per share (Yen)
Basic earnings (loss) per share
Continuing operations
Discontinued operations

–3.68

10.35

-

135.99210.28161.37

Continuing operations

138.63189.51147.82

Discontinued operations

–3.65

9.75

-

134.98199.26147.82

Total
Diluted earnings (loss) per share

Total

DIGITAL GARAGE

24

ANNUALREPORT

Non-Financial
Information

Number of Group employees

954

The number of DG Group employees
has increased with the expansion ofbusiness.

ESG in DG Group

Concept of New Mid-term Plan:
ESG resonance with “Designing our New Normal Context”
S(as of March 31, 2020)

SocialNumber of employees worldwide*77(as of March 31, 2020)

DG has been recruiting diverse
human resources globally.

E

Environment■ Sponsorship and support for the Tohoku Youth Orchestra aimed
at reconstruction after the Great East Japan Earthquake
・ Planning to support non-profit organizations networked withexperts from Boston■ Fostering and supporting social entrepreneurs through OpenNetwork Lab■ Support for activities in the Peace-Nippon Project
Archiving activities that preserve Japanʼs natural beauty in the
future*Number of non-Japanese employees in DG Group

Number of Group companies

31

2020

Non-Financial Information

There are 31 DG Group companies, ofwhich 18 are consolidated subsidiaries
and 13 are equity-method affiliates.

S

Sponsorship and support for
the Tohoku Youth Orchestra
An orchestra organized around children from the threedisaster-stricken prefectures to symbolize recovery
from the Great East Japan Earthquake. Mr. Ryuichi
Sakamoto presides over it as a volunteer. It was
positioned as a place of growth where children learned
about the world and experienced it with their peers
through instruction and performances by outstanding
musicians and exchanges
with people. We will continue
to provide support not only
through sponsorship but also
through social media andcreative programs.

Social(as of March 31, 2020)

Group ratio of female employees

35.1%

Many women are assuming active roles
as DG aims to establish a friendly
working environment for women.

(as of March 31, 2020)

Return rate after childcare leave100%(as of March 31, 2020)

E

Environment

DG emphasizes work life balance
for each and every employee andis implementing programs and aleave system to support work andchildrearing as well as caring.

G

Paid leave acquisition rate

72.5%
(as of March 31, 2020)

To increase the productivity of eachand every employee, DG is actively
recommending all employees takeleave.

6/42.9%(as of June 30 2020)

25

DIGITAL GARAGE

Six Independent Outside Directors
have been appointed, accounting
for 42.9% of the total of 14 Directors.

As a graduate of Open Network Lab, theentire DG Group provides support tosocial entrepreneurs, such as PIRIKA,
which deals with waste issues.
Example: PIRIKA, DG, andShibuya Ward collaborate
to promote projects toresolve river and marine
trash problems, where
artificial turf is the source.

Full-scale support
for NPOs launched
by Joichi Ito, a
director andco-founder,
together with
Reid Hoffman.
Beginning witha project aimed
Directors and Co-Founderat COVID-19,
Joichi Itowhich is being
promoted through a network of experts
from Boston, a mecca of global biotech,support and promotion of social
contribution-type projects that create
new normal by collaborating with the
DG Group for various projects utilizing
artificial intelligence, statistical analysis,
biotechnology, cybersecurity, etc. beyond
the barriers between industry, government,
and academia.

Projects● Development of COVID-19 diagnostics kit● Development of contact tracing

technologies and policies to maintainsocial activities● Global and open clinical trial design● Design of next-generation coworking
spaces, etc.

GovernanceFurther enhancement of corporate value through dialogue andcollaboration with shareholders and stakeholders, and strengthening of governanceG

Number of Independent Outside Directors/Ratio

Fostering and supportingsocial entrepreneurs

Cooperation in NPO activities utilizing
the latest technologies that bring together
industry, government, and academia

Governance■ Assigning SDGs officers in the U.S.
Selection of three SDGs measures
・ Solving social issues by contributing to the development ofinternet technology
・ Contribution to sustainable society development
・ Building Global Partnerships to Realize SDGs

Assigning SDGs designatedofficers in the U.S.
Corporate Officer Debbie Altomonte

DIGITAL GARAGE

26

ANNUALREPORT

GROUP BUSINESSACTIVITIES

econtext Inc.
Consolidated subsidiary

VeriTrans Inc.
Consolidated subsidiary

econtext Asia Limited
Consolidated subsidiary

NaviPlus Co., Ltd.
Consolidated subsidiary

ANA Digital Gate, Inc.
Affiliate

SCORE Co., Ltd.
Affiliate

TD Payment Corporation
Affiliate

econtext Inc. pioneered cash payments using kiosk terminals at convenience stores andhas promoted the provision of online payment services to EC businesses centered onconvenience store payments. As a money transfer business, it also operates a money
sending service.
Since its establishment in 1997, VeriTrans Inc. has provided a credit card payment system
incorporating the latest security technology in the US, and been a leader in the payment
aspect of e-commerce in Japan. Going forward, VeriTrans Inc. will focus on developing, andintroducing cashless payment systems, in major markets where electronic payment has
yet to be adopted.

econtext Asia Limited operates a payment business based in Hong Kong.

INCUBATION TECHNOLOGY SEGMENT
DG Ventures, Inc.
Consolidated subsidiary

Digital Garage US, Inc.
Consolidated subsidiary

DK Gate, Inc.
Consolidated subsidiary

NaviPlus Co., Ltd. develops and provides marketing solutions that support thedevelopment of e-business, including EC sites, by using gathered and analyzed data basedon its proprietary technology.

DG Technologies, Inc.

ANA Digital Gate, Inc. is a joint venture between VeriTrans Inc. and the ANA Groupʼs ALL
NIPPON AIRWAYS TRADING CO., LTD., that is developing a corporation-oriented payment
solution business that uses FinTech.

D2 Garage, Inc.

SCORE Co., Ltd. is a joint venture between VeriTrans Inc. and Nissen Co., Ltd. providing
post-settlement payment services. The two companies combine their payment businessknowledge, technologies, and other strengths with the aim of developing Fintech services
incorporating new marketing elements, such as credit monitoring, scoring, and purchasing
promotion.
TD Payment Corporation is a joint venture between VeriTrans Inc. and TOSHIBA TECCORPORATION offering multiple payment solutions for POS systems to meet diversifying
cashless payment needs.

Consolidated subsidiary

Consolidated subsidiary

DG Daiwa Ventures, Inc.
Affiliate

Digital Garage
Marketing Technology Company
Company

DG Communications Co., Ltd.
Consolidated subsidiary

BI.Garage, Inc.
Consolidated subsidiary

CyberBuzz, Inc.
(TSE Mothers 7069)
Affiliate

DG Marketing Design, Inc.
Affiliate

In addition to advertising awareness and acquisition advertising, Digital Garage Marketing Technology Company provides
a wide range of marketing solutions from CRM and other solutions to improve engagement, through to data analysis,
AI applications, DX advancement, and settlement systems. It leverages the cutting-edge technology and assets of the
DG Group to develop and offer unique solutions, and provide support to clients, the market, and the world as a businessstrategy partner with continuous assistance and business creation akin to social infrastructure.
Utilizing the real-estate-advertisement-related knowhow cultivated and accumulated overmany years including knowledge, experience, and data, as well as the DG Groupʼs advanced
technology and sophisticated strategy management, DG Communicationsʼ business does
not stop at property sales in the real estate field, but uses real estate as a gateway toprovide solutions to help people live more comfortable lives.
With framing the concept of “CONTENTS × DATA × TECHNOLOGIES”, BI.Garage, Inc. has
been developing the “Contents Media Consortium”, the joint advertisement distribution
business platform collaborated with Japanese influential contents media companies, aswell as other solutions that utilize the know-how of social media management and the DG
Groupʼs extensive data and cutting-edge technologies.
CyberBuzz, Inc. is developing a social media marketing business centered on influencers
under the vision of “changing communication into value and changing the world.”
CyberBuzz, Inc. is providing services such as promotion support using the influencer
network, social media account management service, and “ to buy, ” the influencer
commerce media, etc.

DG Marketing Design, Inc. provides integrated marketing solutions from planning, tocreative, to data analysis that surpass the barriers of real and digital in promotions,conversions, and relations in the marketing field.

As the investment arm of the Digital Garage Group, DG Ventures, Inc. supports Internet
entrepreneurs throughout the world. It operates an investment business going beyond
simple investment as an incubator, to create ventures collaboratively with targeted
startup companies that are expected to give rise to synergies with the DG Groupʼs various
businesses.
Digital Garage US, Inc. is the DG Groupʼs US-based global strategy headquarters. It
operates the DG717 incubation center established in the heart of San Francisco in 2013,
supporting entrepreneurs and engineers from around the world.

A joint venture of Digital Garage, Inc. and Kodansha Ltd., the purpose of DK Gate is tomake strategic investments in content businesses. DK Gate, Inc. focuses on identifying andnurturing companies pursuing next-generation content businesses throughout the world.

As a strategic company that supports the technological aspects of DG Lab, DG
Technologies, Inc. engages in research and development with an eye toward businessapplication and promotes the development of cutting-edge technology by combining thetechnological capabilities, etc. of Digital Garage, Inc. and TIS Inc.
The “Open Network Lab HOKKAIDO” business is creating a start-up support program thataims to build a start-up ecosystem in Hokkaido and investing in developing start-ups thatleverage Hokkaidoʼ s resources and issues such as primary industry, tourism, and richnatural world.
DG Daiwa Ventures, Inc. was established as a joint venture between Digital Garage, Inc.
and Daiwa Securities Group Inc. and operates investment funds. The purpose of this fundis to promote investment in promising Japanese and overseas startups with advanced
technologies in the research areas DG Lab has designated as high priorities.

LONG-TERM INCUBATION SEGMENT
Kakaku.com, Inc.

MARKETING TECHNOLOGY SEGMENT

2020

FINANCIAL TECHNOLOGY SEGMENT(TSE First Section 2371)
Affiliate

Crypto Garage, Inc.
Consolidated subsidiary

New Context Services, Inc.
Consolidated subsidiary

BrainscanTechnologies, Inc.
Consolidated subsidiary

Academie du Vin Co., Ltd.
Consolidated subsidiary

Dentsu ScienceJam Inc.
Affiliate

Kakaku.com, Inc. operates a price comparison site (kakaku.com) and a restaurant review
and advertising site (tabelog.com).

Crypto Garage, Inc. is a joint-venture between Digital Garage, Tokyo Tanshi Co., Ltd. andBlockstream, Inc. that is accelerating R&D and commercialization of advanced financial
services leveraging blockchain in the Fintech field.

New Context Services, Inc. provides data security-related solutions.

BrainscanTechnologies, Inc. aims to develop and monetize services using a medical
examination data platform founded on business dealing with brain MRI medical
examinations for driving operators.

Academie du Vin manages the wine school business and is expanding a wine wholesale
business.

Dentsu ScienceJam commercializes scientific research results.

(as of March 31, 2020)

27

DIGITAL GARAGE

DIGITAL GARAGE

28

ANNUALREPORT

Company &Stock Information(as of March 31, 2020)

Basic Information

2020

COMPANY INFORMATIONSTOCK INFORMATION
Stock Information(as of March 31, 2020)

Company Name

Digital Garage, Inc.

Authorized shares

120,000,000

H e a dDG Bldg., 3-5-7 Ebisu Minami, Shibuya-ku, Tokyo 150-0022, Japan

Total number of shares issued

47,406,800

O f f i c e

Shibuya PARCO DG Bldg., 15-1 Udagawa-cho, Shibuya-ku, Tokyo 150-0042, Japan

Voting rights

460,100

E s t a b l i s h e dAugust 17th, 1995

Shareholders

6,009

P

e

03-6367-1111 (Main)x

03-6367-1119

F

h

o

n

a

Major Shareholders

Stock listings

Tokyo Stock Exchange 1st section (4819)

Fiscal year end

March 31

Stock Capitalization
Number of employees(as of March 31, 2020)

Shares Owned

Ownership Percentage

Kaoru Hayashi

6,819,200

14.82

7,591 million yen

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

3,464,500

7.53

954 [consolidated] / 468 [non-consolidated]

Dentsu Group Inc.

3,300,000

7.17

TIS Inc.

2,364,500

5.14Japan Trustee Services Bank, Ltd. (Trust accounts)

1,859,700

4.04

Japan Trustee Services Bank, Ltd. (Trust accounts 9)

1,755,900

3.82

J.P. Morgan Bank Luxembourg S.A. 385576

1,572,426

3.42

The Bank of New York Mellon 140051

1,212,900

2.64

DIGITAL GARAGE GROUP CHART(as of April 1, 2020)

Organization Chart
Shareholdersʼ General Meeting

Japan Trustee Services Bank, Ltd. (Trust accounts 5)

720,200

1.57

Credit Saison Co., Ltd.

655,200

1.42* Share ownership percentages were calculated based on issued shares net of treasury shares (1,390,316 shares).

Audit and
Board of Directors Supervisory Committee

Internal Audit Office

Dividend Trends

Representative Director

FY14.6(JGAAP)

FY15.6(JGAAP)

FY16.6(JGAAP)

FY17.3(JGAAP)

FY18.3(JGAAP)

FY19.3(IFRS)

FY20.3(IFRS)

Ordinary dividend

5 JPY

5 JPY

15 JPY

20 JPY

24 JPY

28 JPY

28 JPY

Commemorative
dividend

-

-

-

-

Purchase of treasury shares

Management Committee

Presidentʼs Office

DG Lab Div.

Open Innovation Dept.
Smart City Planning Dept.

Open Network Lab Promotion Dept.

Corporate Strategy Div.

Corporate Strategy Dept.

20 JPY

15 JPY

20th anniversary

In commemoration of ourchange to the TSE First Section

-

-

-

-

-

5.0 billion JPY-

Ordinary dividend payout ratio

8.2%

4.6%

13.7%

22.0%

20.7%

13.3%

17.4%

Total return ratio

8.2%

23.1%

27.3%

22.0%

20.7%

64.3%

23.5%

Share Ownership Distribution

10 JPY
25th anniversary(as of March 31, 2020)

Accounting Dept.
Legal Dept.
Information Technology Dept.

Treasury shares
2.93%（1,390,316）

Investment securities firms
0.74%（352,706）

General Affairs Dept.
Human Resources Dept.
Marketing Technology Company

Performance Marketing Div.

Non-Japanese individuals
35.07%（16,626,344）

CRM Strategy Div.
Business Strategy Div.

29

DIGITAL GARAGE

Other Japanese institutions
15.60%（7,393,447）

Total numberof shares issued

Individuals/other
23.40%（11,094,987）

47,406,800
Financial institutions
22.25%（10,549,000）

DIGITAL GARAGE30

Digital Garage, Inc.
DG Bldg., 3-5-7 Ebisu Minami, Shibuya-ku, Tokyo 150-0022, Japan
Shibuya PARCO DG Bldg., 15-1 Udagawa-cho, Shibuya-ku, Tokyo 150-0042, Japanwww.garage.co.jp/en/