GREE : FY2023 Annual Report（Annual Securities Report）

Annual Securities Report

(Report based on Article 24, Paragraph 1 of the Financial Instruments and Exchange Act of Japan)

(The 19th fiscal term)

From July 1, 2022 to June 30, 2023

GREE, Inc.

3632/E22012/GREE/2023

		Contents
Cover	................................................................................................................................................................................................................	3
Part I. Information on the Company	4
I. Overview of the Company	4
1.	Key financial data	4
2.	History	6
3.	Description of business	7
4.	Subsidiaries and associates	9
5.	Employees	10
II. Business Overview	12
1.	Management policy, management environment, and issues to be addressed	12
2.	Stance on sustainability and related initiatives	13
3.	Business and other risks	14
4. Analyses of financial position, operating results, and cash flows	18
5.	Material agreements	21
6.	Research and development	21
III. Equipment and Facilities	22
1.	Capital expenditures	22
2.	Principal facilities	22
3.	Plans for additions or disposals of facilities	22
IV. Information on the Company	23
1.	Information on the Company's shares	23
	(1) Total number of shares	23
	(2)	Share acquisition rights	24
	(3)	Exercise status of moving strike convertible bonds	35
	(4)	Total number of shares issued and share capital	35
	(5)	Shareholder composition	36
	(6)	Major shareholders	36
	(7)	Voting rights	37
	(8)	Executive and employee stock ownership plan	38
2. Acquisition of treasury shares	40
3.	Dividend policy	41
4.	Corporate governance	42
	(1)	Overview of corporate governance	42
	(2)	Directors and Audit & Supervisory Committee members	49
	(3)	Status of audits	64
	(4)	Executive remuneration	67
	(5)	Information on shareholdings	70
V. Financial Information	72
1.	Consolidated financial statements	73
	(1)	Consolidated financial statements	73
	(2)	Other	118
2.	Non-consolidated financial statements	119
	(1)	Non-consolidated financial statements	119
	(2)	Detail of major assets and liabilities	130
	(3)	Other	130
VI. Stock-Related Administration for the Company	131
VII. Reference Information on the Company	132
1.	Information on parent company of the Company	132
2.	Other reference information	132
Part II. Information on Guarantors for the Company	133
Independent Auditor's Report and Internal Control Audit Report	134

3632/E22012/GREE/2023

Cover

Document filed:	Annual Securities Report ("Yukashoken Hokokusho")
Applicable law:	Article 24, Paragraph 1 of the Financial Instruments and Exchange Act of Japan
Filed with:	Director-General, Kanto Local Finance Bureau
Filing date:	September 28, 2023
Fiscal year:	19th fiscal term (from July 1, 2022 to June 30, 2023)
Company name:	GREE Kabushiki-Kaisha
Company name in English:	GREE, Inc.
Title and name of representative:	Yoshikazu Tanaka, Founder, Chairman and CEO
Address of head office:	11-1, Roppongi 6-chome,Minato-ku, Tokyo, Japan
Phone number:	[phone]
Contact person:	Toshiki Oya, Director, CFO and Senior Vice President
Contact address:	11-1, Roppongi 6-chome,Minato-ku, Tokyo, Japan
Phone number:	[phone]
Contact person:	Toshiki Oya, Director, CFO and Senior Vice President
Place where the filed document is	Tokyo Stock Exchange, Inc.
available for public inspection:	(2-1, Nihombashi Kabutocho, Chuo-ku, Tokyo, Japan)

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Part I. Information on the Company

I. Overview of the Company

1. Key financial data

1. Consolidated financial data

Fiscal term		15th	16th	17th	18th	19th
Year ended		June 2019	June 2020	June 2021	June 2022	June 2023
Net sales	(millions of yen)	70,936	62,665	63,210	74,906	75,440
Ordinary profit	(millions of yen)	5,725	4,219	11,098	14,106	13,086
Profit attributable to owners of	(millions of yen)	3,485	2,709	13,533	10,121	9,278
parent
Comprehensive income	(millions of yen)	3,311	5,953	17,960	7,741	5,710
Net assets	(millions of yen)	110,669	113,406	120,212	90,930	92,549
Total assets	(millions of yen)	122,490	126,492	141,389	116,730	124,806
Net assets per share	(yen)	478.50	496.30	567.43	521.76	539.35
Basic earnings per share	(yen)	14.81	11.79	61.44	54.58	54.07
Diluted earnings per share	(yen)	14.77	11.75	61.21	54.01	53.47
Equity ratio	(%)	89.9	89.3	84.6	77.4	73.7
Return on equity	(%)	3.1	2.4	11.6	9.6	10.2
Price earnings ratio	(times)	33.83	39.19	9.57	15.10	11.80
Cash flows from operating	(millions of yen)	7,258	2,032	6,846	13,218	4,590
activities
Cash flows from investing	(millions of yen)	(3,576)	4,204	4,217	(5,299)	(439)
activities
Cash flows from financing	(millions of yen)	(6,459)	(3,751)	(4,013)	(37,516)	3,264
activities
Cash and cash equivalents at end	(millions of yen)	84,472	87,018	94,824	66,624	74,293
of period
Number of employees		1,685	1,649	1,543	1,560	1,610
[Separately, average number of	(people)
[1,391]	[1,361]	[1,069]	[1,080]	[1,166]
temporary employees]

(Notes) 1. The number of employees represents full-time employees. The average number of temporary employees during the fiscal year (including regularly assigned temporary employees) is shown separately in square brackets.

1. In regard to the average number of shares during the period, which is used in calculating basic earnings per share and diluted earnings per share, the number of the Company's stock held by Stock Grant ESOP Trust and Executive Remuneration BIP Trust has been excluded since they are shown as treasury shares in the consolidated balance sheet.
2. The Company began applying the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) and relevant accounting standards at the beginning of the 18th fiscal term, with key financial data for the 18th fiscal term reflecting the application of these accounting standards.
3. The Company changed its accounting policy related to the accounting method for revenue and expenses in the Investment and Incubation segment at the beginning of the 18th fiscal term, with key financial data for the 17th fiscal term retroactively adjusted according to the change in the accounting policy.

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(2) Non-consolidated financial data

Fiscal term		15th	16th	17th	18th	19th
Year ended		June 2019	June 2020	June 2021	June 2022	June 2023
Net sales	(millions of yen)	45,666	39,371	22,560	14,919	11,949
Ordinary profit	(millions of yen)	5,517	4,233	8,810	7,732	5,218
Profit	(millions of yen)	410	3,107	12,115	5,984	2,958
Share capital	(millions of yen)	2,362	2,367	100	100	100
Total number of shares issued	(shares)	242,231,200	242,249,700	242,249,700	179,749,700	179,749,700
Net assets	(millions of yen)	108,683	111,781	116,703	83,155	61,701
Total assets	(millions of yen)	117,034	122,251	135,373	101,270	92,514
Net assets per share	(yen)	470.11	489.33	551.02	447.20	358.89
Dividend per share	(yen)	10.00	10.00	12.50	11.00	11.00
(Interim dividend included herein)	(-)	(-)	(-)	(-)	(-)
Basic earnings per share	(yen)	1.74	13.52	55.00	32.27	17.24
Diluted earnings per share	(yen)	1.74	13.47	54.79	31.93	17.05
Equity ratio	(%)	92.5	91.1	85.8	81.6	66.2
Return on equity	(%)	0.4	2.8	10.6	6.0	4.1
Price earnings ratio	(times)	287.93	34.17	10.69	25.53	37.01
Dividend payout ratio	(%)	574.7	74.0	22.7	34.1	63.8
Number of employees		726	718	399	365	363
[Separately, average number of	(people)
[738]	[770]	[489]	[466]	[484]
temporary employees]
Total shareholder return	(%)	86.2	81.3	104.6	146.3	116.8
(Index for comparison: TOPIX
(91.8)	(94.6)	(120.5)	(118.8)	(149.3)
including dividends)
Highest share price	(yen)	637	557	648	1,285	946
Lowest share price	(yen)	384	341	435	573	628

(Notes) 1. The number of employees represents full-time employees. The average number of temporary employees during the fiscal year (including regularly assigned temporary employees) is shown separately in square brackets.

1. In regard to the average number of shares during the period, which is used in calculating basic earnings per share and diluted earnings per share, the number of the Company's stock held by Stock Grant ESOP Trust and Executive Remuneration BIP Trust has been excluded since they are shown as treasury shares in the non-consolidated balance sheet.
2. The highest and lowest share prices are those on the Tokyo Stock Exchange (Prime Market) from April 4, 2022 onward, and those on the Tokyo Stock Exchange (First Section) prior to that.
3. The Company began applying the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) and relevant accounting standards at the beginning of the 18th fiscal term, with key financial data for the 18th fiscal term reflecting the application of these accounting standards.
4. The Company changed its accounting policy related to the accounting method for revenue and expenses in the Investment and Incubation segment at the beginning of the 18th fiscal term, with key financial data for the 17th fiscal term retroactively adjusted according to the change in the accounting policy.

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3632/E22012/GREE/2023

2. History

Date	Overview
December 2004	GREE, Inc., established in Shirokanedai, Minato-ku, Tokyo (capitalized with ¥10,000,000)
February 2005	Absorbed GREE, Inc. (Mitaka, Tokyo), with GREE, Inc. (Minato-ku, Tokyo) as the surviving company
February 2005	Relocated head office to 5-chome, Roppongi, Minato-ku, Tokyo
July 2005	Relocated head office to 4-chome, Roppongi, Minato-ku, Tokyo
November 2006	Launched social networking service EZ GREE (currently GREE) for au users in cooperation with KDDI Corporation
February 2007	Mobile version of GREE became official service on i-mode from NTT Docomo, Inc.
February 2007	Relocated head office to 3-chome, Roppongi, Minato-ku, Tokyo
April 2007	Launched paid service as part of EZ GREE (currently GREE)
May 2007	Launched paid service as part of mobile version of GREE for i-mode users
August 2007	Mobile version of GREE became official service on Yahoo! Mobile from SoftBank Mobile Corp.
March 2008	Relocated head office to 4-chome, Roppongi, Minato-ku, Tokyo
August 2008	Launched paid service as part of mobile version of GREE for Yahoo! Mobile users
December 2008	Listed on Tokyo Stock Exchange Mothers market
June 2010	Moved to the First Section of Tokyo Stock Exchange
June 2010	Launched GREE Platform service
July 2010	Relocated head office to 6-chome, Roppongi, Minato-ku, Tokyo
December 2010	Launched GREE Platform for Smartphone service
January 2011	Established US subsidiary GREE International, Inc. to conduct online business in the US
January 2011	Made Atlantis Co., Ltd. (currently Glossom, Inc.) a subsidiary to conduct online advertising business
April 2011	Made OpenFeint Inc. a subsidiary to strengthen the online business in the US
May 2012	Made Funzio, Inc. a subsidiary to strengthen ability to develop social games
October 2012	Made Pokelabo, Inc. a subsidiary to strengthen ability to develop social games
February 2014	Established Wright Flyer Studios, Inc. to strengthen ability to develop social games
May 2015	Liquidated US subsidiary OpenFeint Inc.
October 2015	Established funplex, Inc. (currently GREE Entertainment, Inc.) for full-scale entry to the game operation business
August 2016	Established US subsidiary GREE International Entertainment, Inc. to succeed GREE International, Inc.
February 2017	Made 3Minute inc. a subsidiary to strengthen the advertising and media business, with a focus on video
March 2018	Established aumo, Inc. to operate the excursion, sightseeing, and travel information site aumo
April 2018	Established Wright Flyer Live Entertainment, Inc. (currently REALITY, Inc.), which operates the Metaverse business
May 2018	Liquidated US subsidiary GREE International Entertainment, Inc.
August 2018	Wright Flyer Live Entertainment, Inc. (currently REALITY, Inc.) launched REALITY, the world's first live streaming
	platform specializing in virtual YouTubers (VTubers)
January 2019	Established GREE Lifestyle, inc., which operates media sites including ARINE and WOOZ
July 2020	Conducted absorption-type demerger of the Wright Flyer Studios business from the game business, putting the Wright
	Flyer Studios business under the control of wholly owned subsidiary WFS, Inc.
September 2020	Transitioned to a company with an Audit & Supervisory Committee
July 2021	Conducted absorption-type demerger of the smartphone game and licensing businesses from the game business,
	putting these businesses under the control of wholly owned subsidiary funplex, Inc., which changed its name to GREE
	Entertainment, Inc.
March 2022	The headquarters of the Company and some Group companies were relocated to Roppongi Hills Gate Tower
July 2022	Established BLRD PTE. LTD. to operate the Web3 business
October 2022	Established QUANT, Inc. to support digital marketing activities
January 2023	Established REALITY Studios, inc. to operate the VTuber business
January 2023	Established REALITY XR cloud, Inc. to operate the B2B Metaverse business

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3. Description of business

The GREE Group (the "Group") constitutes GREE, Inc. (the "Company") and 25 consolidated subsidiaries, for a total of 26 companies. The Group primarily operates in the Internet and Entertainment segment and the Investment and Incubation segment.

1. Internet and Entertainment segment
   In the Internet and Entertainment segment, the Group generates the bulk of its revenue from paid services in the game business. As a general rule, it provides GREE platform, smartphone games, and other services at no charge, but also provides some items for a charge, allowing users to gain an advantage or enjoy greater convenience and originality.
2. 1. Game and Anime business
      In addition to its GREE platform, the Group operates and develops various smartphone games, and distributes a large number of popular titles in Japan and globally through its group members WFS, Pokelabo, and GREE Entertainment. It also participates in anime production committees, develops original content, develops domestic and overseas businesses with a focus on game content, and disseminates its products globally. In this way, it creates, develops, and produces IP that will be loved over the long term by fans in Japan and abroad.
   2. Metaverse business
      The Group mainly operates the smartphone-oriented metaverse REALITY for individual users, the VTuber business that produces a wide range of talents, and the metaverse construction platform REALITY XR cloud that utilizes 3D computer graphics (3DCG) and extended reality (XR) technology for corporate applications.
   3. DX business
      The Group strives to support the digital transformation (DX) of corporate clients. Drawing on its experience in the Internet business gained over many years, it proposes effective measures and accompanies corporate clients in their evolution with the aim of creating a better future.
   4. Commerce business
      The Group creates outing and living-related products that are indispensable to people's lifestyles, providing comprehensive value to everyone through media such as the excursion, sightseeing, and travel information site aumo and the living information site LIMIA.
3. Investment and Incubation segment
   In the Investment and Incubation segment, the Group seeks to invest in major domestic and overseas venture capital (VC) funds with investment portfolios geared toward the Internet and IT fields, as well as in corresponding startup companies.

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Business diagram

Licensors

Live streamers

Grant license

Allocate revenue

Provide live streaming Allocate revenue

GREE, Inc. and the GREE Group

Internet and

Entertainment segment

Game and Anime business

Metaverse business

Commerce business

Provide app games

Pay platform fee

Provide apps

App delivery platforms*

Pay usage fee

Members and users

External investors

Invest through limited partnerships

DX business

Investment and

Incubation segment

Provide service

Pay fee

Invest

Clients

Venture capital (VC) funds and startup companies

*Companies including Google Inc. (Google Play), Apple Inc. (App Store), and others

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3632/E22012/GREE/2023

4. Subsidiaries and associates

		Capital stock		Ratio of voting
Name	Location	(millions of	Main business	rights held	Detail of relationship
		yen)		(%)
(Consolidated subsidiary)			Development and		Three officers serving
WFS, Inc.	Minato-ku, Tokyo	110	operation of smartphone	100.0	concurrently; receipt of
(Notes) 1, 2			games		funds
(Consolidated subsidiary)			Development and		Two officers serving
Pokelabo, Inc.	Minato-ku, Tokyo	50	operation of smartphone	100.0	concurrently; receipt of
(Note) 2			games		funds
(Consolidated subsidiary)			Development and		Two officers serving
GREE Entertainment, Inc.	Minato-ku, Tokyo	310	operation of smartphone	100.0	concurrently; receipt of
(Note) 2			games		funds
(Consolidated subsidiary)					Three officers serving
REALITY, Inc.	Minato-ku, Tokyo	10	Metaverse business	100.0	concurrently; lending of
(Note) 2					funds
(Consolidated subsidiary)					Two officers serving
Glossom, Inc.	Shinjuku-ku, Tokyo	141	Advertising business	100.0	concurrently; receipt of
(Note) 2					funds

(Notes) 1. Net sales of WFS, Inc. (excluding intragroup sales between consolidated subsidiaries) exceed 10% of consolidated net sales.

WFS, Inc.
Key financial data	(1) Net sales	¥34,938 million
	(2)	Ordinary profit	¥3,395 million
	(3)	Profit	¥2,898 million
	(4)	Net assets	¥5,556 million
	(5) Total assets	¥8,493 million

1. The company is classified as a specified subsidiary.
2. There are also 20 consolidated subsidiaries and two equity-method affiliates not listed above.

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5. Employees

1. Consolidated

As of June 30, 2023

Segments	Number of employees
Internet and Entertainment	1,605	[1,164]
Investment and Incubation	5	[2]
Total	1,610	[1,166]

(Note) The number of employees represents full-time employees. The average number of temporary employees during the fiscal year (including regularly assigned temporary employees) is shown separately in square brackets.

(2) The Company

						As of June 30, 2023
Number of employees			Average age	Average years of service		Average annual salary
			(thousands of yen)
363	[484]		38.2		6.3		8,108
	Segments		Number of employees
Internet and Entertainment					363	[484]
	Total			363	[484]

(Notes) 1. The number of employees represents full-time employees. The average number of temporary employees during the fiscal year (including regularly assigned temporary employees) is shown separately in square brackets.

1. 2. Average annual salary includes bonuses and extra wages.

2. Labor unions
   The Group has no labor unions, but the management and labor have a favorable relationship, and there are no particular items of note.

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