Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between thistranslated document and the Japanese original, the original shall prevail.
DIGITAL HOLDINGS, Inc. assumes no responsibility for actions taken based on this translation.

(Securities code: 2389)
March 4, 2021
To our shareholders:Atsushi Nouchi
President and Group CEO
DIGITAL HOLDINGS, Inc.
6, Yonbancho, Chiyoda-ku, Tokyo
Convocation Notice of the 27th Annual General Meeting of Shareholders
You are cordially invited to attend the 27th Annual General Meeting of Shareholders of DIGITAL HOLDINGS,
Inc. (the “Company”), which will be held as described below.
In consideration of the current situation of the COVID-19 pandemic, we place our top priority on the safetyof our shareholders. Therefore, we strongly ask you to exercise your voting rights in advance and refrainfrom attending the meeting in person regardless of your physical condition on the day. The meeting will belive streamed on the Internet. Please note that you cannot exercise your voting rights through the live
streaming. No souvenir will be handed out to shareholders attending the meeting in person. We highly
appreciate your understanding and cooperation.
Please refer to the Reference Documents for the General Meeting of Shareholders, and exercise your voting
rights no later than 6 p.m., Thursday, March 25, 2021 (JST).
1.

Date and time: Friday, March 26, 2021 at 10:00 a.m. (JST)2.

Place:

3.

Agenda of the Meeting:Conference room, Head office, DIGITAL HOLDINGS, Inc.
5th floor, 6 Yonbancho, Chiyoda-ku, Tokyo, Japan

Matters to be reported:
I. Report on Business Report, Consolidated Financial Statements and audit results of the Consolidated
Financial Statements by the Accounting Auditor and the Audit and Supervisory Committee for the
27th Fiscal Term (from January 1, 2020 to December 31, 2020).
II. Report on the Non-Consolidated Financial Statements of DIGITAL HOLDINGS, Inc. for the 27th
Fiscal Term (from January 1, 2020 to December 31, 2020).
Proposals to be resolved:<Company’s proposals (Proposal No. 1 and Proposal No. 2)>
Proposal No. 1:

Election of Seven (7) Directors (Excluding Directors Who Are Audit and Supervisory
Committee Members)

Proposal No. 2:

Revision of Remuneration, etc. related to Performance-based Monetary Remuneration,etc. for Executive Directors<Shareholder’s proposal (Proposal No. 3)>
Proposal No. 3:

Partial Amendments to the Articles of Incorporation

The Board of Directors of the Company is opposed to Proposal No. 3.

-1-

4.

Instructions for Exercising Voting Rights(1) Exercising voting rights in writing
To vote in writing, please indicate your approval or disapproval of the proposals on the enclosed Voting Rights
Exercise Form, and return the Form by post to reach us by 6 p.m. Thursday, March 25, 2021 (JST).
(2) Exercising voting rights via the Internet
To vote via the Internet, please access to the “Voting Right Exercise Site (https://www.net-vote.com/)”(Japanese only), which is provided on the enclosed Voting Rights Exercise Form. Follow the instructions andindicate your approval or disapproval by 6 p.m. Thursday, March 25, 2021 (JST). If you want to use yoursmartphone, you can exercise your voting rights by using QR code (Please refer to the next page for details.)(3) Handling of duplicate voting
1) If you vote both in writing and via the Internet, we will treat the vote submitted via the Internet as valid.
2) If you vote more than once via the Internet, we will treat the most recent vote as valid.

Request: When attending the meeting in person, you are kindly requested to submit the enclosed Voting Rights
Exercise Form to the receptionist at the meeting site. Please bring this Convocation Notice of the27th Annual General Meeting of Shareholders with you to the meeting.
Notice:The digital documents of the Convocation Notice of the Annual General Meeting of Shareholders
and the Reference Documents for the General Meeting of Shareholders are available on the
Company’s website (https://digital-holdings.co.jp/).
The English version of the Convocation Notice of the Annual General Meeting of Shareholders and theReference Documents for the General Meeting of Shareholders are available on the Company’s website(https://digital-holdings.co.jp/en/).
Any amendments to the Reference Documents for the General Meeting of Shareholders, Business
Report, Consolidated Financial Statements or Non-consolidated Financial Statements will be posted on
the Company website. (https://digital-holdings.co.jp/).

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Instructions for Exercising Voting Rights via the Internet
You can exercise your voting rights via the Internet by accessing the Voting Right Exercise Site as instructed below
from your PCs or smartphones.
1. Accessing the Voting Right Exercise Site
[Address of Voting Right Exercise Site]
https://www.net-vote.com/
Please use the Company’s designated voting website above to exercise votes regarding the proposals. Votes canbe submitted until 6 p.m. Thursday, March 25, 2021 (JST).
2. How to vote online[For PC users]
Access the Voting Right Exercise Site at the URL provided above, log in using the login ID and password
printed on the enclosed Voting Rights Exercise Form and follow the instructions on the screen to indicate yourapproval or disapproval of the proposals.
[For smartphone users]
Simply scan the QR code® located on the bottom right of the enclosed Voting Rights Exercise Form. You
don’t have to enter login ID nor password.
In case you wish to change any of your votes, access the Voting Right Exercise Site at the above URL, log inusing the login ID and password printed on the Voting Rights Exercise Form and follow the instructions on thescreen to indicate approval or disapproval of the proposal. (QR code® is a registered trademark of DENSOWAVE INCORPORATED).
3. Notes(1) Any costs arising from accessing the Voting Right Exercise Site shall be borne by shareholders.
(2) Depending on your network environments, you may not be able to exercise your voting rights.
(3) The Voting Right Exercise Site is not accessible via the cellular phones.
Institutional investors can exercise their voting rights through “The Electronic Proxy Voting Platform” operated by
ICJ, Inc.
For an inquiry regarding online exercise of the voting rights, please contact the following:
Custody Service Department, IR Japan, Inc.
TEL: 0120-975-960
Business Hours: 9:00 a.m. to 5:00 p.m. (JST) (not available on Saturdays, Sundays and holidays)-3-Live Streaming of the General Meeting of Shareholders
The 27th Annual General Meeting of Shareholders will be live streamed on the Internet as follows for viewing at
home or elsewhere.
1. Date and time of the live streaming
From 10:00 a.m. to the end of the meeting on Friday, March 26, 2021 (JST)
2. How to watch the live streaming
Access the Live Streaming Site at the URL provided below with your “Shareholder ID number” as you will be
required to enter it on the authentication screen (login screen) for shareholders. Please be sure to make a note ofyour “Shareholder ID number” before sending the enclosed Voting Rights Exercise Form by post.
◆Live Streaming Site
https://2389.ksoukai.jp

QR code®

◆Shareholder ID number (9-digit number without hyphen)“Shareholder ID number” provided on the enclosed Voting Rights Exercise
Form or other such documents as dividend-related documents. (If your ID
number is eight (8) digits, add a zero (0) in front of the ID number.)◆Password (7-digit number without hyphen)“Postal code” of the registered address on the register of shareholders◆Viewing test
You can check your viewing environment in advance at the Live Streaming Site. The test page will beavailable from 10:00 a.m. Thursday, March 4, 2021 to around 9:30 a.m. Friday, March 26, 2021 (JST).
For an inquiry regarding how to watch the live streaming, please contact the following (only available on the date of
the meeting):
TEL: 03-4323-4081
Available from 9:00 a.m. to the end of the meeting on Friday, March 26, 2021 (JST)Shareholders’ Comments
To improve communication with shareholders, we are accepting inquiries for the General Meeting of Shareholders(to distinguish from inquiries made by exercising the right to inquire under the Article 314 of the Companies Act,
hereinafter the “Comments”) through the following methods. Although they will not be regarded as formal
statements at the General Meeting of Shareholders, some of the Comments may be featured and answered during themeeting. We highly appreciate your understanding on this matter.
Method 1: Enter your comment at https://digital-holdings.co.jp/contact_ir and send it by 6:00 p.m. Monday, March
22, 2021 (JST).
Method 2: Enter your comment on the comment submission form on the live streaming screen and send it after the
opening of the meeting and up until the chairperson declares the acceptance closed.

Matters to Be Noted on the Operation of the General Meeting of Shareholders•

To prevent the spread of COVID-19, the number of seats available at the meeting will be considerably reduced
this year from the previous years in order to ensure there is enough space between seats. Therefore, even if youcome to the venue on the day, we may refuse your entry.

•

Placing the top priory on the safety of our shareholders, our staff will check your body temperature at thereception and if your body temperature is at 37.5 degree Celsius or above, or if you look unwell, we may refuse
your entry into the venue.

•

All shareholders who attend the meeting in person will be asked to wear a mask. To avoid infection to othershareholders, those who refuse to wear a mask may not be allowed to enter the venue.

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•

From the perspective of reducing the risk of infection with COVID-19, some officers may attend the meeting
via telecommunication means from a remote location.

•

As the Q&A session will also be live streamed, if you intend to attend the meeting in person and do not wish
that your name be broadcasted, please tell your number on the attendance list without mentioning your namebefore making a comment.

•

In consideration of the privacy of shareholders attending the meeting in person, the live streaming video will be
shot from the rear of the venue and limited to showing the area where the chairperson and officers are seated.
However, shareholders may inevitably appear in the streaming. We highly appreciate your understanding.

•

While watching the live streaming, the video or audio may be distorted depending on the environment of yourPC or other device (model, specifications, etc.) or the Internet connection environment (network conditions,connection speed, etc.). Any costs to watch the live streaming, including communication charges, will be borneby shareholders.

•

While every effort will be made to ensure the live streaming is available, the live streaming may be suspended
or cancelled due to unavoidable circumstances such as deterioration in the communication environment or
system failure.

•

No souvenir will be handed out to shareholders attending the meeting in person.

-5-

Business Report (January 1, 2020 to December 31, 2020)
1.

Overview of the Group(1) Business for the Year Ended December 31, 2020
DIGITAL HOLDINGS, Inc. and its consolidated subsidiaries (hereinafter the “Group”) are surrounded by a businessenvironment where the domestic market is shrinking due to Japan’s declining population accelerated by its aging
society with a falling birth rate. However, the recent rapid advances in science, technology and innovation haveboosted the trend to realize digital transformation (DX) that transforms conventional products and services as well as
business models by leveraging data and digital technologies.
Furthermore, based on the recognition that we will see the realization of “Society 5.0” — a society that aims toachieve a high degree of convergence between cyberspace (virtual space) and physical space (real space), whichbrings new value to industry and society in ways not previously possible — proposed by the Japanese Cabinet
Office, we expect that such progress will further drive the growth of demand for “digital shift” relating to“information, human resources, products and money,” which are what the Group pursues to offer.
With the sights set on the vision of becoming a “true digital shift company committed to creating new value that will
be a driver for Society 5.0 as well as resolving social challenges” by 2030, the Group has set a management policy tomaximize corporate value and cash flows by leading any and all corporate “digital shift.” As such, “OPT Holding,Inc.” changed its trade name to “DIGITAL HOLDINGS, Inc.” on July 1, 2020.
The Group also aims to expand its business by shifting its main business domain from the Marketing Business,
centering on support for clients’ sales promotion, to the Digital Shift-related Businesses, thereby achieving a targetof “corporate value of JPY 1 trillion by 2030.”
As a results of business operations based on the above management policy, the Group reported operating results forthe fiscal year ended December 31, 2020 (hereinafter the “current fiscal year”) with revenue of JPY 88,768 million(down 1.3% YoY), gross profit of JPY 17,793 million (up 0.4% YoY), operating income of JPY 3,240 million (up23.0% YoY), EBIT of JPY 6,175 million (up 131.8% YoY) and EBITDA of JPY 7,591 million (up 55.1% YoY).
The full-year operating results for each reporting segment are as follows.

Marketing Business
Marketing Business mainly consists of two sub-segments: Large Corporations, which includes OPT, Inc. and otherconsolidated subsidiaries providing internet advertising, digital marketing and related services to large-scalecompanies; and Local SMEs, which includes SoldOut, Inc. and its consolidated subsidiaries providing a variety ofdigital marketing solutions to small- to mid-sized regional companies.
Operating results of the Marketing Business segment for the current fiscal year were affected especially by the
reduction of advertising budgets by certain existing clients and stagnation in new project acquisition due to theimpact of the COVID-19 pandemic, which emerged during and after the second quarter of the current fiscal year.
Consequently, revenue and gross profit decreased to JPY 82,780 million (down 0.7% YoY) and JPY 13,666 million(down 3.5% YoY), respectively. In spite of working on reducing selling, general and administrative expenses,
especially in the Large Corporations sub-segment, operating income amounted to JPY 2,507 million (down 17.2%
YoY) with EBIT of JPY 2,441 million (down 6.7% YoY) and EBITDA of JPY 2,951 million (down 14.1% YoY).

Synergy Investment Business
Synergy Investment Business consists of two sub-segments: Business Development Investment, which includes
SIGNATE, Inc., which is mainly engaged in the AI business, and the Chinese business; and Financial Investment,
which includes, among other businesses, BIG No. 1 Limited Partnership for Investment (changed its name from OPT
Ventures No. 1 Limited Partnership for Investment), BIG No. 2 Limited Partnership for Investment (changed its
name from OPT Ventures No. 2 Limited Partnership for Investment) and investment businesses managed by OPT
America, Inc.
Operating results of the Synergy Investment Business segment for the current fiscal year were affected especially bya substantial decline in sales from the Chinese cross-border e-Commerce business in the Business Development
Investment sub-segment due to the impact of COVID-19 pandemic. Consequently, revenue decreased to JPY 6,065
million (down 8.7% YoY). On the other hand, gross profit and operating income improved significantly to JPY
4,203 million (up 16.8% YoY) and JPY 3,080 million (up 60.7% YoY), respectively, mainly due to the recording of-6-

gains on sales of shares in RAKSUL Inc. and Jimoty, Inc. held by the Company as operational investment securities
and shares in rakumo Inc. and ENECHANGE Ltd. held by BIG No. 1 Limited Partnership for Investment in the
Financial Investment sub-segment. In addition to the above, EBIT and EBITDA improved further to JPY 6,154
million (up 152.6% YoY) and JPY 6,667 million (up 89.3% YoY), respectively, mainly as a result of the recordingof non-operating income and extraordinary income due to the recording of investment returns from overseas
investment funds as well as the sale of a part of the shares in Commerce One Holdings Inc. held by the Company as
investment securities.
In addition, the Company discloses AUM (Assets Under Management) and IRR (Internal Rate of Return) to enhance
the transparency of investment returns. At the end of the current fiscal year, AUM was JPY 24,877 million (up 8.3%
YoY) mainly due to the increase in prices of listed securities held by the Company, partially offset by the sale of apart of the securities held by the Company. IRR after tax at the end of the current fiscal year was 11.7%, which is adecrease by 0.2 percentage points compared to the end of the previous fiscal year, in relation to the decline in theshare price of a listed subsidiary, SoldOut, Inc.

The definitions of AUM and IRR are as follows:
Assets Under Management (AUM)
AUM is defined as aggregate amount of 1) book value of subsidiaries’ and affiliates’ shares and 2) fair value of
operational investment securities and investment securities.
(1)

Shares of subsidiaries and affiliates: Stated at book value(2)

Operational investment securities and investment securities: Each security’s fair market value is calculated
depending on the classification shown below:i.

Notes or securities of which investment amount is small: Acquisition costii.

Listed companies’ shares: Closing price at the end of reporting periodiii. Securities involved in financing in the recent period: Based on the value of relevant financing
iv. Other securities: Calculated by using the comparable multiple method, DCF method, or net asset
valuation method depending on each company’s performance.

Internal Rate of Return (IRR)
Prerequisites for calculation (Un-sold securities are calculated as if they were sold)-Subject to: Those the Company has invested in from 2003 to the end of December 2020 (including
securities of operational investment securities, investment securities, shares of subsidiaries and sharesof affiliates)-

The reference date for calculation: December 31, 2020-

Method:-1.

Impaired investment: Calculated as if they were sold at the net asset value after impairment.

2.

Investment involved in financing in the recent period: Calculated as if they were sold at the valueof relevant financing.

3.

IPOed investment: Calculated as if they were sold at the market value as of the reference date.

4.

Fund: Calculated with the amount collected until the end of the reporting period and the bookvalue as of the end of reporting period.

5.

Others: Any other investment with no change in their acquisition cost due to sale, impairment,
financing, IPO or the like are calculated as if they were sold on the reference date at the acquisition
cost.
Income tax are included.

Corporate function cost of DIGITAL HOLDINGS, Inc.

-7-

The Corporate Function of DIGITAL HOLDINGS, Inc. made efforts in reducing selling, general and administrative
expenses. As a result, selling, general and administrative expenses in the corporate function for the current fiscal year
were JPY 2,326 million, (up 1.6% YoY).

(2) Issues to be Addressed
The following six items are key business and financial issues to be addressed by the Group.
1. Maintain high growth rate in the digital shift business
While the demand for “digital shift” in Japan has been on the rise, the competition among corporate DXrelated services has been increasingly fierce as they are offered by a variety of companies, such as leading
IT vendors and consulting firms. The Group intends to achieve high growth rate in the digital shift businessby offering services utilizing the client base and marketing know-how cultivated through the conventional
Internet advertising business.
2. Improve profitability in the advertising businessTotal Internet advertising expenditures in Japan surpassed television media advertising expenditures for the
first time in 2019, and the market size of the Internet advertising business, which is the core domain in theGroup’s advertising business, has expanded to exceed JPY 2 trillion. Meanwhile, the competition among
peers is intensifying. The Group intends to secure profitability by such means as reviewing its operational
processes to promote the offshoring and nearshoring of operations and driving the automation ofprogrammatic advertising operations.
3. Secure a certain size of investment in the digital shift business
The Group plans to acquire companies related to the digital shift business using capital gains arising frominvestments in Internet-related companies in the Financial Investment sub-segment as funds for acquisition.
Investments in digital shift-related companies tend to be valued higher due to their high growth potential.
However, we intend to select candidate investees by making full use of knowledge and network of personal
contacts that the Group has cultivated in Internet-related industries since its foundation.
4. Reorganize Group’s operating structure
The Group has been working on the reorganization of its operating structure to adapt to changes of businessin order to develop and secure human resources capable of supporting the future growth of its corebusinesses. The Group also intends to reorganize the decision-making process as the Group’s businesses areaffected by significant advancements in technology.
5. Adapt to changes in the external business environment amid the COVID-19 pandemic
The Group’s operating results, especially in the advertising business, have been adversely affected bydecreased demand for advertising caused by constrained consumer activity amid the COVID-19 pandemic.
While it is still difficult to predict when the pandemic will be over, the Group has been working on thereview of its investment plan and the adoption of new working styles that can flexibly adapt to changes inthe social environment. As such, the Group intends to mitigate the impact of the COVID-19 pandemic on its
operating results by promoting the reduction of expenses related to office and sales activities.
6. Achieve ROE of 10%
The Group uses ROE as a key performance indicator to be achieved in order to make decisions with a focus
on investment efficiency to improve its profitability and capital efficiency. To this end, the Group intends togive consideration to shareholder return policies such as repurchase of treasury shares taking into accountthe level of internal reserves, while improving the profitability of its core businesses.

(3) Capital Expenditure
There were no significant capital expenditures.
(4) Financing
The Company has concluded one-year loan commitment agreements with a total value of JPY 10 billion with twocorrespondent financial institutions in September 2020 in order to secure liquidity on hand to prepare for
unforeseen circumstances resulting from the impact of COVID-19 pandemic.
(5) Significant Reorganizations and Other Such Events
1) On June 30, 2020, the Company transferred all the shares in relaido, Inc. it held to CMerTV, Inc. and-8-excluded relaido, Inc. from the scope of consolidation of the Group.
2) The Company excluded Crossfinity Inc. from the scope of consolidation of the Group because theliquidation was completed on December 16, 2020.

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(6) Assets, revenue and income(Yen in millions,
unless otherwise stated)

FY2017FY2018FY2019FY2020

Revenue

82,602

87,21689,95388,768

Ordinary income

1,921

1,669

2,833

4,358

Net income attributable toowners of parent

1,011

1,922

1,928

3,750

Net income per share (Yen)

43.95

84.66

84.23

167.86

Total assets

46,12756,551

61,13270,443

Net assets

18,81327,13332,601

39,072(Notes) 1. Net income per share is calculated based on the average number of shares issued (total shares issued excluding treasury
shares) during each fiscal year.
2. (Application of “Partial Amendments to Accounting Standard for Tax Effect Accounting” and relevant Guidance)“Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ statement No. 28, February 16, 2018)
and relevant Guidance were applied from the beginning of the 25th Fiscal Term. Deferred tax assets are presented underinvestments and other assets and deferred tax liabilities are presented under noncurrent liabilities.

(7) Status of Parent Company and Principal Subsidiaries (As of December 31, 2020)
1) Status of Parent Company
Not applicable2) Status of Principal Subsidiaries
Company Name

Capital(Yen in millions)Voting rights owned by
the Company

OPT, Inc.

100

100.0%

So

600

56.5%

SO Technologies, Inc.

45

56.5%

Digital Shift, Inc.

300

100.0%

ldOut, Inc.

Major businesses
Marketing business
Advertising agency business serving mid-sized
and venture companies
Provides marketing technology to mid-sizedcompanies and small- to mid-sized regional
companies
Support services related to digital shift(Notes) 1. The Company has 23 consolidated subsidiaries, including those in the table above.
2. The Company does not have any specified wholly owned subsidiaries as defined in the Companies Act.

(8) Major Businesses (As of December 31, 2020)
The Group is comprised of DIGITAL HOLDINGS, Inc. and 23 consolidated subsidiaries as of the end of the
fiscal year ended December 31, 2020. It operates the Marketing Business segment and the Synergy Investment
Business segment. The Marketing Business provides Internet advertising agency, digital marketing, and related
services to large companies and various digital marketing solutions to small to mid-sized regional companies.
The Synergy Investment Business provides support to investees, invests in Internet-related venture companies,
collects information in the US, develops AI and AI platforms, provides support and educational services tocompanies for digital shift, and conducts business in China.
Segment
Marketing Business

Synergy Investment Business

Major businesses• Internet advertising, digital marketing, and related services to large-scale companies• Digital marketing solutions to small to mid-sized regional companies• Investments in Internet-related venture companies• Information gathering in US• Development of AI and AI platforms• Support and educational services to companies for digital shift- 10 -

(9) Major Offices (As of December 31, 2020)
1) Main Office
OfficeHead Office

Address
Chiyoda-ku, Tokyo

2) Subsidiaries
Company Name
OPT, Inc.
SoldOut, Inc.
SO Technologies, Inc.
Digital Shift, Inc.

Address
Chiyoda-ku, Tokyo
Bunkyo-ku, Tokyo
Bunkyo-ku, Tokyo
Chiyoda-ku, Tokyo(10) Workforce (As of December 31, 2020)
Number of Employees

Change from Dec. 31, 2019

1,571

+63

(Notes) 1. Part-time, contractors and temporary workers are not counted as employees.
2. Personnel seconded to positions outside of the Group are not counted as employees.

(11) Main Lenders (As of December 31, 2020)
Amount borrowed(Yen in millions)
3,564

LenderSumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.

3,500

MUFG Bank, Ltd.

2,000

Resona Bank, Limited.

983

Syndicated Loan

750

(Note) The syndicated loan is provided by 15-bank syndicate, lead-managed by Sumitomo Mitsui Banking Corporation.

(12) Other Significant Matters Concerning the GroupNot applicable- 11 -

2. Status of the Company(1) Matters Concerning Shares (As of December 31, 2020)
1) Total Number of Shares Authorized to Be Issued
86,630,400 shares2) Total Number of Shares Issued
23,817,700 shares (including 1,623,695 treasury shares)
3) Number of Shareholders
3,3104) Major Shareholders (Top 10)
Shareholder
HIBC Co., Ltd.
Custody Bank of Japan, Ltd. (Trust account)
Tomohito Ebine
The Master Trust Bank of Japan, Ltd. (Trust account)
Atsushi Nouchi
NOMURA PB NOMINEES LIMITED OMNIBUS-MARGIN(CASHPB)
Mynavi Corporation
Goldman Sachs International
The Bank of New York, JASDEC Treaty Account
CGML PB CLIENT ACCOUNT/COLLATERAL

Number of Shares Held
(Shares)
4,651,200
1,669,500
1,036,900
957,900
885,000

Ownership of Shares (%)
20.95%
7.52%
4.67%
4.31%
3.98%

828,600

3.73%

755,800
721,051
577,400
548,350

3.40%
3.24%
2.60%
2.47%

*1. Although the Company holds 1,623,695 treasury shares, it is omitted from the above list of major shareholders.
The treasury shares (1,623,695 shares) do not include the Company’s shares held by OPT Group Employee Stock Ownership Plan
(171,916 shares).
*2. Ownership of shares is calculated based on shares outstanding (the number of shares issued net of treasury shares) and rounded
off to two decimal places.
*3. HIBC Co., Ltd., is an asset management company wholly owned by the Chairman of the Company, Noboru Hachimine.
*4. Time and Space, Ltd, an asset management company wholly owned by the President and Group CEO of the Company, Atsushi
Nouchi, holds 390,800 shares of the Company.
*5. Dalton Investments LLC held the following shares as of July 21, 2020, which was reported in the Large Shareholding Report(Change Report) submitted on July 28, 2020. However, the Company could not confirm the number of shares actually held by theentity as of the end of the reporting period. Thus, major shareholders are described based on the register of shareholders at the endof the reporting period. The following table is the summary of the Change Report.
Name or Name of Institution
Dalton Investments LLC

Address
1601 Cloverfield Blvd. Suite 5050N,
Santa Monica, California, 90404
United State

Number of shares held*
2,456,900(Note) The number of shares held is described in the Change Report as of July 28, 2020.
*6. 3D Investment Partners Private Ltd., held the following shares as of July 22, 2019, which was reported in the Large Shareholding
Report (Change Report) submitted on July 29, 2019. However, the Company could not confirm the number of shares actually heldby the entity as of the end of the reporting period. Thus, major shareholders are described based on the register of shareholders at
the end of the reporting period. The following table is the summary of the Change Report.
Name or Name of Institution
3D Investment Partners Private Ltd.

Address
250 North Bridge Road
#13-01 Raffles City Tower,
Singapore 179101(Note) The number of shares held is described in the Change Report as of July 29, 2019.

5) Other Significant Matters Concerning Shares
There were no significant matters concerning shares.

- 12 -

Number of shares held*
2,268,100

(2) Matters Concerning Corporate Officers
1) Matters Concerning Directors (As of December 31, 2020)
Position in Company

Name

ChairmanNoboru Hachimine

President and Group CEO

Atsushi Nouchi

Director
Director

Shusaku Minoda
Tomoyuki Mizutani

Director

Koji Yanagisawa

Director
Director (Chairman of Audit andSupervisory Committee, full-time)
Director (Audit and Supervisory
Committee member)
Director (Audit and Supervisory
Committee member)
Director (Audit and Supervisory
Committee member)

Yasuhiro Ogino
Fumiyuki Shinomiya

Area of Responsibility andSignificant Other Positions
Director at SoldOut, Inc.
External Director at UT Group Co., Ltd.
President and Representative Director at Digital
Shift, Inc.
Representative Director at Bonds Investment
Group, Inc.

Director, Executive Vice President & CFO at
ZOZO, Inc.
External Director at COLOPL, Inc.
Director and CFO at ANDPAD Inc.
Auditor at OPT, Inc.
Auditor at OptDigital, Inc.

Yuki Okabe

Certified Public Accountant

Toshio Yamaue

LawyerMasahiro Yamamoto

Certified Public Accountant(Notes) 1. Directors Tomoyuki Mizutani, Koji Yanagisawa and Yasuhiro Ogino, Director and Chairman of the Audit and Supervisory
Committee (full-time), Fumiyuki Shinomiya, and Directors and Audit and Supervisory Committee members Yuki Okabe,Toshio Yamaue and Masahiro Yamamoto are External Directors.
2. Director and Chairman of the Audit and Supervisory Committee (full-time) Fumiyuki Shinomiya had a long career at afinancial institution and possesses considerable expertise in finance and accounting.
3. Director and Audit and Supervisory Committee member Yuki Okabe has experience as an auditor at multiple listedcompanies and possesses considerable expertise in finance and accounting as a Certified Public Accountant (CPA).
4. Director and Audit and Supervisory Committee member Masahiro Yamamoto has experience in supporting numerous
companies as a Representative Partner at audit firms and possesses considerable expertise in finance and accounting as a
CPA.
5. Former Director Hiroshi Teraguchi and former Director and Audit and Supervisory Committee member Nobuaki Ishizaki
terminated their office upon its expiration at the conclusion of the Annual General Meeting of Shareholders held on March
27, 2020.
6. The Company established a full-time Audit and Supervisory Committee position to strengthen audit and oversightfunctions, improve information gathering and increase audit effectiveness.
7. The Company has designated Directors Tomoyuki Mizutani, Koji Yanagisawa and Yasuhiro Ogino, Director andChairman of the Audit and Supervisory Committee (full-time) Fumiyuki Shinomiya and Directors and Audit andSupervisory Committee members Yuki Okabe, Toshio Yamaue and Masahiro Yamamoto as independent directors inaccordance with the Tokyo Stock Exchange’s independence standards and filed a notification to that effect with the Tokyo
Stock Exchange.
8. The Company and Directors Shusaku Minoda, Tomoyuki Mizutani, Koji Yanagisawa and Yasuhiro Ogino, Director andChairman of the Audit and Supervisory Committee (full-time) Fumiyuki Shinomiya and Directors and Audit andSupervisory Committee members Yuki Okabe, Toshio Yamaue and Masahiro Yamamoto have entered into agreements
limiting each of the eight (8) Directors’ liability for damages under, Article 423, paragraph 1 of the Companies Act to thestatutory prescribed minimum liability, pursuant to the Company’s Articles of Incorporation.

2) Total Remuneration, etc. for Directors
Subgroup

Number of Recipients

Directors (excluding those who are Audit and Supervisory
Committee members)(External Directors’ share thereof)
Directors who are Audit and Supervisory Committee members(External Directors’ share thereof)
Total(External Directors’ share thereof)

7 (3)
5 (5)
12 (8)

Total Compensation(Yen in millions)
134
(25)
27
(27)
161
(52)

(Notes) 1. The above number of recipients includes one (1) Director and one (1) Director and Audit and Supervisory Committee
member who terminated their office upon its expiration at the conclusion of the Annual General Meeting of Shareholders
held on March 27, 2020.
2. Total remuneration, etc. for Directors does not include salaries earned as employees by Directors who concurrently holdemployee positions.
3. The above remuneration includes a JPY 15 million expense recognized in the fiscal year ended December 31, 2020 in- 13 -

connection with one (1) Director’s restricted stock compensation.
4. At the Annual General Meeting of Shareholders held on March 25, 2016, shareholders passed a resolution to set the
remuneration for Directors who are not Audit and Supervisory Committee members at up to JPY 200 million per year.
Meanwhile, at the Annual General Meeting of Shareholders held on March 27, 2020, shareholders passed a resolution to
set the remuneration for Directors who are Audit and Supervisory Committee members at up to JPY 50 million per year.
To award restricted stock grants to Directors (excluding External Directors and Directors who are Audit and Supervisory
Committee members), shareholders passed an additional resolution authorizing total Directors’ remuneration of up to JPY
550 million per year at the Annual General Meeting of Shareholders held on March 29, 2018.

- 14 -

3) Matters Concerning External Directors
Position in the Company

Director

Name

Significant Concurrent
Positions at Other Entities

Tomoyuki
Mizutani

Director

Koji
Yanagisawa

Director, Executive Vice
President & CFO at ZOZO,Inc.
External Director at
COLOPL, Inc.

Director

Yasuhiro
Ogino

Director and CFO at
ANDPAD Inc.

Position in the Company
Director(Chairman of the Audit andSupervisory Committee(full-time))

Name

Fumiyuki
Shinomiya

Significant Concurrent
Positions at Other Entities

Auditor at OPT, Inc.
Auditor at OptDigital, Inc.

Director(Audit and Supervisory
Committee member)

Yuki
Okabe

CPA

Director(Audit and Supervisory
Committee member)

ToshioYamaueLawyerDirector(Audit and Supervisory
Committee member)

Masahiro
Yamamoto

CPA

Main Activities at the Company
Mr. Mizutani attended 14 of 17 Board meetings held in
2020. He appropriately spoke up at meetings to ensure
the validity and appropriateness of the Board’s decisionmaking from an objective and neutral standpoint
independent from management, capitalizing on his wealthof experience and long achievement in corporate
management.
Mr. Yanagisawa attended all 13 Board meetings held
after his appointment in 2020. He appropriately spoke up
at meetings to ensure the validity and appropriateness of
the Board’s decision-making from an objective andneutral standpoint independent from management,
capitalizing on his experience as CFO and others at a
growing company as well as broad insight in overallbusiness administration centered on accounting, finance,
IR, legal affairs and corporate governance.
Mr. Ogino attended all 13 Board meetings held after his
appointment in 2020. He appropriately spoke up at
meetings to ensure the validity and appropriateness of theBoard’s decision-making from an objective and neutral
standpoint independent from management, capitalizing
on his experience as CFO and others at growing
companies as well as broad insight in overall businessadministration centered on business development andM&A.
Main Activities at the Company
Mr. Shinomiya attended all 17 Board meetings and all 14
Audit and Supervisory Committee meetings held in 2020.
He appropriately provided valuable perspectives on
agenda items and other discussions, capitalizing on his
insight and wealth of domestic and international
experience, mainly in the financial sector.
Ms. Okabe attended all 13 Board meeting and all 10
Audit and Supervisory Committee meeting held after her
appointment in 2020. She appropriately provided
valuable perspectives on agenda items and otherdiscussions, capitalizing on her career as a CPA as well
as experience in serving as an auditor at multiple listedcompanies.
Mr. Yamaue attended all 17 Board meetings and all 14
Audit and Supervisory Committee meetings held in 2020.
He appropriately provided valuable perspectives on
agenda items and other discussions from lawyer’s
perspectives.
Mr. Yamamoto attended all 13 Board meeting and all 10
Audit and Supervisory Committee meeting held after his
appointment in 2020. He appropriately provided valuable
perspectives on agenda items and other discussions,capitalizing on his career as a CPA as well as experiencein supporting numerous companies as a Representative
Partner at audit firms.

(Notes) 1. The Company’s relationships with ZOZO, Inc. and COLOPL, Inc., two companies at which Director Mr. Yanagisawa
holds positions, do not warrant disclosure.
2. The Company’s relationship with ANDPAD Inc., at which Director Mr. Ogino holds a position, does not warrant
disclosure.
3. OPT, Inc. and OptDigital, Inc., at which Director and Chairman of the Audit and Supervisory Committee (full-time) Mr.
Shinomiya holds positions, are subsidiaries of the Company.

- 15 -

(3) Accounting Auditor
1) Name KPMG AZSA LLC
2) Amount of Compensation(Yen in millions)43
Accounting auditor’s compensation for fiscal year ended December 31, 2020
72
Total monetary amount payable to the Accounting Auditor by the Company and its subsidiaries(Notes) 1. The audit agreement between the Company and its Accounting Auditor does not explicitly distinguish thecompensation for audit services performed pursuant to the Companies Act from the compensation for audit
services performed pursuant to the Financial Instruments and Exchange Act. Given disaggregating compensation
between the two types of audit services is not feasible, the Company is disclosing the above total amount as its
Accounting Auditor’s compensation for the fiscal year ended December 31, 2020.
2. The Audit and Supervisory Committee approved the Accounting Auditor’s compensation after performing
required verification of the appropriateness of the Accounting Auditor’s audit plan, audit performance and basis
for calculating estimates of its compensation.

3) Non-Audit Services
The Company paid KPMG AZSA LLC compensation for advisory services.
4) Policy for Dismissal or Non-reappointment of Accounting Auditor
If the Audit and Supervisory Committee decides that the Accounting Auditor needs to be replaced for
failure to perform its duties or for other reasons, it shall draft a proposal regarding dismissal or nonreappointment of the Accounting Auditor to be submitted to a general meeting of shareholders. Additionally,
if any of the causes for dismissal fall into the provisions of Article 340, paragraph 1 of the Companies Act,
the Audit and Supervisory Committee may dismiss the Accounting Auditor with the unanimous consent of
all of its members.
If the Accounting Auditor is dismissed, an Audit and Supervisory Committee member selected by the Audit
and Supervisory Committee shall report on the dismissal, including the reason(s) for it, at the earliest
general meeting of shareholders convened after the dismissal.

- 16 -

3.

The Systems and Policies of the Group(1) System for Ensuring the Appropriateness of Business Operation
1) Controls to Ensure the Company and Its Subsidiaries’ Directors and Employees Comply with Laws andArticles of Incorporation in Executing Their Duties
Under the directions and orders of those responsible for Group compliance, the division responsible for theCompany’s compliance conducts training sessions and prepares and distributes manuals in accordance withthe “Group Compliance Rules,” working to improve the compliance knowledge of the Directors andemployees of the Company and its subsidiaries, and to cultivate a mindset of respect for compliance. Basedon the “Group Internal Audit Rules,” the Company’s Internal Audit Office conducts regular audits of theexecution of duties and confirms that the execution of duties complies with laws and the Articles ofIncorporation.
2) Controls Related to Retention and Management of Information Concerning Execution of Duties by theCompany and Its Subsidiaries’ Directors
Regarding information on important decision-making and reports, the Company and its subsidiaries’
Directors prepare, retain and manage documents and electronic records in accordance with the “Group
Authority Rules,” “Group Confidentiality Protection Rules” and “Group Document Management Rules.”The Company’s subsidiaries keep such information readily accessible if requested to do so by theCompany’s Audit and Supervisory Committee or their own auditors.
3) Regulations and Other Controls Related to Management of the Company and Its Subsidiaries’ Risk of
LossesBased on the “Group Risk Management Basic Guidelines” and “Group Risk Management Rules”
established by the Board of Directors, the Company operates the Group Risk Management Committee
composed of the Company’s corporate officers, mainly those responsible for Group risk, and the Group
Risk Management Committee reports on the state of risk management to the Board of Directors on an asneeded basis. The Company’s subsidiaries have implemented their own controls for managing risks,
including the risk of losses, to the extent needed by their scale, attributes and other relevant circumstancesin accordance with the “Group Risk Management Rules.”4) Controls to Ensure the Company and Its Subsidiaries’ Directors Execute Their Duties Effectively
The Company and its subsidiaries prepare business plans in accordance with the “Group Rules on Financeand Accounting,” explicitly set operating performance targets on a company-wide basis and clarify how
they evaluate performance. They pursue improvement in operating efficiency by clearly defining everyorganizational unit’s responsibilities with respect to operating performance. The Company and its
subsidiaries also analyze and make decisions on significant management matters in accordance with the“Group Authority Rules,” working to ensure operating efficiency.
5) Controls to Ensure the appropriateness of Business Operation of the Group Consisting of the Company and
Its Subsidiaries
To ensure Group companies’ appropriateness of business operation, the Company supervises its
subsidiaries as required based on their respective circumstances in accordance with “Group Authority
Rules.” Additionally, in the Group Executive Officer meetings held monthly, the Company’s Directors
and subsidiaries’ management teams promote information-sharing and effective communication among
Group companies and alignment of Group management policies by exchanging information on importantmatters affecting the Group as a whole.
6) Matters Concerning Staffing Requested by Audit and Supervisory Committee of the Company to Assist
with Its Duties
When the Audit and Supervisory Committee requests staff to assist performing its duties, the Company
assigns the needed staff to the Committee.
7) Matters Concerning Assurance that Staff Assigned to Audit and Supervisory Committee Are Independent
from Directors and Effectively Supervised
The Company respects the Audit and Supervisory Committee’s request on assignment of staff to assist the
Audit and Supervisory Committee. Staff that have been ordered to perform auditing tasks by the Audit andSupervisory Committee will not obey to orders or directions from the Company’s Directors (excluding- 17 -

Directors who are Audit and Supervisory Committee members) against the orders from the Audit andSupervisory Committee.
8) System for the Company and Its Subsidiaries’ Directors (Excluding Company Directors Who Are Audit
and Supervisory Committee Members) and Employees to Report to Chairman of the Audit andSupervisory Committee
The Company’s Directors (excluding Directors who are Audit and Supervisory Committee members) andemployees are required to immediately report to the Chairman of the Audit and Supervisory Committee ifthey become aware of an illegal act or misconduct by a Director (other than a Director who is an Audit andSupervisory Committee member) or if any matter that would cause a material loss on the Company arises
or is at risk of arising.
Additionally, the Company has established an internal reporting channel within the Group. It has createdan environment in which misconduct and illegal acts can be reported either directly or indirectly to theCompany’s full-time Audit and Supervisory Committee member, working to enhance compliance toprevent misconduct and illegal acts throughout the entire Group.
9) Controls to Prevent Retaliation Against Whistleblowers
The Company prohibits retaliatory treatment for individuals who have reported to the full-time Audit andSupervisory Committee member and promotes universal awareness of this prohibition among its Directors(excluding Directors who are Audit and Supervisory Committee members), employees, its subsidiaries’
Directors and employees.
10) Matters Concerning Policy Pertaining to Prepayment or Reimbursement of Expenses Related to Executionof Duties by Audit and Supervisory Committee Members of the Company or Handling of Other Expenses
or Liabilities Related to Said Duties’ Execution
When billed in advance for necessary expenses related to execution of Audit and Supervisory Committee
members’ duties, the Company promptly pays the billed charges.
11) Other System to Ensure Effectiveness of Audit and Supervisory Committee’s Audits
Directors of the Company (excluding Directors who are Audit and Supervisory Committee members)
endeavor to make the audit system function more efficiently by promoting deeper understanding about theaudit system and creating an audit-friendly environment within the Company. Furthermore, theRepresentative Director notifies Audit and Supervisory Committee members of Board of Directors meeting
dates, details, etc. in advance and promotes appropriate communication and effective performance of audit
work to ensure that the Audit and Supervisory Committee’s audits are conducted effectively.
12) System to Ensure Reliability of Financial Reporting
To ensure the reliability of its financial reporting, and effective and appropriate reporting on internal
controls in accordance with the Financial Instruments and Exchange Act, the Company has established the“Basic Policy for Building Internal Controls Systems,” and implements and operates internal controls overfinancial reporting accordingly. It also continually evaluates whether its internal controls are functioning
properly and modifies them as needed.
13) System to Eradicate Antisocial Forces
The Company has established the “Group Rules on Response to Anti-Social Forces” containing required
provisions on severing relations with anti-social forces (as defined in the “Guideline for How Companies
Prevent Damage from Anti-Social Forces” issued by the Ministerial Meeting Concerning Measures
Against Crime) pursuant to the “Group Compliance Basic Policy.” Such rules and regulations mandate that
the Company sever all relations with anti-social forces and respond organizationally to any illicit demandsby anti-social forces. Additionally, the Company is a long-standing member of the Special Anti-Violence
Countermeasures Federation of the Metropolitan Police Department. It also builds cooperative
relationships with lawyers and other concerned external organizations, and incorporates an anti-social
forces clause into its contracts with new suppliers and customers.

- 18 -

(2) Overview of Implementation Status of Controls to Ensure Appropriateness of Business Operation
1) Execution of Directors’ Duties
In the fiscal year ended December 31, 2020, the Board of Directors met 17 times and made management
decisions. The Board of Directors instituted Board of Directors Regulations and other internal regulations
to ensure that Directors act in accordance with laws, government regulations and the Company’s Articles
of Incorporation.
2) Execution of Duties by Directors Who Are Audit and Supervisory Committee Members
In addition to conducting audits pursuant to audit plans formulated at Audit and Supervisory Committee
meetings, Directors who are Audit and Supervisory Committee members oversee Directors’ execution of
their duties through such means as attending important meetings, including Board of Directors meetings,
and regularly exchanging information with the Accounting Auditor and Internal Audit Office.
3) Risk Management and Compliance
The Company works to strengthen the risk management system to reduce risk, facilitate risk prevention,and take prompt action should a risk materialize, and in addition to establishing the “Group Risk
Management Basic Guidelines” and the “Group Risk Management Rules,” it has established the Group
Risk Management Committee. Furthermore, the Company works to enhance awareness among the
Directors and employees of the Company and its subsidiaries by creating the “Group Compliance
Guidelines” and the “Group Compliance Rules,” establishing the Group Compliance Committee, andgetting the department in charge of compliance in the Company to create manuals and guidelines, and plan,
conduct and administrate trainings.
The Company has established and operates a group management system that respects the independence of
the SoldOut Group, which operates under its parent company, SoldOut, Inc., the Company’s subsidiary
listed on the First Section of the Tokyo Stock Exchange.
(3) Policy for Determination of Dividends from Retained Earnings
As its dividend policy, the Company aims to pay dividends equivalent to 20% of net income attributable toowners of parent before amortization of goodwill so it can internally retain earnings to fund investments,
including business and human-resource investments needed to strengthen its management team and boost
earnings in pursuit of further growth in its corporate value over the medium to long term. For the fiscal year
ended December 31, 2020, the Company’s Board of Directors passed a resolution authorizing a dividend of
JPY 35.00 per share on February 10, 2021.
Monetary values presented in this Business Report are rounded down to the nearest whole unit in which
they are presented; percentages and other numbers are rounded off to one decimal places.

- 19 -

Consolidated balance sheet(As of December 31, 2020)
Account
AssetsAmountCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Operational investment securities
Inventories
Other
Allowance for doubtful accounts

63,372
27,054
14,66320,701
9956(12)Noncurrent assets
Property, plant and equipment
Buildings and structures
Other

7,070
798
582
215

Intangible assets
Goodwill
Other

1,527
156
1,370

Investments and other assets
Shares of affiliates
Investment securities
Lease and guarantee deposits
Other
Allowance for doubtful accounts

4,745
408
3,331
876
158
(28)

Account
Liabilities
Current liabilities
Accounts payable-trade
Short-term loans payable
Current portion of long-term loans
payableIncome taxes payable
Provision for bonuses
Other

Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Asset retirement obligations
Other
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Accumulated other comprehensive income
Valuation difference on available-forsale securities

Foreign currency translation
adjustment
Subscription rights to shares
Non-controlling interests
Total net assets
Total assets
70,443
Total liabilities and net assets(Note) The amounts presented above are rounded down to the nearest whole million yen.

- 20 -(Yen in millions)
Amount19,62912,750
1,500
1,236
772
328
3,042
11,740
8,091
3,437
208
3
31,37021,0438,212
3,972
10,557(1,698)10,050
9,969
80
0
7,978
39,07270,443

Consolidated statement of income(From January 1, 2020 to December 31, 2020)(Yen in millions)
Account

AmountRevenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Investment gain on equity method
Gain on investments in partnership
Other
Non-operating expenses
Interest expenses
Commission fee
Other
Ordinary income
Extraordinary income
Gain on change in equity
Gain on sales of investment securities
Gain on transfer of business
Other
Extraordinary loss
Loss on retirement of noncurrent assets
Impairment loss
Loss on valuation of investment securities
Loss on sales of investment securities
Other
Net income before taxes and other adjustments
Income taxes-current
Income taxes-deferred
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of parent(Note) The amounts presented above are rounded down to the nearest whole million yen.

- 21 -

88,76870,975
17,793
14,552
3,240
34
1,104
104
26
50
50

41
1,896
115
5
35
32
67
87
43
1,512
(63)

1,244

126
4,358

2,059

267
6,150
1,448
4,702
951
3,750

Consolidated statement of changes in net assets(From January 1, 2020 to December 31, 2020)(Yen in millions)Shareholders’ equity

Balance at beginning of year
Changes of items during theperiodDividends from surplus
Net income attributable toowners of parent
Purchase oftreasury shares
Changes in ownershipinterest in subsidiaries
Change in scope of
consolidation
Change in scope of equity
methodNet changes of items otherthan shareholders’ equity
Total changes of items during
the period
Balance at end of year

Balance at beginning of year
Changes of items during theperiodDividends from surplus
Net income attributable toowners of parent
Purchase oftreasury shares
Changes in ownershipinterest in subsidiaries
Change in scope of
consolidation
Change in scope of equity
methodNet changes of items otherthan shareholders’ equity
Total changes of items during
the period
Balance at end of year

Capital stock

Capital surplus

Retained earnings

Treasury shares

8,212

3,924

6,936

(698)

Total shareholders’equity18,375

(389)

(389)

3,750

3,750
(1,000)(1,000)

6

6

41

41
258

258

―

47

3,620

(1,000)

2,668

8,212

3,972

10,557(1,698)21,043

Accumulated other comprehensive income
Total
Valuation
Subscription Non-controlling
Foreign currency accumulated
Total net assets
difference onrights to sharesinterests
translation
otheravailable-for-saleadjustment
comprehensive
securities
income
8,593
225
8,819
0
5,405
32,601(389)
3,750(1,000)
6
41
258
1,375

(145)

1,230

―

2,572

3,803

1,375

(145)

1,230

―

2,572

6,471

9,969

80

10,050

07,97839,072(Note) The amounts presented above are rounded down to the nearest whole million yen.

- 22 -

Notes to Consolidated Financial Statements
1. Significant matters that form the basis of preparing consolidated financial statements:(1) Scope of consolidation
1) Status of consolidated subsidiaries• Number of consolidated subsidiaries: 23 consolidated subsidiaries• Names of consolidated subsidiaries
OPT, Inc.
SoldOut, Inc.
Heartlass, Inc.
ConnectOm, Inc.
Platform ID, Inc.
Demand Side Science, Inc.
SO Technologies, Inc.
Growth Gear Co., Ltd.
MEDIA ENGINE INC.
Bonds Investment Group, Inc.
BIG No. 1 Limited Partnership for Investment
BIG No. 2 Limited Partnership for Investment
SIGNATE Inc.
OPT Incubate Inc.
IMJ FENOX PTE. LTD. No.2
OPT China Limited
OPT Shenzhen (China)
OPT China, Inc.
OPT America, Inc.
OPT SEA Pte., Ltd.
Digital Shift, Inc.
OptDigital, Inc.
RePharmacy, Inc.
OptDigital, Inc. and RePharmacy, Inc. are included in the scope of consolidation because they were newly
established in the fiscal year ended December 31, 2020.
relaido, Inc. was excluded from the scope of consolidation because the Company sold shares it held in
relaido, Inc.
Crossfinity Inc. was excluded from the scope of consolidation because the liquidation was completed in thefiscal year ended December 31, 2020.
Internet-Utilization association was excluded from the scope of consolidation because the liquidation
was completed in the fiscal year ended December 31, 2020.
As of April 1, 2020, Digital Shift Academy, Inc. changed its trade name to Digital Shift, Inc. Also, as
of July 1, 2020, OPT Ventures, Inc., OPT Ventures No. 1 Limited Partnership for Investment and OPT
Ventures No. 2 Limited Partnership for Investment changed their names to Bonds Investment Group,
Inc., BIG No. 1 Limited Partnership for Investment and BIG No. 2 Limited Partnership for Investment,
respectively.
2) Status of major non-consolidated subsidiaries
Not applicable- 23 -

(2) Application of equity method accounting
1) Status of equity-method affiliates• Number of equity-method affiliates: Two affiliates• Names of equity-method affiliates
GENERATE INC.
PharmaShift Co., Ltd.
Jimoty, Inc. was excluded from the scope of equity method accounting as the Company sold a part of theshares it held.
PharmaShift Co., Ltd. is included in the scope of consolidation as it was newly established as a joint
venture with MEDICAL SYSTEM NETWORK Co., Ltd. in the fiscal year ended December 31, 2020.
2) Status of major non-consolidated subsidiaries and affiliates not subject to the equity method• Name of non-consolidated subsidiaries and affiliates in this categoryNon-consolidated subsidiary: Not applicable
Affiliates: Shenzhen Tianxi E-Commerce Co., Ltd.
Kejusi Shenzhen Technology Co., Ltd.
• Reasons for not applying the equity method
Non-consolidated subsidiaries and affiliates not subject to equity method were excluded from the scopeof equity method because they have a minor impact on the consolidated financial statements in terms of
the Company’s pro rata shares of net income or loss and retained earnings even if they are excluded
from the scope, and have no significance as a whole.
(3) Special notes to procedures for application of equity method accounting
Since the financial closing dates of GENERATE INC. and PharmaShift Co., Ltd., equity method affiliates,
are March 31, we used the financial statements based on the provisional settlement of accounts on the
consolidated closing date.
(4) Fiscal years of consolidated subsidiaries
The financial closing dates of OPT SEA Pte., Ltd. and MEDIA ENGINE INC. are November 30. In preparing
the consolidated financial statements, we used the financial statements based on the provisional settlement ofaccounts on the consolidated closing date for MEDIA ENGINE INC., whereas for OPT SEA Pte., Ltd., weused the financial statements at its closing date and significant transactions between consolidated companies
before the consolidated closing date are adjusted as required for consolidation.
Other consolidated subsidiaries have the same fiscal year-end as the consolidated closing date.
(5) Matters on accounting policies
1) Valuation standards and methods for significant assets
A. Securities
Shares of subsidiaries and affiliates
Stated at cost using the moving-average method.
Available-for-sale securities (including operational investment securities)• Those with market value:
Stated at fair value based on the market prices and the like on the fiscal year-end. (The related valuationdifferences are directly debited or credited to the net assets and the cost of securities sold is calculatedusing the moving average method.)• Those without market value:
Stated at cost using the moving-average method.
• Investment in limited partnership for investment:
Stated at an amount calculated using the method where the amount equivalent to the Company’s equity
interests in the partnership is added to or subtracted from the partnership’s gains or losses based on themost recent financial statements available.
B. Inventories• Merchandise and Work in process:Mainly stated at cost using the FIFO method. (The balance sheet value is calculated by writing down thebook value based on decreased profitability.)- 24 -

• Supplies:
Mainly stated at cost using the specific cost method. (The balance sheet value is calculated by writing
down the book value based on decreased profitability.)2) Depreciation/amortization method for significant depreciable/amortizable assets
A. Property, plant and equipment (excluding leased assets)
Mainly subject to the declining-balance method.
However, buildings (excluding equipment attached to buildings) acquired on or after April 1, 1998 andequipment attached to buildings and structures acquired on or after April 1, 2016 are subject to the straightline method.
The straight-line method is adopted by overseas consolidated subsidiaries. Primary useful lives are as
indicated below:
Buildings and structures:
5 to 18 years.
Other:
2 to 15 years.
B. Intangible assets (excluding leased assets)
Subject to the straight-line method.
Software for internal use is subject to the straight-line method based on the period available for internal use(mainly, five years).
C. Leased assets• Leased assets from non-ownership-transfer finance lease transactions:
Subject to the straight-line method where the lease term is the useful life, and the residual value is theguaranteed residual value if the relevant lease agreement stipulates residual value guarantee, or otherwise,
residual value is zero.
3) Standards for recognition of significant allowances
A. Allowance for doubtful accounts
To prepare for losses from receivables, uncollectible amounts are estimated and recognized, for ordinary
receivables, by the actual bad debt ratio based on losses in the past, or for doubtful receivables and othercertain receivables, by taking into consideration the collectability of individual receivable accounts.
B. Provision for bonuses
In terms of provision for bonuses, the amount accrued in the fiscal year for the estimated payout toemployees is recognized to prepare for payments of bonuses to employees.
4) Standard for translating significant assets or liabilities denominated in foreign currencies into Japanese yen
Assets and liabilities of overseas subsidiaries are translated into the Japanese yen based on the spot
exchange rate as of the closing date while their earnings and expenses are translated into the Japanese yen
based on the average rate. The translation differences are included in and recognized as foreign currencytranslation adjustment under net assets.
5) Amortization method and period for goodwill
Goodwill is regularly amortized over a reasonable period, which we estimate case-by-case based on the
duration of its effect.
6) Other significant matters that form the basis of preparing consolidated financial statements
A. Accounting procedures for consumption taxes
The accounting procedures for national and local consumption taxes are subject to the tax-excluded
method. Non-deductible national and local consumption taxes are expensed for the current fiscal year.
B. Application of the consolidated taxation system
The Company and its certain consolidated subsidiaries have adopted the consolidated taxation system.
With respect to items subject to the review under the non-consolidated taxation system conducted tocoincide with the transition to the group tax sharing system established under the “Act Partially Amending
the Income Tax Act” (Act No. 8 of 2020), we have not adopted the provisions of paragraph 44 of the“Guidance on Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No. 28, February 16,2018) in accordance with the treatment set out in paragraph 3 of the “Practical Solution on the Treatment- 25 -

of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax
Sharing System” (PITF No. 39, March 31, 2020). Accordingly, the amounts of deferred tax assets anddeferred tax liabilities have been calculated based on the provisions of tax laws in effect before therevision.
2.

Notes to additional information(Accounting estimates relating to the impact of the spread of COVID-19)
With respect to the impact of the spread of COVID-19 on the business the Group operates, the recent operating
results have been adversely affected, especially in the advertising business. The impact of COVID-19 on
accounting estimates is likely to remain even after January 2021. Under such circumstances, however, theGroup has been working on the development of new businesses. Based on the business plan prepared on thepremise of such efforts, the Group makes accounting estimates for the recoverability of deferred tax assets.
Due to many uncertainties about the impact of the spread of COVID-19, if the future circumstances differ fromthe above assumption, the Group’s financial position and operating results may be affected.
(Sale of shares of a material subsidiary)
The Company transferred all the shares it held in its consolidated subsidiary, relaido, Inc., effective June 30,
2020, and recognized loss on sales of investment securities of JPY 87 million under extraordinary loss. Pleaserefer to “7. Notes to business combination, etc.” for details of the sales of the shares.

3. Notes to consolidated balance sheet(1) Breakdown of inventories(Yen in millions)

MerchandiseWork in process
Supplies090(2) Commitment line agreements and financial covenants, etc.
1) The Company has concluded loan commitment agreements with Sumitomo Mitsui Banking Corporation.
The undrawn committed borrowing facilities under these agreements is as follows:(Yen in millions)
Total loan commitment
5,000
Undrawn committed borrowing facilities―
Difference
5,000
The above commitment line agreements are subject to the following financial covenants:
A. The total net assets in the balance sheet of the Company at each fiscal year-end shall be equivalent to atleast 60% of the total net assets in the balance sheet at the most recent fiscal year-end.
B. The sum of cash and deposits and operational investment securities in the balance sheet of the Company ateach fiscal year-end and interim fiscal-year end shall be equivalent to at least 50% of the sum of cash anddeposits and operational investment securities in the balance sheet at the most recent fiscal year-end.
2) The Company has concluded loan commitment agreements with Mizuho Bank, Ltd. The undrawn
committed borrowing facilities under these agreements is as follows:(Yen in millions)
Total loan commitment
5,000
Undrawn committed borrowing facilities―
Difference
5,000
The above commitment line agreements are subject to the following financial covenants:
A. The total net assets in the consolidated balance sheet shall be at least 50% of the total net assets in the
consolidated balance sheet at the end of the fiscal year ended December 31, 2019.
(3) Syndicated loan agreement and financial covenants, etc.
The syndicated loan agreement of JPY 5,000 million (loan balance as of December 31, 2020 was JPY 750
million) concluded by the Company in August 2016 is subject to financial covenants. The requirements of thecovenants are as follows:- 26 -

A. The total net assets in the consolidated balance sheet at each fiscal year-end shall be equivalent to at least
75% of the total net assets in the consolidated balance sheet at the end of the fiscal year ended December
31, 2015 or equivalent to at least 75% of the total net assets in the consolidated balance sheet at the mostrecent fiscal year-end, whichever is higher.
B. The Group shall not report operating loss in the consolidated statement of income at each fiscal year-end
for two consecutive fiscal years.
(4) Accumulated depreciation of property, plant and equipment(Yen in millions)349
Accumulated depreciation
The above accumulated depreciation includes JPY 0 million of impairment loss on property, plant andequipment.

- 27 -

4. Notes to consolidated statement of changes in net assets(1) Matters concerning class and total number of shares issued and class and number of treasury sharesClass of stock

As of Jan. 1, 2020

Additions

Subtractions

As of Dec. 31, 2020

Shares issued
Common shares

23,817,700 shares――

23,817,700 shares

917,705 shares

705,990 shares―

1,623,695 shares

Number of shares underlying stock options

Balance as ofDec. 31, 2020
(Yen inmillions)

Treasury shares
Common shares(2) Matters concerning subscription rights to shares
Category

Consolidated
subsidiaries

Type

Class ofunderlying
stock

As of
Jan. 1, 2020

Additions

Subtractions

As ofDec. 31, 2020

―

―

―

―

0

―

―

―

―

0

Subscription
rights to shares Common
granted as stock shares
options
Total(3) Matters concerning dividend
1) Amount of dividend distribution
Resolution

Class of stock

Total dividend
distribution(Yen in millions)February 12, 2020
Board of Directors
Meeting

Common shares

389

Dividend per share
(Yen)

17.0

Record date

Effective date

December 31,
2019

March 6, 2020

2) Dividends with a record date in the fiscal year ended December 31, 2020, but with an effective date in thefollowing fiscal year
Scheduledresolution date

Class ofstock

Dividend funding
sourceFebruary 10, 2021
Board of Directors
Meeting

CommonsharesRetainedearnings

Total dividend
distribution(Yen in millions)776- 28 -

Dividend per share
(Yen)

35.0

Record date

Effective date

December31, 2020

March 5, 2021

5. Notes on financial instruments(1) Matters concerning financial instruments
1) Policy for financial instruments
The Group invests into financial assets focusing on safety and liquidity given own cash flows and financial
market conditions. When borrowing funds or otherwise raising capital, the Group takes stability, costefficiency and flexibility into consideration in selecting funding instruments.
The Group manages investment businesses that invest in securities for investment purposes throughdedicated business units.
2) Nature of financial instruments and associated risks
Notes and accounts receivable-trade, which are trade receivables, are exposed to customer credit risk. With
respect to this risk, the Group has staff that manage receivable collection schedules and receivable balances
on a customer-by-customer basis and periodically assess major customers’ credit status in accord withregulations regarding the Group’s credit management. Trade receivables denominated in foreign currencies
are exposed to currency risk. Investment securities are mainly stocks of companies with which theCompany has business relationships. They are exposed to the risk of market price fluctuations. Operational
investment securities and investment securities other than the aforementioned investment securities held by
the Group are mainly stocks and equity interests in partnerships and other such entities. The Group holds
these securities for purely investment purposes or to advance its businesses. Listed stocks among thesesecurities are exposed to the risk of market price fluctuations. Unlisted stocks among these securities are
exposed to the following two risks because unlisted companies tend to be more sensitive than listedcompanies to changes in the economic environment and other such developments as a result of having lessstable financial and earnings foundations and being more constrained in terms of management resources.
a. The Group has no assurance of earning any capital gains from its investments.
b. The Group may incur capital losses on its investments.
Accounts payable-trade, which are trade payables, are mostly payable within one year. Trade payables
denominated in foreign currencies are exposed to currency risk.
Short-term loans payable and long-term loans payable are mostly funding needed for working capital,
among other purposes.
3) Risk-management regime for financial instruments• Management of credit risk (risk associated with counterparties’ contractual nonperformance, etc.)
For trade receivables, the Group conducts credit screenings when it starts doing business with a newcustomer, continually monitors receivables’ collection status and reviews credit limits when necessary inaccordance with its credit management regulations.
• Management of market risks (foreign currency risk, interest rate fluctuation risk, etc.)
For operational investment securities and other investment securities, the Group periodically checks
market values and assesses the issuer’s (or counterparties’) financial condition and continually reviews
and, as necessary, adjusts its holdings in light of market conditions and/or its relationship with thecounterparty.
• Management of liquidity risk in connection with financing (risk of inability to repay borrowings on thedue date)
The Group manages liquidity risk through such means as having its finance staff prepare and update cash
flow schedules on a timely basis.
4) Supplemental information on the fair value of financial instruments
The fair value of financial instruments includes values based on market prices and values reasonably
calculated if no market price is available. The latter calculation incorporates variables and are therefore
subject to change in response to changes in underlying assumptions.

- 29 -

(2) Matters concerning financial instruments’ fair value
The book value and fair value of financial instruments in the consolidated balance sheet as of December 31,
2020 (the consolidated balance sheet date for the current fiscal year) and their differences are as follows. The
table omits financial instruments for which fair value is extremely difficult to determine (see Note 2).
(Yen in millions)(1) Cash and deposits(2) Notes and accounts receivable-trade(3) Operational investment securities andinvestment securities
Total assets(1) Accounts payable-trade(2) Short-term loans payable(3) Long-term loans payable (including
current portion thereof)
Total liabilities

Carrying amount in the
consolidated balance sheet
27,054
14,663

Fair value

Difference
27,054
14,663――

17,323

17,323―59,04012,7501,500

59,04012,750
1,500

―
―
―

9,328

9,323

(4)

23,57823,573(4)(Note 1) Matters concerning fair-value measurement method of financial instruments and securities
Assets(1) Cash and deposits and (2) notes and accounts receivable-trade
Because these assets all have short-term maturities, their fair value approximates their book value. Their fair value istherefore measured at their respective book value.
(3) Operational investment securities and investment securities
As a general rule, the fair value of stocks is based on prices traded at the stock exchange.
Liabilities(1) Accounts payable-trade and (2) short-term loans payable
Because these liabilities have short-term maturities, their fair value approximates their book value. Their fair value istherefore measured at their book value.
(3) Long-term loans payable (including current portion thereof)
The fair value of long-term loans payable is measured by discounting the total amount of principal and interest at an interest
rate that incorporates a benchmark rate (e.g., government bond yield) plus a credit spread.
(Note 2) Financial instruments for which fair value is extremely difficult to determine(Yen in millions)
Type
Carrying amount on consolidated balance sheet
Operational investment securities and investment securities*1
4,061
Unlisted stocks
Equity interests in investment limited partnerships and similar
2,647
partnerships
Affiliates’ shares*2
408
Unlisted stocks
Total
7,117
(*1) These financial instruments have no market prices and their fair value is extremely difficult to determine.
They are therefore omitted from “(3) Operational investment securities and investment securities.”(*2) Affiliates’ shares have no market prices and their fair value is extremely difficult to determine.
They are therefore not included in the above table.
(Note 3) Post-reporting-date maturity schedule for monetary receivables

(1)
(2)

Type
Cash and deposits
Notes and accounts receivable–
trade
Total

―

―

(Yen in millions)Over 10 years―

14,663―――

41,717―――

Within 1 year
27,054- 30 -

1-5 years

5-10 years

(Note 4) Post-reporting-date repayment schedule for loans payable

(2)
(3)

Type
Short-term loans payable
Long-term loans payable
Total

6.

Notes to per-share information

Within 1 year
1,500
1,236
2,736

1-5 years

5-10 years

―
8,038
8,038

Net assets per share
Net income per share
7.

―
42
42

(Yen in millions)Over 10 years―
99¥1,401.00¥167.86

Notes to business combination, etc.
Business divestiture(Sale of shares of a subsidiary)
The Board of Directors of the Company, at its meeting held on June 18, 2020, resolved to transfer all theshares the Company held in its consolidated subsidiary, relaido, Inc. (hereinafter “relaido”) to CMerTV, Inc.
(hereinafter “CMerTV”) and concluded a Share Purchase and Sale Agreement with CMerTV on the same date.
After that, the Company sold all the shares to CMerTV on June 30, 2020.

(1) Overview of the business divestiture
1) Name of the buyer
CMerTV, Inc.
2) Name and business description of the divested subsidiary
Name of the subsidiary: relaido, Inc.
Business description:
Video advertising distribution platform business
3) Reason for the business divestiture
relaido is a wholly-owned consolidated subsidiary, which operates the video advertising distribution
business to promote the supply of and support for video advertising under the Group’s Marketing Businesssegment. While the video advertising market in Japan is rapidly expanding, the market environment ischanging day by day and the competition is getting increasingly fierce. As such, we have been seeking thepossibility of collaboration with a partner with which we can expect to generate synergistic effects.
Under such circumstances, after careful consideration from various angles, we reached the conclusion thatcreating an environment where the Company and CMerTV, which operates the video advertising
distribution platform business, work together to aim for the growth of video business will lead to thegrowth and enhancement of competitiveness of both companies.
4) Date of the business divestitures
June 30, 20205) Other matters including legal form of business divestiture
A share transfer in which consideration is limited to cash or other properties(2) Overview of accounting treatments applied
1) Amount of gain or loss on the transfer(Yen in millions)

Loss on sales of investment securities
872) Appropriate book value and breakdown of assets and liabilities of the business transferred
The transfer price is not disclosed in accordance with the non-disclosure agreement concluded between theparties concerned. Therefore, we refrain from providing this information.
3) Accounting treatments
The difference between consolidated book value and sales price of shares in relaido is recorded as loss on
sales of investment securities under extraordinary loss.
(3) Reporting segment of the divested business
Marketing Business- 31 -

(4) Approximate amounts of profit or loss of the divested business included in consolidated statement of income
for the fiscal year ended December 31, 2020
(Yen in millions)

Revenue
Operating loss

145
(144)

8. Notes to significant subsequent events(Sale of operational investment securities)
The Board of Directors of the Company, at its meeting held on February 3, 2021, resolved to sell shares theCompany held in RAKSUL INC. (Securities code: 4384, First Section of the Tokyo Stock Exchange) and soldthe shares on February 4, 2021 as follows:(1) Details of the sale1) Issue: Common shares of RAKSUL INC.
2) Number of shares sold: 2,836,100 shares
3) Number of shares held after the sales: 0 shares(2) Future outlook
As a result of the sale of the shares, the Company will record revenue of JPY 11,355 million and operating
income of JPY 9,553 million in the fiscal year ending December 31, 2021.
(Repurchase of treasury shares)
The Board of Directors of the Company, at its meeting held on February 10, 2021, resolved that the Company
would repurchase its own shares pursuant to Article 156 of the Companies Act as applied pursuant to Article
165, paragraph 3 of the same act.
(1) Reason for the repurchase of treasury shares
To improve returns to shareholders by improving capital efficiency and implementing flexible capital policies(2) Details of the repurchase1) Class of shares to be repurchased: Common shares of the Company
2) Total number of shares to be repurchased: Up to 650,000 shares (2.93% of the total number of sharesissued, excluding treasury shares)
3) Total repurchase amount: Up to JPY 1 billion
4) Period of repurchase: From February 12, 2021 to June 30, 2021
5) Method of repurchase: Market purchase on the Tokyo Stock Exchange
Reference)
Total number of shares issued and number of treasury shares as of December 31, 2020:• Total number of shares issued (excluding treasury shares): 22,194,005 shares• Number of treasury shares: 1,623,695 shares- 32 -

Balance sheet(As of December 31, 2020)
Account
AssetsAmountCurrent assets
Cash and deposits
Accounts receivable-trade
Operational investment securities
Advances paid
Short-term loans receivable fromsubsidiaries and associates
Accounts receivable - other
Other
Allowance for doubtful accounts

38,117
20,231447
15,986102

Noncurrent assets
Property, plant and equipment
Buildings and structures
Tools, furniture and fixtures
Intangible assets
Trademark right
Software
Software in progress
Other
Investments and other assets
Investment securities
Shares of subsidiaries and associates
Investments in other securities ofsubsidiaries and associates
Long-term prepaid expenses
Lease and guarantee deposits
Other

8,407
169
105
64
72
6
62
2
1
8,164
1,205
4,765

Account
Liabilities
Current liabilities
Short-term loans payable
Current portion of long-term loans
payableAccounts payable

300

Deposits received from subsidiaries
and associates

515
712
(178)

1,647
4
541
0

Accrued expenses
Income taxes payable
Deposits received
Provision for bonuses
Other
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Asset retirement obligations
Other
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Retained earnings
Retained earnings brought forward
Treasury shares
Valuation and translation adjustments
Valuation difference on available-forsale securities

Total net assets
Total assets
46,524
Total liabilities and net assets(Note) The amounts presented above are rounded down to the nearest whole million yen.

- 33 -(Yen in millions)
Amount
7,423
1,000
1,233
416
3,748
74
657
240
31
21
11,559
8,000
3,507
52
0
18,982
17,765
8,212
3,423
3,423
7,827
7,827
(1,698)9,776
9,776
27,541
46,524

Statement of income(From January 1, 2020 to December 31, 2020)(Yen in millions)
Account

AmountRevenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Gain on investments in investment partnerships
Gain on reversal of allowance for doubtful accounts
Other
Non-operating expenses
Interest expenses
Commission fee
Other
Ordinary income
Extraordinary income
Gain on sales of investment securities
Recoveries of written off receivables
Gain on liquidation of subsidiaries
Extraordinary loss
Loss on valuation of investment securities
Loss on sales of shares of subsidiaries
Loss on valuation of shares of subsidiaries
Other
Net income before income taxes
Income taxes-current
Income taxes-deferred
Net income(Note) The amounts presented above are rounded down to the nearest whole million yen.

- 34 -

5,546
2,505
3,041
592
2,448
5
484
132
32
25
50
0

1,718
100
657
67
292
144
7
924
(61)

654

76
3,026

2,475

511
4,990
863
4,126

Statement of changes in net assets(From January 1, 2020 to December 31, 2020)(Yen in millions)Shareholders’ equity
Capital surplus

Balance at beginning of year
Changes of items during period
Dividends from surplus
Net income (loss)
Purchase of treasury shares
Net changes of items other thanshareholders’ equity
Total changes of items during
the period
Balance at end of year

Capital stock

Legal capitalsurplus

Total capitalsurplus

8,212

3,423

3,423

Retained earnings
Other retained
earnings
Total retained
earnings
Retained earnings
brought forward
4,089
4,089
(389)
4,126

(389)
4,126

―

―

―

3,737

3,737

8,212

3,423

3,423

7,827

7,827

Valuation and translation
adjustments
Valuation
Total valuation and Total net assets
Total shareholders’ difference on
Treasury sharestranslation
equityavailable-for-saleadjustments
securities(698)
15,0278,460
8,460
23,488
Shareholders’ equity

Balance at beginning of year
Changes of items during period
Dividends from surplus(389)
Net income (loss)
4,126
Purchase of treasury shares(1,000)(1,000)Net changes of items other than
1,315
shareholders’ equity
Total changes of items during(1,000)2,737
1,315
the period
Balance at end of year
(1,698)17,765
9,776(Note) The amounts presented above are rounded down to the nearest whole million yen.

- 35 -(389)
4,126(1,000)
1,315

1,315

1,315

4,053

9,776

27,541

Notes to Non-Consolidated Financial Statements
1.

Notes to significant accounting policies(1) Valuation standards and methods for significant assets
1) Valuation standards and methods for securities
A. Shares of subsidiaries and affiliates
Stated at cost using the moving-average method.
B. Available-for-sale securities (including operational investment securities)• Those with market value:
Stated at fair value based on the market prices and the like on the fiscal year-end. (The related valuationdifferences are directly debited or credited to the net assets and the cost of securities sold is calculatedusing the moving average method.)• Those without market value:
Stated at cost using the moving-average method.
• Investment in limited partnership for investment:
Stated at an amount calculated using the method where the amount equivalent to the Company’s equity
interests in the partnership is added to or subtracted from the partnership’s gains or losses based on themost recent financial statements available.
(2) Depreciation/amortization methods for noncurrent assets
1) Property, plant and equipment (excluding lease assets)
Mainly subject to the declining-balance method.
However, buildings (excluding equipment attached to buildings) acquired on or after April 1, 1998 andequipment attached to buildings and structures acquired on or after April 1, 2016 are subject to the straightline method.
Primary useful lives are as indicated below:
Buildings and structures:
5 to 18 years
Tools, furniture and fixtures:
4 to 6 years
2) Intangible assets (excluding leased assets)
Subject to the straight-line method.
Software for internal use is subject to the straight-line method based on the period available for internal use(mainly, five years).
(3) Standards for recognition of significant allowances
1) Allowance for doubtful accounts
To prepare for losses from receivables, uncollectible amounts are estimated and recognized, for ordinary
receivables, by the actual bad debt ratio based on losses in the past, or for doubtful receivables and othercertain receivables, by taking into consideration the collectability of individual receivable accounts.
2) Provision for bonuses
In terms of provision for bonuses, the amount accrued in the fiscal year for the estimated payout to employees
is recognized to prepare for payments of bonuses to employees.
(4) Other significant matters that form the basis of preparing financial statements
1) Accounting procedures for consumption taxes
The accounting procedures for national and local consumption taxes are subject to the tax-excluded method.
Non-deductible national and local consumption taxes are expensed for the fiscal year.
2) Application of the consolidated taxation system
The Company has adopted the consolidated taxation system. With respect to items subject to the review
under the non-consolidated taxation system conducted to coincide with the transition to the group tax
sharing system established under the “Act Partially Amending the Income Tax Act” (Act No. 8 of2020), we have not adopted the provisions of paragraph 44 of the “Guidance on Accounting Standard- 36 -

for Tax Effect Accounting” (ASBJ Guidance No. 28, February 16, 2018) in accordance with thetreatment set out in paragraph 3 of the “Practical Solution on the Treatment of Tax Effect Accounting
for the Transition from the Consolidated Taxation System to the Group Tax Sharing System” (PITF
No. 39, March 31, 2020). Accordingly, the amounts of deferred tax assets and deferred tax liabilities
have been calculated based on the provisions of tax laws in effect before the revision.
(5) Changes to significant matters that form the basis of preparing financial statements
Not applicable2.

Notes to additional information(Accounting estimates relating to the impact of the spread of COVID-19)
With respect to the impact of the spread of COVID-19 on the business the Company operates, the recent
operating results have been adversely affected, especially in the advertising business. The impact of COVID19 on accounting estimates is likely to remain even after January 2021. Under such circumstances, however,
the Company has been working on the development of new businesses. Based on the business plan prepared on
the premise of such efforts, the Company makes accounting estimates for the recoverability of deferred tax
assets.
Due to many uncertainties about the impact of the spread of COVID-19, if the future circumstances differ fromthe above assumption, the Company’s financial position and operating results may be affected.
(Sale of shares of a material subsidiary)
The Company transferred all the shares it held in its consolidated subsidiary, relaido, Inc., effective June 30,
2020, and recognized extraordinary loss of JPY 292 million. Please refer to “9. Notes to business combination,etc.” in the Notes to Non-Consolidated Financial Statements for details of the sales of the shares.

3. Notes to balance sheet(1) Commitment line agreements and financial covenants, etc.
The Company has concluded loan commitment agreements with two correspondent banks in order to secureliquidity on hand to prepare for unforeseen circumstances resulting from the impact of COVID-19 pandemic.
For details, please refer to “3. Notes to consolidated balance sheet (2) Commitment line agreements andfinancial covenants, etc.” in the Notes to Consolidated Financial Statements.
(2) Syndicated loan agreement and financial covenants, etc.
The Company borrowed a total of JPY 5,000 million (loan balance as of December 31, 2020 was JPY 750
million) through a syndicated loan lead-managed by Sumitomo Mitsui Banking Corporation in August 2016 inorder to finance business.
For details, please refer to “3. Notes to consolidated balance sheet (3) Syndicated loan agreement and financial
covenants, etc.” in the Notes to Consolidated Financial Statements.
(3) Monetary receivables from and monetary payables to subsidiaries and associates (excluding those presented as
separate line items)(Yen in millions)Short-term monetary receivables
1,560
Short-term monetary payables
198(4) Accumulated depreciation of property, plant and equipment(Yen in millions)258

Accumulated depreciation- 37 -

4. Notes to statement of income(1) Transactions with subsidiaries and associates(Yen in millions)Operating transactions
Revenue
Non-operating transactions

2,800
5

(2) Gain on liquidation of subsidiaries
Gain on liquidation of subsidiaries is resulting from the completion of the liquidation of a consolidated
subsidiary Crossfinity, Inc.
5.

Notes to statement of changes in net assets
Matters concerning class and number of treasury sharesClass of stock

As of Jan. 1, 2020

Additions

Subtractions

As of Dec. 31, 2020

Treasury shares
Common shares

6.

917,705 shares

705,990 shares― shares

1,623,695 shares

Notes to deferred tax accounting matters
Breakdown of deferred tax assets and deferred tax liabilities by main cause(Yen in millions)Deferred tax assets
Allowance for doubtful accounts
Provision for bonuses
Asset retirement obligations
Long-term accounts receivable - other
Loss on valuation of investment securities
Adjustment of investments’ book value
Loss on liquidation of subsidiaries
Enterprise taxes payable
Loss brought forward
Other
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Valuation difference on available-for-sale securities
Total deferred tax liabilities
Net deferred tax assets

54
9
14
168
1,077
96
92
36
42
53
1,645
(837)
807
(4,314)(4,314)(3,507)- 38 -

7.

Notes to transactions with related party(1) Subsidiaries, etc.
Capital stock orequity stake(Yen in millions)Type

Name ofcompany

Address

Subsidiary

OPT, Inc.

Chiyoda-ku, TokyoType

Subsidiary

Name of company

OPT, Inc.

Relationship withrelated party

Director interlock
Management
involvement
CMS transactions

100

Nature of transaction

Business

Percentage of voting
rights holding (held)MarketingBusiness

Transaction
amount(Yen inmillions)

Management
consulting fee

2,133

Borrowing of funds
via CMS (Note 2)―

Payment of interest(Note 3)0

100.00%(―)

Account

Accounts receivable- tradeDeposits received
from subsidiaries
and associates

Fiscalyear-endbalance(Yen inmillions)
414
3,024

―

―

(Notes) 1. Transaction amounts do not include consumption and other taxes.
2. For borrowing transactions through the CMS (cash management system), only fiscal year-end balances are presented
because balances frequently change.
3. For transaction amount, interest rates are rationally determined based on market interest rates and other relevant factors.

(2) Corporate officers and individual shareholders
Not applicable
8.

9.

Notes to per-share information
Net assets per share
Net income per share¥1,240.94¥184.68

Notes to business combination, etc.
Business divestiture(Sale of shares of a subsidiary)
Overview of accounting treatments applied
Amount of gain or loss on the transfer
Loss on sales of shares of subsidiaries(Yen in millions)292

As the content other than above is identical to that in “7. Notes to business combination, etc.” in the Notes toConsolidated Financial Statements, the information is omitted.
10. Notes to significant subsequent events
As the content is identical to that in “8. Notes to significant subsequent event” in the Consolidated Financial
Statements. For details, therefore, please refer to the said item.

- 39 -

Certified Copy of Audit and Supervisory Committee’s Audit Report
AUDIT REPORT
We, the Audit and Supervisory Committee of DIGITAL HOLDINGS, Inc. (“the Company”), have audited theperformance of duties by Directors and Executive Officers during the 27th fiscal year from January 1, 2020 to
December 31, 2020. We report the method and results as follows.
1. Method and details of audit

We, the Audit and Supervisory Committee, have received reports from Directors, employees and others on aregularly basis on the details of the board resolutions with respect to items prescribed in Article 399-13,
paragraph 1, item i (b) and (c) of the Companies Act, and the status of the establishment and operation of thesystem established based on such board resolutions (internal control system), sought explanations, whenever
the necessity arose, and expressed our opinions.
Additionally, we conducted audits as follows.
(1) In coordination with the Company’s internal audit staff, we attended important meetings, received reports

from Directors, employees and others regarding the execution of their job duties, requested explanations asneeded, inspected documents, including documentation of significant decisions, and investigated the statusof operations and property at the Company’s Head Office and other major places of business, all incompliance with auditing standards prescribed by the Audit and Supervisory Committee and in accordancewith audit policies, audit plans and an agreed-upon division of duties. We also communicated andexchanged information with subsidiaries’ Directors, Auditors and other personnel and, as needed, received
reports from subsidiaries on their operations.
(2) In addition to monitoring and examining whether the Accounting Auditor maintained an independent

position and performed auditing appropriately, we received reports from the Accounting Auditor on theperformance of its duties and requested explanations when necessary. In addition, we received notice fromthe Accounting Auditor that “The systems for ensuring the proper performance of duties” (set forth in each
item of Article 131 of the Regulations of Corporate Financial Calculation) are organized in accordance withthe “Standards for Quality Control of Audit” (Business Accounting Council, October 28, 2005) and otherrelevant standards, and sought explanations whenever necessity arose.
Based on the above methods, we examined the business report, financial statements (balance sheet, statementof income, statement of changes in net assets, notes to financial statements), supporting schedules, andconsolidated financial statements (consolidated balance sheet, consolidated statement of income,consolidated statement of changes in net assets and notes to consolidated financial statements) for the fiscal
year under review.
2. Results of audit(1) Results of audit of business report, etc.
i)

In our opinion, the business report and accompanying schedules fairly represent the condition of theCompany in accordance with the laws, regulations and Articles of Incorporation of the Company.

ii)

We have determined that there were no serious occurrences of dishonest or false activity or violationsof any laws, regulations or the Company’s Articles of Incorporation by any Directors or Executive
Officers in carrying out their duties.

iii)

We believe the details of resolutions of the Board of Directors regarding the internal control system areappropriate. We found no matters of note with respect to the description on the business report as wellas the execution of duties of Executive Officers regarding the internal control system.

(2) Results of audit of financial statements and accompanying schedules

In our opinion, the audit method and audit results received from the Accounting Auditor KPMG AZSA LLC
are appropriate.
(3) Results of audit of consolidated financial statements

In our opinion, the audit method and audit results received from the Accounting Auditor KPMG AZSA LLC
are appropriate.

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February 19, 2021
Audit and Supervisory Committee of DIGITAL HOLDINGS, Inc.

Chairman of the Audit and Supervisory Committee(Full-time)

Fumiyuki Shinomiya (Seal)

Audit and Supervisory Committee member(Full-time)

Yuki Okabe (Seal)

Audit and Supervisory Committee member

Toshio Yamaue (Seal)

Audit and Supervisory Committee member

Masahiro Yamamoto (Seal)

Notes to the Reader of Audit Report:
1. The Audit Report herein is the English translation of the Audit Report as required by the Companies Act.
2. Audit and Supervisory Committee members Mr. Fumiyuki Shinomiya, Ms. Yuki Okabe, Mr. Toshio Yamaue
and Mr. Masahiro Yamamoto are External Directors as provided for in Article 2, item 15 and Article 331,
paragraph 6 of the Companies Act.

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Reference Documents for the General Meeting of Shareholders<Company’s proposals (Proposal No. 1 and Proposal No. 2)>
Proposal No. 1: Election of Seven (7) Directors (Excluding Directors Who Are Audit and Supervisory
Committee Members)
The terms of office of all the current six (6) Directors (excluding Directors who are Audit and Supervisory
Committee members; the same shall apply hereinafter in this proposal) will expire at the conclusion of this Annual
General Meeting of Shareholders.
In that regard, the Company proposes to increase the number of Directors by one (1) to further enhance themanagement system and elect seven (7) Directors.
As for this proposal, the Audit and Supervisory Committee of the Company has agreed that all the candidates are
qualified to serve as Directors.
The candidates for Director are as follows:
Candidate
No.

Name(Date of birth)

Career Summary and Position in the Company(Significant concurrent positions)Apr. 1991
Mar. 1994

1

2

3

Number of theCompany’s
Shares
Owned

Joined Mori Building Co., Ltd.
Established Deca Legs Ltd. (currently DIGITAL HOLDINGS,
Inc.) and assumed the position as President
Jun. 2016
Outside Director, UT Group Co., Ltd. (current position)
Noboru Hachimine
4,651,200
Mar. 2017
Director, SoldOut, Inc. (current position)(June 22, 1967)
Mar. 2020
Chairman, OPT Holding, Inc. (currently DIGITALHOLDINGS, Inc.) (current position)
Apr. 2020
President and Representative Director, Digital Shift, Inc.
(current position)[Reasons for nomination as candidate for Director]
Mr. Noboru Hachimine has long been demonstrating excellent leadership and driving growth in the Group’s corporate
value. He has been nominated because he is well-qualified to continue to build an operational foundation for therealization of sustainable Group-wide growth and to improve corporate value over the medium to long term.
Apr. 1991
Joined Mori Building Co., Ltd.
Oct. 1996
Joined OPT, Inc. (currently DIGITAL HOLDINGS, Inc.)
Mar. 1999
Director, OPT, Inc.
Atsushi Nouchi
Feb. 2015
CEO, OPT Ventures, Inc. (currently Bonds Investment Group,(December 21,
1,275,800
Inc.) (current position)
1967)
Mar. 2017
Vice President and Group COO, OPT Holding, Inc.
Mar. 2020
President and Group CEO, OPT Holding, Inc. (current
position)[Reasons for nomination as candidate for Director]
Mr. Atsushi Nouchi is well-versed in all aspects of the Company’s operations and has been driving growth in theGroup’s corporate value through strong leadership, decisiveness and executive capabilities. He has been nominatedbecause he is well-qualified to continue to build an operational foundation for the realization of sustainable Group-wide
growth and to improve corporate value over the medium to long term.
Sep. 2005
Joined OPT, Inc.
Jan. 2008
General Manager of Sales Department, OPT, Inc.
Jan. 2010
General Manager of Sales Division, OPT, Inc.
Apr. 2013
Executive Officer, OPT, Inc.
*
Daisuke Kanazawa Apr. 2015
President, Representative Director and CEO, OPT, Inc.
49,300(September 4,(current position)
1980)
Apr. 2017
Senior Executive Officer, OPT Holding, Inc. (currently
DIGITAL HOLDINGS, Inc.)
Apr. 2019
Group Executive Officer, OPT Holding, Inc. (current position)
Apr. 2020
Director, OptDigital, Inc. (current position)[Reasons for nomination as candidate for Director]
Mr. Daisuke Kanazawa has been engaged in marketing throughout his career since he joined OPT, Inc. in 2005 and has
long been leading the execution of operations in the Company’s core business domains through strong leadership,decisiveness and executive capabilities by serving in such positions as Representative Director at OPT, Inc. and Group
Executive Officer of the Company. He has been newly nominated for Director because he is considered to be the best
qualified for the position of Chief Operating Officer (COO) in order for the Group to achieve a target of corporate
value of JPY 1 trillion in the future.

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Candidate
No.

Name
(Date of birth)

Career Summary and Position in the Company(Significant concurrent positions)Apr. 1974

4

5

Number of theCompany’s
Shares
Owned

Joined The Industrial Bank of Japan (currently Mizuho Bank,
Ltd.)
Jun. 1998
Manager of Business Promotion Arrangement Office, Mizuho
Bank, Ltd.
Apr. 2000
Manager of Syndication, Mizuho Bank, Ltd.
Apr. 2002
Manager of Syndication, Mizuho Corporate Bank (currently
Mizuho Bank, Ltd.)
Apr. 2004
Managing Executive Officer, Supervisor of SyndicatedFinance Business Unit, Supervisor of Syndicated Finance &Loan Trading Compliance, and Group Supervisor, Mizuho
Bank, Ltd.
Shusaku Minoda
Apr. 2006
Managing Executive Officer, Supervisor of Global
10,000(July 20, 1951)
Syndication Unit and Global Products Unit, Mizuho Bank,
Ltd.
Jul. 2007
Managing Director and Co-Chief Executive Officer, Kohlberg
Kravis Roberts & Co. (KKR) Japan
Sep. 2007
Director, KKR Capital Markets (KCM)
Jan. 2008
President, KKR Japan
Apr. 2009
Director, Toys“R”US JapanMay 2013
Chairman, KKR Japan
Sep. 2014
Company Advisor, OPT Holding, Inc. (currently DIGITALHOLDINGS, Inc.)
Mar. 2015
Director, OPT Holding, Inc. (current position)[Reasons for nomination as candidate for Director]
Mr. Shusaku Minoda has vast experience in the financial sector both in Japan and overseas. He also possesses extensive
experience and broad insight as a high-ranking corporate executive. He has been nominated to offer opinions andadvice to the Company’s management from various perspectives.
Apr. 1988
Joined Recruit Co., Ltd. (currently Recruit Holdings Co., Ltd.)
Apr. 1997
Editor-in-Chief, “Tech Being”
Apr. 2001
Editor-in-Chief, “Recruit Navi Career” (currently “RikuNavi
NEXT”)
Apr. 2002
Editor-in-Chief, “Being” (Kanto region edition)
Apr. 2004
Corporate Executive Officer (responsible for Human Resource(HR) Division) of Recruit Holdings Co., Ltd.
Apr. 2006
Director, Recruit HR Marketing Co., Ltd. (currently Recruit
Jobs Co., Ltd.)Tomoyuki
Mizutani
10,000
Apr. 2007
Director and Corporate Executive Officer (responsible for HR,(August 16, 1964)
administration, corporate communication) of Recruit Holdings
Co., Ltd.
Apr. 2011
President, Recruit Agent Co., Ltd.
Oct. 2012
First President, Recruit Career Co., Ltd.
Apr. 2015
Advisor, Recruit Holdings Co., Ltd.
Apr. 2016
Advisor, Japan Executive Search and Recruitment Association(current position)
Mar. 2017
External Director, OPT Holding, Inc. (currently DIGITALHOLDINGS, Inc.) (current position)[Reasons for nomination as candidate for Director]
Mr. Tomoyuki Mizutani has spent much of his career at Recruit Co., Ltd. (currently Recruit Holdings Co., Ltd.),
mainly in the HR business domain. He was active in multiple high-ranking executive positions, including as a
Corporate Executive Officer (responsible for HR Division) at Recruit and the first President of Recruit Career Co.,
Ltd. Outside of the Recruit Group, he has been active in a wide range of activities with HR and societal-contribution
themes, including cultivation of social entrepreneurs. In addition to such extensive experience, he possesses broad
insight. He has been nominated to offer opinions and advice to ensure appropriate, sound management decisionmaking from an independent and objective standpoint.

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Candidate
No.

Name
(Date of birth)

Career Summary and Position in the Company(Significant concurrent positions)

Number of theCompany’s
SharesOwned

Apr. 1995
May 1999

6

7

Joined The Fuji Bank, Limited (currently Mizuho Bank, Ltd.)
Joined NTT DATA INSTITUTE OF MANAGEMENTCONSULTING, Inc.
May 2005
Joined Mizuho Securities Co., Ltd.
Feb. 2006
Full-time Statutory Auditor, START TODAY CO., LTD.
(currently ZOZO, Inc.)
Jun. 2008
Director and General Manager of Strategic Planning andKoji Yanagisawa
Business Administration Division, START TODAY CO.,
0(May 19, 1971)
LTD.
Apr. 2009
Director and CFO, START TODAY CO., LTD.
Dec. 2015
External Director, COLOPL, Inc. (current position)
Apr. 2017
Director, Executive Vice President & CFO, START TODAYCO., LTD. (current position)
Mar. 2020
External Director, OPT Holding, Inc. (currently DIGITALHOLDINGS, Inc.) (current position)[Reasons for nomination as candidate for Director]
With his experience as CFO and others at a growing company, Mr. Koji Yanagisawa possesses broad insight in overallbusiness administration centered on accounting, finance, IR, legal affairs, and corporate governance. He has been
nominated to offer opinions and advice to ensure appropriate, sound management decision-making from an
independent and objective standpoint.
Aug. 2005
Joined Macromill, Inc.
Jan. 2008
Executive Officer (in charge of Finance and Accounting
Headquarters), Macromill, Inc.
Jun. 2008
Joined J-Magic K.K.
Dec. 2008
Director, CFO, General Manager of Administration
Management Division, J-Magic K.K.
Dec. 2009
Joined mixi, Inc.
Nov. 2011
Executive General Manager of the Administrative
Yasuhiro Ogino
Headquarter, mixi, Inc.
(September 29,
0
1973)
Feb. 2012
Executive Officer, mixi, Inc.
Jun. 2012
Director, mixi, Inc.
May 2017
Representative Director, SMART HEALTH Inc.
Apr. 2018
Executive Officer, mixi, Inc.
Mar. 2020
External Director, OPT Holding, Inc. (currently DIGITALHOLDINGS, Inc.) (current position)
Apr. 2020
Director and CFO, OCT Inc. (currently ANDPAD Inc.)(current position)[Reasons for nomination as candidate for Director]
With his experience as CFO and others at growing companies, Mr. Yasuhiro Ogino possesses abundant insight inoverall business administration centered on business development and M&A. He has been nominated to offer opinions
and advice to ensure appropriate, sound management decision-making from an independent and objective standpoint.

(Notes) 1. New candidates for Director are indicated by an asterisk (*).
2. None of the candidates has any special interests in the Company or vice versa.
3. Messrs. Tomoyuki Mizutani, Koji Yanagisawa and Yasuhiro Ogino are External Director candidates.
4. Mr. Tomoyuki Mizutani is currently an External Director of the Company; he will have served as an External Director for
four years as of the conclusion of the 27th Annual General Meeting of Shareholders. Messrs. Koji Yanagisawa andYasuhiro Ogino will have served as External Directors for one year as of the conclusion of the said meeting.
5. If Messrs. Shusaku Minoda, Tomoyuki Mizutani, Koji Yanagisawa and Yasuhiro Ogino are reappointed, the Company
plans to renew each of the existing agreements with them pursuant to the provisions of Article 427, paragraph 1 of theCompanies Act. The agreements limit their liability for damages under Article 423, paragraph 1 of the Companies Act tothe minimum liability stipulated in Article 425, paragraph 1 of the same act.
6. The Company has concluded Directors and Officers liability insurance (D&O insurance) contracts, under which corporate
officers of the Company and its subsidiaries and their spouses or legal heirs are the insured. The D&O insurance contracts
cover the insured against loss caused by compensation claim and the like filed in connection with the execution of duties
by the insured during the coverage period. The insurance premiums are fully paid by the Company.
7. Messrs. Tomoyuki Mizutani, Koji Yanagisawa and Yasuhiro Ogino meet the independent director requirements of theTokyo Stock Exchange, Inc. If reappointed, they will continue to serve as independent directors.
8. The number of the Company’s shares owned by Mr. Noboru Hachimine includes 4,651,200 shares owned by HIBC Co.,
Ltd., an asset management company wholly owned by Mr. Hachimine.
9. The number of the Company’s shares owned by Mr. Atsushi Nouchi includes 390,800 shares owned by Time & Space, anasset management company wholly owned by Mr. Nouchi.

- 44 -

Proposal No. 2:

Revision of Remuneration, etc. related to Performance-based Monetary Remuneration,etc. for Executive Directors

The amount of remuneration, etc. for Directors (excluding Directors who are Audit and Supervisory Committee
members) of the Company was approved to be up to JPY 200 million per year (not including employee salaries for
Directors who concurrently serve as employees) at the 22nd Annual General Meeting of Shareholders held on
March 25, 2016. Also, at the 24th Annual General Meeting of Shareholders held on March 29, 2018, the amount of
remuneration, etc. paid separately from the amount of the aforementioned remuneration, etc. to Directors(excluding Outside Directors and Directors who are Audit and Supervisory Committee members) to award
restricted stock grants was approved to be up to JPY 550 million per year (not including employee salaries for
Directors who concurrently serve as employees).
This time, as part of the revision of the remuneration system for corporate officers, the Company proposes tointroduce a new performance-based monetary remuneration plan for Executive Directors of the Company(hereinafter the “Plan”), separately from the aforementioned amounts of previously approved remuneration, etc. for
Directors. The purpose of this Plan is to offer Executive Directors of the Company incentives connected to theCompany’s three fiscal years between the fiscal years ending December 31, 2021 and 2023 in order to increase
their motivation to contribute to improving business performance over the medium to long term, as well as tofurther promote shared value with shareholders.
Subject to the approval and adoption of this proposal as proposed, the Company will abolish the provisions
concerning the amount of remuneration, etc. paid to award restricted stock grants and no longer award restricted
stock grants in accordance with the provisions concerning the amount of such remuneration, etc., except for grants
already awarded.
The calculation and payment procedures for the performance-based monetary remuneration to be paid to Executive
Directors of the Company under this Plan are described below. The total remuneration amount shall be up to JPY
600 million per year, which is deemed reasonable by comprehensively considering the aforementioned purpose as
well as various factors such as contributions to the Company made by its Executive Directors. However, because
the performance-based monetary remuneration under this Plan will be paid collectively as remuneration for the
fiscal year following the respective fiscal year linked to the incentive, in practice, the total amount of theperformance-based monetary remuneration to be paid to the Company’s Executive Directors under this Plan will beequivalent to up to JPY 200 million per fiscal year. The total amount of the performance-based monetary
remuneration under this Plan shall not include employee salaries for Directors who concurrently serve as
employees.
The Audit and Supervisory Committee of the Company considers the content of this Plan appropriate as thedecisions on the payment of the performance-based monetary remuneration under this Plan were made bycomprehensively considering various factors such as contributions to the Company made by its Executive
Directors.
The Company currently has two (2) Executive Directors. If Proposal No. 1 “Election of Seven (7) Directors(Excluding Directors Who Are Audit and Supervisory Committee Members)” is approved and adopted as proposed,
the Company will have three (3) Executive Directors. However, the performance-based monetary remuneration will
not be paid to Mr. Noboru Hachimine under this Plan.

- 45 -

Calculation and payment procedures for the performance-based monetary remuneration
1.

Payment conditions(1) The remuneration shall be paid on condition that the market capitalization of the Company (*) will be atleast (i) JPY 200 billion or (ii) JPY 150 billion at one point during a period from the first date of taking
office as a Director for each Executive Director after the conclusion of this General Meeting of
Shareholders to the end of the fiscal year ending December 31, 2023 (hereinafter the “Applicable
Period”).
* The “market capitalization of the Company” indicates the amount to be calculated using the following
formula on a given day during the Applicable Period:(Total number of shares of the Company’s common stock issued – Number of treasury shares ofcommon stock held by the Company) × Closing price of ordinary transactions of the Company’scommon stock on the Tokyo Stock Exchange(2) The remuneration shall not be paid if an Executive Director loses his/her position determined by the
Board of Directors of the Company or dies during the Applicable Period.

2.

Payment amountThe following amount, up to the limit of JPY 600 million per year in total, shall be paid under this Plan.
•

If the payment condition described in 1. (1) (i) above is met, the amount shall be fourfold the amount of
fixed monetary remuneration to be paid to each Executive Director as a Director of the Company in thefirst fiscal year of taking office as a Director during the Applicable Period.

•

If the payment condition described in 1. (1) (ii) above is met (except in cases where the payment
condition described in 1. (1) (i) above is met), the amount shall be four-thirds (4/3) of the amount of fixedmonetary remuneration to be paid to each Executive Director as a Director of the Company in the firstfiscal year of taking office as a Director during the Applicable Period (the amount shall be rounded down
to the nearest whole number).
Provided, however, that if the first fiscal year of taking office as a Director during the Applicable Period
is either the fiscal year ending December 31, 2022 or 2023, the amount shall be two-thirds (2/3) or onethird (1/3) of either of the above applicable amounts, respectively (the amount shall be rounded down to
the nearest whole number).

- 46 -

<Shareholder’s proposal (Proposal No. 3)>
Proposal No. 3 is a proposal submitted by a shareholder LIM Japan Event Master Fund (hereinafter the “Proposing
Shareholder”).
We quote herein the original text of the outline of and the reasons for such proposal submitted in writing by the
Proposing Shareholder in relation to the exercise of shareholder’s right to make a proposal. The opinion of theBoard of Directors of the Company on the shareholder’s proposal is also included herein following theshareholder’s proposal.
Proposal No. 3:

Partial Amendments to the Articles of Incorporation

1. Outline of the proposal
We propose to establish a new Chapter and Article in the Articles of Incorporation of the Company as follows:(Underlines denote amendments)
Current Articles of Incorporation

Proposed Amendments(Newly established)

Chapter VIII
Control of Listed Subsidiaries
Article 43 (Control of Listed Subsidiaries)
With regard to listed subsidiaries that the Company
controls as a parent company, in order to review whether it
is appropriate to maintain them as listed subsidiaries fromthe perspective of maximizing the corporate value andimproving capital efficiency of the entire Group, theCompany shall deliberate on matters concerning such
subsidiaries at the Board of Directors meeting and disclose,
among other things, the details of such deliberations in a
Corporate Governance Report to be submitted to a financial
instruments exchange. The matters to be deliberated by the
Board of Directors are as follows:(1) whether the Company has ensured the effectiveness of
its governance structure;(2) whether the Company has secured a system that enables
it to collect information necessary to manage risks ofthe entire Group and make prior discussion thereon
based on the premise that independent decision-making
by its listed subsidiaries is guaranteed; and(3) whether there is any rational reason for maintaining
such subsidiaries as listed subsidiaries (including
review on consistency with the Group-wide businessportfolio strategy, and on whether benefits frommaintaining them as listed subsidiaries exceed
associated restrictions and costs).

2. Reasons for the proposal
According to a press release issued by a listed subsidiary of the Company SoldOut, Inc. (hereinafter, “SoldOut”) on
July 21, 2020, an employee of SoldOut was arrested for being involved in a violation of the Act on Securing
Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices. The series of media
reports over the case said that the employee had been arrested on suspicion of involvement in an illegal advertorial
for the efficacy of health foods. It was nothing less than a scandal that would tarnish the credibility of the Group,
whose core business is marketing, and its major customers and possibly adversely affect its corporate value.
The Proposing Shareholder believes that the cause of this scandal was mainly rooted in the malfunction of group
governance between the Company and SoldOut, which are in the so-called “parent-child listing” relationship. The
Company, which has dispatched its officer to the subsidiary as a director, should be held accountable for failing tosupervise its subsidiary as the parent company. SoldOut’s customer base and services it offers differ from those of
the Company. As such, in the first place, it is questionable whether there is any synergistic effect in keeping such a
subsidiary under the Group. If the Company intends to concentrate its management resources on the “digital shift”
business, it should give a serious consideration, from the perspective of the “Group-wide business portfolio
strategy,” to whether it should maintain SoldOut as its listed subsidiary.
Accordingly, the Proposing Shareholder proposes to amend the Company’s Articles of Incorporation based on the
belief that, in order to enhance the Company’s corporate value and improve its group governance, it is necessary to- 47 -

urge the Company to perform a regular “review” to assess whether to maintain its listed subsidiaries, as proposed ina report by the “Corporate Governance System Study Group (2nd Term)” compiled by the Ministry of Economy,
Trade and Industry on June 28, 2019, and incorporate the provisions on a system to ensure the Company’s
accountability for the results of such a review to shareholders in the Articles of Incorporation of the Company.
[Opinion of the Board of Directors of the Company on Proposal No. 3]
The Company’s Board of Directors is opposed to Proposal No. 3.

With regard to last year’s arrest of an employee of the Company’s listed
subsidiary SoldOut, Inc. (hereinafter “SoldOut”) on suspicion of
involvement in an illegal advertorial for the efficacy of health foods, we
believe that although SoldOut has its own system to make management
decisions and perform risk management independently as a listed company,
the Company, as its parent company holding the majority of its voting rights,
should have provided employees of the Group companies with morethorough education on compliance. From now on, subject to the approval at
the general meeting of shareholders of SoldOut, the Company will dispatch
additional one (1) officer to the subsidiary as an auditor to strengthen its
system to collect information necessary for risk management and make priordiscussion thereon. In addition, SoldOut itself has been working onstrengthening its governance system by increasing the percentage of outside
directors in its board of directors to clarify its supervisory function on
business execution.
We have been discussing whether the Company should maintain SoldOut as its
listed subsidiary at great length. The focus of the Company’s Group-widebusiness portfolio strategy lies on shifting its core from the Marketing Businessto the Digital Shift-related Businesses. As such, what we have to do now is tokeep a close eye on SoldOut’s recently announced growth strategy and how itwill be implemented in the future.
In the first place, the Proposing Shareholder’s proposal merely calls for securing
the Group-wide risk management system, reviewing whether to maintain listed
subsidiaries and disclosing the details thereof, and therefore, is not contradictory
to the Company’s efforts and approach mentioned above. Of course, theCompany will continue to comply with the “Practical Guidelines for Group
Governance Systems,” which is also mentioned by the Proposing Shareholder.
However, matters to be considered on the governance of listed subsidiaries interms of both business portfolio strategy and risk management are not limited towhat the guidelines require. Thus, we believe that the Company should makeflexible and agile decisions, rather than stipulating in its Article of Incorporation
in a uniform and fixed manner, on the details of such matters, including what todisclose and the timing and method of disclosure, and after careful considerationby the Board of Directors, taking into account dialogue with our shareholders
and investors, disclose them through various means of disclosure such as
Corporate Governance Report. We have therefore reached the conclusion that it
is not appropriate to establish the new provisions in the Article of Incorporationof the Company in accordance with the shareholder’s proposal.

- 48 -