GMO Payment Gateway, Inc.

Annual Report for the
22nd Fiscal Year: 2015
2014.10.1-2015.9.30

Trajectory of GrowthDelineating a new growth curve
into the next two decades

Expansion
Moving into a new growth stage
where we will fight off serious
global competition

We launched operations in 1995 as a company offering credit card payment processing services, principally for

GrowthEC (electronic commerce) businesses. We then expanded the scope of our services and businesses, to include

Created new services conducive tothe growth of affiliated merchants,
strengthened organizations andsecured human resources in
preparation for a period of expansion,
constructed infrastructure in
readiness for global competition

such diverse methods of payment as convenience store payment, cash on delivery and electronic moneyin addition to credit cards. As a result we have posted continuous growth and have now firmly establishedourselves as the top company in the Japanese payment processing service sector.
We will continue to expand our business domain by developing comprehensive
financial services, and will enter a new growth stage with our sights on the

Maturationnext two decades, during which we will delineate a further growth curve.

Steps such as establishing arecurring payment service that
handles utility payments and publicdues, etc., made us the top company
in the Japanese payment
processing service sector

250

2015

2014

Early years

Launched early
payments services
and expanded
services

100

Launched Transaction Lending services

Perfected the business model on
which our current operational
infrastructure is based and became
listed on the Tokyo Stock Exchange
a mere 10 years after
establishment

1,000

2013

2008

Ordinary income (100 million yen)

Launched payment
After Delivery services

Listing market changed to
the First Section of theTokyo Stock Exchange

2012

2007

To take on global competitors and win

30
Present

Established overseas
bases in Singapore

Launched payment service for
utility payments and public dues

2030

25% growthNo.1 in ASEAN

2011

2006

2020

No.1 in Asia

Fight off for serious global competition
Launched online
advertising services

Launched recurring payment
service of Japan Broadcasting
Corporation (NHK) license fees

• Expand our share of the Japanese payment processing service market

20% growth• Increase revenue via expansion of our money service business (MSB)• Full-scale development of global business• Aggressive financing and investment strategies• Strategies to differentiate GMO-PG from overseas competitors

2005

3

Strategy

Stock listed on the
Mothers Market of theTokyo Stock Exchange

1995

Strategy1Strategy

Established1995

FY2003

FY2004

FY2005

FY2006

1

FY2007

FY2008FY2009FY2010FY2011FY2012FY2013

FY20142

Long-term business area strategy
Overseas business, etc.

Mid-term product strategy
MSB, etc.

Short-term target market strategy
Broader EC market (establish JV, B2B), etc.

FY2015Around2020
2

Around2025

Around2030

Message from the President

Why“Why now?” The question weconstantly ask ourselves as we
aim with perfect timing for
a new growth stage

President &Representative Director

Issei Ainoura

And I also stress the importance of a “distinctive businessmodel.” Our corporate group's core business is as payment
processing service provider that serves as an intermediary in“contracts,” “payment information” and the “settlement” between
affiliated merchants, including online shops, and payment busi-

Construct a solid business model in theelectronics commerce (EC) market by setting aclear-cut objective and demonstrating the powerof human resources to achieve it

in 2020 and 100 billion yen in 2030.” I then broke that vision down

nesses, including credit card companies. Our current growth isinto individual policies which have been steadily implemented. We

underpinned not only by the fact that we are firmly rooted in thehave taught employees the mechanisms to achieve those targets,

growth market of EC (electronic commerce), but also by the fact

trained them to think logically, and have made them capable ofthat we have created a business model which does not just offer

putting what they have learned into practice. As a result, we havepayment processing that reduces the burden of complicatedconstantly achieved growth that exceeds the targets we had set

procedures between affiliated merchants and payment business,at the start of each fiscal year. Even if some unforeseen situa-

but also has an income structure that combines stable revenue

tion occurs, we have a number of plans at hand to break out ofand accelerated growth with an established structure of represen-that deadlock. Our track record shows that we have constantly

tative affiliated merchant contracts that make payment manage-

achieved our targets.

ment easier by serving as a proxy for payment processors such

I have also put a lot of effort into “building up human resources

The year 2015 was a significant milestone for us, having marked

as credit card companies in the entire process of the monthly
settlement of sales payments to affiliated merchants.

20 years since the company was established, 10 years sinceand organizations.” We employ people who are capable oflisting, and 15 years since I was appointed president. We wereembodying the GMO Payment Gateway ethos and train themable to maintain average ordinary income growth of over 20%

thoroughly. Our hiring policy values human resources that have aduring this period, thanks to the support of our shareholders

good balance of “IQ and amiability.” This is because knowledge

and other stakeholders, to whom I would like to express myalone is not enough. It is employees who always think about

2015: Accelerating our transition to a new growthstage via full-scale development of our money
service business (MSB)

sincere gratitude.

what they can do for their customers that achieve professional

The consolidated ordinary income of the GMO-PG Group

growth. We also make it possible for new recruits to decide forexceeded 3 billion yen in FY2015 ended September 30. It was an

I have always emphasized the following points as a corporate

themselves which department they will be assigned to. Choosing

epoch-making year for us when we expanded the scope of ourmanager: “setting targets,” “building up human resources andthe office they want to work in enables them to tackle their job

clients and projects, as well as boosting our systemic, marketingorganizations” and “distinctive business model.”with a high level of motivation, and produces a workplace culture

and overall business strengths. In addition, we strengthened ourwhere bosses and colleagues are ready to nurture the develop-

business foundations by concluding a capital and business alli-

is essential to set definite numerical targets, and to set themment of new recruits. I believe that this has enabled us to build anance with the Sumitomo Mitsui Financial Group, Sumitomo Mitsui

against a time axis of what will be achieved by when. When I wasorganization where, thanks to our hiring and training policies, all

Banking Corporation, and GMO Internet, Inc., and by raising

appointed president, I outlined a long-term vision that we would

employees can make advances together, with a shared vision ofaround 8 billion yen through private placement of shares allotted“become a company that posts ordinary income of 10 billion yen

the future of our business and enterprise.

to Sumitomo Mitsui Banking Corporation, and GMO Internet, Inc.

I believe that this growth has been underpinned by factors that

I have placed particular importance on “setting targets.” It3

4

Message from the President

Whyby our various stakeholders.

In terms of services, we launched an official website “Metropolitan

an increase in our net worth since it will mean holding risk assets

We are expanding our existing operations and developing new

Tax Credit Card Payment Site”(https://zei.tokyo) that processes

such as short-term loans and accounts receivable. With that inbusiness sectors in those markets, which will enable us to make acredit card payments of taxes to the Tokyo Metropolitan Govern-

mind, we have completed preparations for our coming business

commitment to income growth of at least 20%.

ment, and carried out full-scale development of our money

expansion by forming a business partnership with Sumitomoservice business (MSB), including extensive renovation of our

Mitsui Banking Corporation, which possesses a stable businesssector to include not just B2C, but also B2B, C2C, service

provide me with strict guidance, and have constructed extremely

early payment service. I feel that the time is now right to embark

platform and customer infrastructure both in Japan and overseas,commerce, and tax and utility payments, for example, andtransparent processes with effective governance. We have also

upon a new growth stage.

and also increasing our capital via a third-party allocation

also to promote the on-line systemization of credit card settle-

constructed very open mechanisms that reflect assessments

With regard to our corporate governance structure anddecision-making process, we call upon external directors andauditors with a wealth of business expertise and experience who

I intend our payment services in the electronic commerce

I always take the question “Why now?” into considerationof shares. I feel that the fact that we have formed a tie-up withments. I believe that the resulting increase in the stockpilingfrom subordinates as well, for example by introducing a 360

when making business decisions. Based on our stockpile ofone of Japan's leading financial institutions reflects how highly

and analysis of transaction data will enable us to expand value-degree evaluation system. I will be wary of falling into the trap of

payment data (transactions) amassed via the expansion of

our track record and reliability are regarded.

added services focused on money service business (MSB)

sectionalism as the company grows in scale, and intend us to be

and create new services.

a company that will always maintain the venture spirit.

our business scale around our core payment processing busi-

on genuine global competitiveness, for example by aggressive

the leading company in Japan's payment processing servicesof the computing resources that handle those transactions. With

A commitment to income growth of at least 20%
Aiming for ordinary income of 100 billion yen
in 2030

business expansion into the rapidly growing Greater China andsector. Our next objective is to be No. 1 in Asia, and we havemodern developments in computing, such as software that learns

The payment services that the GMO-PG Group provides are

ASEAN markets, and by investing in leading companies in themade preparations to move into that new stage. We will continue

and reasons, and progress in mobile technology, the time is now

a cross-industry business, and have no restrictions in terms ofhighly-advanced North American Bay Area.

to make further progress with our objective of becoming a corpo-

ripe to develop services unique to us based upon data acquiredcompany size, type of industry, or business conditions. Further-from transaction analysis, such as money service business (MSB)

more, we are expanding the sectors in which our company iscurve with ordinary income of 10 billion yen in or around 2020 ascontingent upon credit limits, as well as to plan a full-scale expan-

involved to be not only B2C (consumer transactions) electronic

a waypoint.

sion of FinTech, the fusion of IT and financing.

commerce but also B2B (business-to-business transactions) andConsumer

I respectfully ask our shareholders for their continued guidance and support.

Since our listing in 2005, we have consistently achieved theC2C (consumer-to-consumer transactions), markets in which

numerical targets announced at the beginning of each fiscal year.

there is tremendous potential.

I can proudly say that this has led to the faith placed in us today

Our money service business (MSB) and FinTech

2030. You can look forward to our further growth.

Successful achievement of all ordinary income forecasts
GMO-PG Group

Business operator (Affiliated merchant)

Payment businesses(Million yen)

Ordinary income (Forecast)Ordinary income (Actual)

3,000

2,460

2,000

2 Early payment service

What is FinTech?

A term coined by amalgamating the words ‘finance’ and ‘technology’. It refers to innovative financial services and companies that utilize IT

5

1,113

0

927

A smartphone payment service where customers in places such as restaurants do not need a wallet but can complete
credit card payments via an app

900

A method of payment whereby consumers pay at places such as convenience stores after receiving the goods

5 GMO Pallet756

4 GMO Payment After Delivery

500

750

A service that provides an efficient and economical automated system for the repayment and remittance work generated
in the running of an electronic commerce website

645

3 GMO-PG Remittance Service

600

A service that creates a payment cycle compatible with the affiliated merchant’s needs and helps to improve cash flow

535

2 Early payment service

1,000

500

A service that decides our credit limit based on transaction data and provides the short-term loans required to boost
affiliated merchants’ sales

296

1 Transaction Lending

1,147

1,500

5 GMO Pallet

1,431

1,400

4 GMO Payment
After Delivery

2,047

Daily transaction processing

2,500
2,040

Payment

1,764

Repayment/
Remittance

Credit card company,
Convenience store,
Electronic moneycompany,
Mobile phone,companies, etc.

1,750

1 Transaction Lending

272

Face-to-face market

Online market

3 GMO-PG Remittance Service

3,000

Focusing on the expansion of our money service business(MSB) requires working capital and cash for advances, as well as

rate group that achieves an ordinary income of 100 billion yen in

We will implement these growth strategies and create a growth

2,985

contracts, we have dramatically boosted the cost effectivenessI believe that the GMO-PG Group is now firmly established as

I intend to respond swiftly to overseas markets and focus

2,527

ness and the development of representative affiliated merchant

FY2005

FY2006

FY2007

FY2008FY2009FY20106

FY2011FY2012FY2013

FY2014FY2015

Business Outline

We provide merchants with payment processing
services that consumers can use safely and easily.
Our services
in your daily life
Utility payments

6

Shopping on
smartphone

Taxes

5

Monthly fixed fees8
7

2Content fees3

Online shopping1
Publicdues

4Bills in shops

Fees forvarious services

9

7

1

Online shopping

4

Fees for various services

7

Public dues

Payment for purchases of food anddaily necessities

Payment for travel tickets, homedeliveries, etc.

Payments into the national pension
system, etc.

2

Shopping on smartphone

5

Monthly fixed fees

8

Taxes

Payment for goods and services
purchased while away from home

Payment for regular services suchas water delivery, newspapers or
magazine subscriptions, etc.
Payment of taxes such as thevehicle tax

83

Content fees

6

Utility payments

9Bills in shops

Payment for the purchase of content
such as music, games and e-books

Regular payments such as electricity,
gas and water bills

Payment for service charges andpurchases using a smartphone app

Business Topics

Initiatives to build a solid foundationfor our new growth stage

Developing new sectors

Topic: We launched new methods of payment services such as theMulti-Currency Credit Card Payment Service and LINE Pay that allow
consumers to make purchases from overseas and pay the pricein their local currency by credit card. We also expanded the early
payment services offered as part of the PG Multi-Payment Service.

Pay-easy

PayPalBank
accounttransfer

Bitcoinpayment

Carrier
payment

Walletpayment

LINE Pay

Deferred
payment

DeliveryserviceConvenience
store
payment

Overseas
payment

Multicurrency
payment

Onlineadvertising
service

Payment platform

750

645

600

500

GMO-PG online advertising service

Utility payments/Public dues segment

535

1,000

272

296

We provide support for affiliated merchants (online shops) in
As a payment service provider, we are able to provide online
500
pulling in more customers and boosting sales via such means as
advertising and analysis while monitoring the actual productour online advertising service utilizing Yahoo! JAPAN Promotionalsales, a service that is currently utilized by more than 250 affiliatedAds and Google Adwords, our Facebook advertising service,
0 merchants. We help to improve their cash flow and business effiFY2005
FY2006
FY2007
FY2008FY2009FY2010and our Google analytics consulting service.
ciency by providing a deferred payment service for advertising fees.

We provide credit card payment service for “utility payments” suchas gas and electricity bills and also for the “public dues” segment,
including charges and taxes to be paid to national and local
governments. Our service covers both monthly payments and lumpsum settlements, and offers the optimum solution to make revenue
collection more efficient and cut costs.

Topic: We have been recognized by Twitter, Inc. as one of the main partner
agencies for their advertising product “Twitter Ads”, and we launched ourprovision of Twitter Ads on December 1, 2015.

Topic: As of April 2015, we run a website “Metropolitan Tax Credit
Card Payment Site” (https://zei.tokyo) that processes credit card
payments of taxes to the Tokyo Metropolitan Government.

Overseas expansion

Reinforcement of our business infrastructure
Capital and business alliance andthird-party allocation of sharesinformation technology (FinTech) in order that we may successfully
seize opportunities for domestic growth at a deeper level. It also has
the objective of increasing our net worth in line with the expansionof money service business (MSB), an area of focus for the GMO-PG
Group from now on, and was undertaken in response to the urgent
need to reinforce links with financing business partners so that we
can seize future business opportunities overseas.

In June 2015, we concluded a capital and business alliance with
the Sumitomo Mitsui Financial Group, Sumitomo Mitsui Banking
Corporation, and GMO Internet, Inc., and also issued new sharesin a third-party allocation of shares to Sumitomo Mitsui Banking
Corporation, and GMO Internet, Inc., increasing our capital byaround 8 billion yen.
This is an initiative aimed at the diverse payment processing
businesses engendered by the fusion of financing expertise andOur expansion in Greater China and the ASEAN region

We have established local subsidiaries in the following fivebases: Singapore, Hong Kong, Taiwan, Malaysia and Thailand,
and are developing the GMO-PG Global Payment service forJapanese EC companies moving into those locations or theirsurrounding areas. In tandem with that, we are engaged ininvestment activities such as the GMO Global Payment Fund,which specializes in funding capital and business alliances withpromising local payment service providers. Harnessing thissynergy, we are expanding our business in Asia.

TaiwanHong Kong

ThailandSingapore
Our overseas

Topic: On November 2, 2015 we established the joint venture SMBC
GMO PAYMENT Inc., an affiliated company accounted for by theequity-method.

*The topics cover events from October 2015 or later in order to provide the most recent information.

9

Vietnam

Malaysia
Net worth: Approx.
10 million SGD

10

1,431

SSL server
certificatesInternetbanking
payment

Cash ondelivery

1,147

Detectionof incorrect
addresses

Electronic
money

1,113

Creditcards

Email link
services927

An SaaS-style package service offering the optimum payment
method for electronic commerce websites and Internet payment
needs from a menu that includes credit cards, convenience stores
payments, electronic money and cash on delivery.

900

PG Multi-Payment Service

756

Expansion of existing businesses

The services we are developing include the following: early
payment services to improve the cash flow of affiliated merchants;
Transaction Lending which provides working capital for affiliated(Million yen)merchants during their growth process; GMO Payment After
Ordinary income (Forecast)Ordinary income (Actual)
Delivery, a payment method for which there is a strong consumer 3,000
need and which is increasingly being adopted by affiliatedmerchants; GMO-PG Remittance Service; and finance leases.
We will create distinctive scoring models and financial services 2,500
based on the analysis of our accumulated transaction data andwill continue to expand services that can also provide financing
2,000
support for the growth of our affiliated merchants.
Topic: We participated in the 2015 Japan Conference hosted by
the Bank of America Merrill Lynch on September 10, 2015, where
1,500 we explained our FinTech initiatives at a session entitled “Japanese
Recovery Led by the Fusion of the Internet and Financing”.

1,400

Full-scale development of ourmoney service business (MSB)

The Philippines

Japan’s first ever FinTech fundfor investment in Asian venturecompanies connected withpayment processing (Totalamount: 1,500 million yen)
Our overseas bases

FY2011

Review of Operations

Financial Highlights (Consolidated)

GMO Payment Gateway by the Numbers

Increases in Sales, Profits, and Dividends for the 14th Consecutive Term
Ordinary income

59,559

Taxes

Books
Auto tax Apparel

Water
utilities

CDs

Transactions/Amounts
FY2004

3,866,316

merchants

merchants

FY2011 FY2012 FY2013 FY2014 FY2015(Thousand yen)

FY2011 FY2012 FY2013 FY2014 FY2015

FY2015799

billion¥1.63+19.8% year-on-year(Net income per share)

trillion

Net income
per share

Number of employees

Number of subsidiaries
FY2004FY2015FY201522.35

ROE (%)

19.4

52.60

Net income per share/ROE

Dividends
(Yen)

(Yen)

18.00

43.92

¥120.0transactions

15.00

35.38

transactions

million28.01

37.0 million

FY2004+18.7% year-on-year(Thousand yen)

1,431,391

6,837

5,764,085

FY2015

Fresh food

4,708,097

FY2004

7,205,542+25.3% year-on-year
TAX

3,000,455

Net sales

2,527,793

Games/music

2,047,552

Electronic books

1,764,325

Tickets

9,030,892

Number of merchants

23.0

12.25
24.4
9.75

20.9
7.75
16.1

40

309

(Ordinary income
per employee:¥4.8 million)(Ordinary income
per employee:¥9.71 million)

06(Plus two equitymethod affiliates)

11

FY2011 FY2012 FY2013 FY2014 FY2015

FY2011 FY2012 FY2013 FY2014 FY2015

A 200-for-1 common stock split and a 2-for-1 common stock split were conducted on July 1, 2012 and October 1, 2014 respectively.
“Net income per share” shows figures that have been retroactively revised in
the light of the impact of these stock splits. This is done to make it easier tocompare periods.
The ROE for FY2015 is lower than the previous fiscal year, but this is due tothe increase in our net worth as a result of the third-party allocation of shares
carried out in June 2015.

Our basic dividend policy is to target “a payout ratio of around 35% of consolidated net income” and on this basis we paid a dividend of ¥18.
A 200-for-1 common stock split and a 2-for-1 common stock split were conducted on July 1, 2012 and October 1, 2014 respectively. “Dividends per share”
shows figures that have been retroactively revised in the light of the impact ofthese stock splits. This is done to make it easier to compare periods. Accordingly, in FY2015 there was actually a dividend increase of 3 yen over the previous fiscal year.

12Consolidated Financial Statements

Consolidated Balance Sheets

Key Points in the Consolidated Balance Sheets(Thousand yen)(Thousand yen)

As of
As of
September 30, 2014 September 30, 2015

As of
As of
September 30, 2014 September 30, 2015

AssetsCurrent assets
Cash and deposits 1
Accounts receivable – trade
Lease receivables 3
Merchandise

22,476,019

38,469,492
30,152,630

792,588

2,117,007—

2,293,947

2,165

17,624,339

25,448,186

Accounts payable – trade229,278985,850

Lease obligations

41,74745,267

1,062

Accounts payable – other692,3101,911,844

Income taxes payable

644,375

795,544

Accrued consumption taxes

171,628

73,1087,850

48,69815,589,857

21,184,305

Current liabilities

531

617

Advance payments – trade 3

585,395

2,303,428

Prepaid expenses

58,82367,830

Deferred tax assets

150,097

220,805

Accounts receivable – other 3504,077

1,156,824

Deposits received 2

Other 352,343

341,591

Unearned revenue

1,256

1,573

Provision for bonuses

206,137

337,334

Provision for directors' bonuses

34,84058,700

Other

5,056

5,959

Noncurrent liabilities

173,339

197,198

Supplies

Advances received(56,177)(186,253)

Noncurrent assets

2,137,039

3,362,243

Tangible assets

231,947

215,497

Buildings

57,29873,559Tools, furniture and fixtures

61,07549,373

Lease assets

113,573

92,564

Lease obligations

97,08467,060Intangible assets

764,469

934,811Long-term lease and guarantee deposits

6,254

10,138Goodwill

30,69424,707

Lease assets

16,785

12,217

Provision for directors' remuneration Bond
Incentive Plan Trust

70,000120,000

17,797,678

25,645,385

Allowance for doubtful accounts

Right of trademark
Software272

119

661,723

751,499

Net assets
Shareholders’ equity

6,727,143

16,067,842

Capital stock 4

708,118

4,711,021

Capital surplus 4

968,040

4,970,942

Retained earnings

5,315,707

6,651,114

Treasury stock(264,723)(265,236)

81,506116,382

54,992

146,267

1,140,621

2,211,935

650,739

1,437,144

Shares of subsidiaries and affiliates

2,507

139,047

Bonds of subsidiaries and affiliates

11,000—Other
Investments and other assets
Investment securities

Investments in other securities ofsubsidiaries and affiliates

Total liabilities

264,442

343,047

Subsidiaries Long-term loans receivablefrom directors and employees

1,910

1,443

Claims provable in bankruptcy, claims
provable in rehabilitation and other

Valuation difference on available-for-salesecurities

64,821

134,960

12,43425,545

Foreign currency translation adjustment

16,685(18,578)

Subscription rights to shares

3,774

2,126

Minority interests

2,956

—

Total net assets

6,815,379

16,186,351

Total liabilities and net assets

24,613,058

41,831,736

Long-term prepaid expenses

7,722

2,570

Lease and guarantee deposits

149,210

223,818

Deferred tax assets

51,38464,863

Allowance for doubtful accounts(10,729)(25,545)

24,613,058

41,831,736

Total assets

Accumulated other comprehensive income

IR Site
GMO-PG’s website provides corporate and financial information and introduces business activities and trends to shareholders
and investors. For a more detailed understanding of GMO-PG, please visit the website.
URL http://corp.gmo-pg.com/ir/13

the augmentation of our capital stock and legal capital surplus (capital surplus) via a third-party allocation of shares ("Reinforcement of ourbusiness infrastructure"), our net worth at the end of this fiscal year is now 41,831 million yen, a year-on-year increase of 17,218 million yen.

Liabilities
20,386,175

Thanks to this fiscal year's development of our business activities ("Expansion of existing businesses" and "Developing new sectors") and

AssetsLiabilities and net assets

41,831

41,831

million yen

24,613

million yen

24,613Current assets
38,469million yen

1

3

Tangible assets
215
Intangible assets
934
Investments andother assets
2,211

As of Sept. 30,

2014

Our cash and deposits have increased thanks to
the increase in deposits received in our liabilities
that accompanies revenue growth, and to theaugmentation of our capital stock and capitalreserve (capital surplus) via a third-party allocation of shares.
Cash and deposits in our assets fluctuate in
response to fluctuations in the deposits received
in our liabilities. Accordingly, the amount ofmoney that we can utilize in our business is the
sum left after deducting the amount equivalent
to the deposits scheduled to be paid to affiliatedmerchants each month.

4

As of Sept. 30,

2015

1 Cash and deposits

Net assets
16,186

Noncurrent
liabilities173
Net assets
6,815

As of Sept. 30,

Expansion of existing services

Noncurrent
liabilities
197

Current
liabilities
17,624

Noncurrent assets
3,362

Tangible assets
231
Intangible assets
764
Investments andother assets
1,140

2

million yen

Current assets
22,476
Noncurrent assets
2,137

Current liabilities
25,4482014

2 Deposits received
The sales payments (the amounts paid by credit
card companies etc. to affiliated merchants via
our company) paid to merchants with whom wehave a representative affiliated merchant contract
are appropriated at the end of each month.

Developing new sectors
3 Lease receivables, advance payments,

accounts receivable- other, and other
The full-scale development of our money service
business (MSB: early payment service, GMO
Payment After Delivery, Transaction Lending,financing leases, etc.) has been accompanied bya dramatic increase in each category of current
assets as compared with the previous fiscal year.

14

As of Sept. 30,

2015

Reinforcement of ourbusiness infrastructure
4 Capital stock and capital surplus
On June 9, 2015, we concluded a capital andbusiness alliance with the Sumitomo Mitsui
Financial Group, Sumitomo Mitsui Banking
Corporation, and GMO Internet, Inc. It was alsodecided to issue new shares in a third-party
allocation of shares to Sumitomo Mitsui Banking
Corporation, and GMO Internet, Inc., increasing
our capital stock and capital reserve (capitalsurplus) when the payment was completed
on June 25.

Consolidated Financial Statement

Management System

Consolidated Statements of Income Key Points in the Consolidated(Thousand yen)
Statements of Income

Corporate Governance

FY2014FY2015(from October 1, 2013 to
September 30, 2014)(from October 1, 2014 toSeptember 30, 2015)

Net sales 5

7,205,542

9,030,892

Cost of sales

1,436,281

1,919,836

Gross profit

5,769,260

7,111,055

Selling, general and administrative expenses

3,292,851

4,133,784

Operating income 6

2,476,408

2,977,270

Non-operating income

87,503

91,961

Interest income

7,905

7,716

Dividends income

4,263

5,271

Equity income of affiliates—

20,724

Earnings on investment in silent partnerships

—

1,218

Earnings on investment in partnerships

21,367—

Earnings on reversal of dividends payable

770

1,050

Rent income

13,941

13,978Commissions received

19,11815,586

Exchange earnings

16,49522,030

Other

3,641

4,385

36,11968,777

Interest expenses

1,675

1,802

Equity in losses of affiliates

15,836—

Loss on investment in silent partnerships

4,521

—

—

3,541

13,65913,674—45,317

Non-operating expenses

Loss on investment in partnerships
Rent expenses
Stock issue expenses

426

4,441

Ordinary income 72,527,793

3,000,455

Extraordinary income

32,35756,96232,35730,766

Change in equity—

26,196Extraordinary loss

19,7322,148

Loss on retirement of noncurrent assets

14,330

2,148

Other

5,402

—

Income before income taxes

2,540,417

3,055,268

Income taxes – current

1,075,020

1,295,625

Income taxes – deferred(49,929)(91,075)

Other

Income from securities soldIncome before minority interests
Minority interest in loss
Net income 8

5 Net sales
There are particularly good transitions in processing fee takings and affiliated merchants’ sales as a result of our initiatives driving the expansion of
the EC market. Processing fee takings have shown a 29% year-on-yearincrease thanks to the launch of the GMO-PG Remittance Service and therobust state of the GMO Payment After Delivery service of our subsidiary
GMO Payment Service, Inc. Affiliated merchants’ sales have posted a yearon-year increase of 38.4% thanks to such factors as growth in the sales of
our affiliated merchants and the contribution to revenue from our money
service business (MSB), as well as to the effect of the operation of new payment processing services in generating the equivalent of approximately one
month's affiliated merchants’ sales. As a result of the above, our consolidated net sales achieved a 25.3% year-on-year increase.
6 Operating income
Despite the expansion of services with a high sales-cost ratio and the higher
labor costs as a result of personnel increases, our operating income posted
a 20.2% year-on-year increase thanks to such factors as the economies ofscale and revenue growth that accompanied increased settlement amounts,
and ongoing cost cutting.
7 Ordinary income
In addition to operating income, although equity income of affiliates resulting from the business expansion of GMO Financial Gate, Inc. and exchangeearning were calculated as non-operating income, expenses such as legal
fees involved in the issue of new shares in the third-party allocation of shares
carried out in June 2015 were calculated as non-operating expenses, andour ordinary income thus achieved a year-on-year increase of 18.7%.
8 Net income
We pressed forward with capital and business alliances where we maintainsome of the shares of key affiliated merchants and business partners as partof the strengthening of our partnerships business. Thanks to the inclusion ofincome from the sale of securities when some of our business partners soldoff stock when they were acquired by listed companies and of changes inequity resulting from GMO Financial Gate, Inc.’s increase of capital, our net
income posted a year-on-year increase of 22.3%.

Furthermore, based on an annual audit plan, the Internal Audit Officechecks compliance with the relevant laws and ordinances, company statutes, in-house rules and regulations, and so on, and takes corrective measures if areas in need of improvement are identified. It then follows up on
the status of those measures. We have constructed and operate a whistleblower system, in addition to the regular system based on the chain of command, if an incident should occur within the company that is thought toconstitute a compliance violation.

Our Fundamental Approach to
Corporate GovernanceIn order to maintain both management efficiency and legal compliance while
continuing to develop in a sound manner, we have established the necessary governance structures and implement policies accordingly. We recognize that corporate governance is one of the most important managementtasks. In order to fulfil this commitment as well, we intend to practice aneven more transparent form of management through the timely disclosureof management information to shareholders and investors.

Information Security
The GMO-PG Group has made it our mission to contribute to the creationof payment systems that are safe and convenient for consumers and businesses as we aim to establish the infrastructure for payment processing inJapan. In addition to utilizing our own information assets when conducting
corporate activities in accordance with this mission, we are also entrusted
by many of our stakeholders with information assets which include personal
information. We are striving for even higher levels of performance as a company that creates added value for credit cards and other types of payment
formats, and we recognize that protection of these information assets fromoutside threats is a top management priority. Accordingly, we construct andoperate information security systems and implement the necessary protective procedures and appropriate security measures for our own information
assets and those of our stakeholders.

Overview of Our Corporate
Governance System
GMO Payment Gateway has adopted a system whereby two external directors are appointed to provide advice and opinions from an independent perspective, while also overseeing the activities of the full-time directors. Thereis also a Board of Auditors consisting of five members (two of whom are
independent executives) charged with auditing the company in coordination
with the Internal Audit Office and accounting auditors. Important matterssuch as key management decisions or deciding the remuneration for directors, as well as decisions to strengthen governance, are all decided by the
Board of Directors.

ISO27001 Certification

Communication with
Shareholders and Investors

All our business premises have acquired ISO/IEC 27001:2013 certification (domestic standard JIS Q 27001:2014), the global standard for
information security management. We are thefirst publicly listed payment processing service
provider to achieve this.

We are committed to engaging in active communication with shareholders and investors. Since becoming a listed company in 2005, we not only
hold explanatory meetings at the end of each quarter when we publish ourfinancial results, but also hold individual meetings with institutional investors
in Japan and overseas. Approximately 180 such meetings have been held
during the term under review.
In addition, the management regularly receives reports on how themarket assesses our company and on feedback from our shareholders andinvestors and our employees receive explanations regarding the Investor
Relations (IR) at our in-house employee training, etc. so that our management team and all our employees are aware of the opinions of our shareholders and investors and can reflect them in our business.

Full PCIDSS Conformance
GMO-PG’s services fully conform to PCIDSS
Ver. 3.0, the global security standard in thecredit card industry established jointly by thefollowing five international credit card brandcompanies: JCB, American Express, Discover, MasterCard and VISA. We provide all
customers with secure credit card payments
and the peace of mind this brings.

Compliance
Consolidated Statementsof Cash FlowsFY2014(Thousand yen)

FY2015(from October 1, 2013 to
September 30, 2014)(from October 1, 2014 toSeptember 30, 2015)

Net cash provided by (used in) operating activities

3,088,604

3,709,772

Net cash provided by (used in) investing activities(666,417)(1,374,094)

Net cash provided by (used in) financing activities(444,357)

7,398,573

Effect of exchange rate change on cash andcash equivalents

13,13530,044

Increase in cash and cash equivalents

1,990,965

9,764,296

1,515,326

1,850,718(462)(2,730)

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

18,358,343

20,349,309

1,515,788

1,853,449

Balance of cash and cash equivalents at theend of the period

20,349,309

30,113,605

15

The GMO-PG Group recognizes the scope of compliance as consisting of a)laws and ordinances, etc., b) ethics and social norms, c) rules, regulations
and procedures, etc., and d) corporate vision, etc., and recognizes that
this entails “adapting to social requirements” including legal requirements(in other words, all-round compliance). Recognizing this, we are working
to raise the compliance awareness of all our employees. In addition to thisaction to boost awareness, the Corporate Support Division constructed andran a compliance training program for all employees during the term underreview. Appropriate training is provided according to the participants’ levelof comprehension and rank, and levels of employee understanding andachievement are monitored by the Internal Audit Office established in
October 2007.

P-Mark Certification
GMO-PG has acquired P-Mark certification, which is forcompanies that have established systems with appropriate measures for protecting personal information in conformance with the requirements of JIS Q 15001: 2006
Personal Information Protection Management Systems,
the Japan Industrial Standard on the handling of personal information.

16

Corporate Profile

Company Profile (As of September 30, 2015)

Members of the Board (As of Dec. 20, 2015)

Stock Information (As of September 30, 2015)

Major Shareholders

Company name:

Chairman & Director

Total number of shares authorized: 102,400,000

GMO Payment Gateway, Inc.
(3769; Tokyo Stock Exchange, First Section)

Masatoshi Kumagai

President &Representative Director

Established:

March 1995

Head office:

Humax Shibuya Bldg. 7F
1-14-6 Dogenzaka, Shibuya-ku, Tokyo, Japan

Executive Vice President Ryu Muramatsu

Capital stock:

4,711 million yen

Issei Ainoura

Executive Vice President Satoru Isozaki
Yuichi Hisada

Director

Yasuhiko Kimura

No. of employees:

309 (consolidated)

Director

Tadashi Ohshima

Business outline:

Credit card payment processing services andall related services

Director

Tomoyuki Murakami

Director

Shinichi Sugiyama

Director

Yusuke Arai

External Director

Masaya Onagi

External Director

Akio Sato

Auditor (Full-time)

Yasuhiro Kanda

External Auditor

Akihiro Suzuki

External Auditor

Masashi Yasuda

AuditorTakashi Iinuma

External Auditor

Kazuo Ikeda

Japan Multi-Payment Network Promotion
Association (JAMPA)EC Payment Forum
Japan Association of New Economy
Japan E-Commerce Consultant Association(JECCICA)
Main subsidiaries:

GMO Epsilon, Inc.
GMO Payment Service, Inc.
GMO PAYMENT GATEWAY PTE. LTD.

Foreign corporations, etc.

Treasury stock(6,591,341 shares)(2,500 shares)

Note: Shareholding ratios are calculated on the total number of shares issued lesstreasury stock (2,500 shares).

2,850

No. of Shares for Each Shareholder TypeManaging Director

Japan Consumer Credit Association (JCA)

37,140,900

No. of shareholders:

Additional paid-in capital: 4,970 million yen

Memberships:

Shareholder name
No. of shares Percentage (%)
51.66
GMO Internet, Inc.
19,186,100
6.51
Japan Trustee Services Bank, Ltd. (Trust account)
2,421,000
3.36
Sumitomo Mitsui Banking Corporation
1,250,800
2.69
Issei Ainoura
1,000,100
2.37
The Master Trust Bank of Japan, Ltd. (Trust account)882,300
1.91
JPMC OPPENHEIMER JASDEC LENDING ACCOUNT
710,900
1.43
Trust & Custody Services Bank, Ltd.
533,400(Trust account for securities investment)
0.99
STATE STREET BANK AND TRUST COMPANY 505041
370,000
0.96
STATE STREET BANK AND TRUST COMPANY
359,855
0.92
CBNY-GOVERNMENT OF NORWAY
345,000

Total number of shares issued:

Financial institutions

Other corporations

Individuals, other(7,536,000 shares)(19,343,000 shares)(3,546,420 shares)

20.29%

52.08%

Financial instruments
business operators

9.55%

17.75%

0.33%(121,639 shares)

0.00%

Stock Price Transitions (Monthly: September 2008 to November 2015)
(Yen)
7,000

6,000

Main affiliated companies: GMO Financial Gate, Inc.

5,000

4,000

Board Members (excluding External Directors) / Presidents of Group Companies

3,000

3

2,000

1,000

2
1

9

12

2008

Masatoshi Kumagai

Issei Ainoura

Ryu Muramatsu

Satoru Isozaki

Yuichi Hisada

Yasuhiko Kimura

Chairman & Director

President &Representative Director

Executive Vice President,
General Manager ofCorporate Value Creation
Strategy Division;
Director, GMO PAYMENTGATEWAY PTE. LTD.

Executive Vice President,
General Manager ofSystem Division

Managing Director,
General Manager of
Innovation Partners
Division

Director, General
Manager of Corporate
Support Division & Billing
Adjustment Section

3

6

2009

9

12

3

2010

6

9

12

3

2011

6

9

12

3

2012

6

Shareholder MemoBusiness year:

October 1 to September 30

Record dates for
dividend of surplus:

December 31, March 31, June 30 and September 30

Shareholder registryadministrator:

Tomoyuki Murakami

Shinichi Sugiyama

Yusuke Arai

Katsunari Mukai

Akira Takano

Director;
Executive Officer &General Manager ofMarketing Division,
SMBC GMO PAYMENT, Inc.

Director;
President & COO,
SMBC GMO PAYMENT, Inc.

Director, System Division
IT Service Control andGeneral Manager of IT
Service Department

Director;
President & Chief
Executive Officer,
GMO Epsilon, Inc.

President &Representative Director,
GMO Payment Service, Inc.

President & Chief
Executive Officer,
GMO Financial Gate, Inc.

12

3

2013

6

9

12

3

2014

6

9

12

3

6

9

2015

1. Listing changed to the First Section of the Tokyo Stock Exchange on September 17, 2008.
2. A 200-for-1 common stock split was conducted on July 1, 2012. Stock prices have been retrospectively adjusted taking the stock split into account.
3. A 2-for-1 common stock split was conducted on October 1, 2014. Stock prices have been retrospectively adjusted taking the stock split into account.

Annual shareholders’ meeting: December

Tadashi Ohshima

9

Mitsubishi UFJ Trust and Banking Corporation

Contact:

Transfer Agent Department,
Mitsubishi UFJ Trust and Banking Corporation
7-10-11 Higashi-suna, Koto-ku, Tokyo 137-8081
Tel: 0120-232-711 (Toll free)

Stock Listing:Tokyo Stock Exchange

Method of public notice:

By electronic public notice
Public notice URL: https://corp.gmo-pg.com/ir/(If an electronic public notice is impossible due to an accident or some other unavoidable reason, it will be published in the Nikkei (Nihon Keizai Shimbun newspaper).

[Information]
1. Points of note
(1) Procedures such as the shareholder’s change of address, specification of the dividend transfer account, and purchase requests are in principal carried out at theaccount management institution (securities company, etc.) at which the account
was opened. Please contact the securities company at which you opened youraccount. Kindly note that the shareholder registry administrator (Mitsubishi UFJ
Trust and Banking Corporation) does not handle such matters.
(2) Unreceived dividends will be paid at the head or branch offices of Mitsubishi UFJ
Trust and Banking Corporation.
2. Dividend statements
The enclosed “Dividend Statement” is also a “Notice of Payment” drawn up on thebasis of the regulations of the Act on Special Measures concerning Taxation. It can beused as confirmation of the dividend amount after the receipt of the dividend, and as
a document for income tax returns. Shareholders who receive their dividend in theirsecurities account (proportional distribution according to the number of shares) should
check with the securities company that made the transaction.
3. Please contact Tokyo Securities Transfer Agent Co, Ltd., the institution that administers
special accounts, regarding the procedures for shares recorded in special accounts.
Post-delivery address/Contact address:
2-8-4 Izumi, Suginami-ku, Tokyo 168-8522
Business Center, Tokyo Securities Transfer Agent Co, Ltd.
Tel: 0120-49-7009 (Toll free)*At the annual meeting of shareholders held on December 20, 2015, it was decided that the board of directors shall be the body that determines the dividend of surplus, and that the record
dates for the dividend of surplus shall be December 31, March 31, June 30 and September 30 of each year. Although this makes it possible for GMO-PG to perform a dividend of surplus
four times a year, we plan to have one dividend of surplus per year, at the end of the term, so that we can secure the internal reserves required to strengthen our business structure.

1718

GMO Payment Gateway, Inc.
URL https://www.gmo-pg.com/
Tokyo Head Office: Humax Shibuya Building 7F, 1-14-6 Dogenzaka, Shibuya-ku, Tokyo 150-0043 Tel: 03-3464-2740
Osaka Branch:

Grand Front Osaka Tower B 23F, 3-1 Ofukacho, Kita-ku, Osaka 530-0011 Tel: 06-7634-3070

Fukuoka Branch:

Tenjin Miyuki Building 8F, 4-2-20 Tenjin, Chuo-ku, Fukuoka 810-0001 Tel: 092-688-9018