Securities code: 3765
March 13, 2020
Dear shareholders
1-11-1, Marunouchi, Chiyoda-ku, Tokyo
GungHo Online Entertainment, Inc.
President & CEO Kazuki Morishita
Notice of Convocation of the 23rd Annual General Meeting
of Shareholders
It gives us great pleasure to invite you to the 23rd Annual General Meeting of Shareholders of GungHo Online Entertainment, Inc.
If you are unable to attend the meeting, you can exercise your voting rights in writing. Please review the "Reference Materials for the General Meeting of Shareholders" and indicate your approval or disapproval for each proposal on the enclosed Voting Rights Exercise Form. Please send it back to the Company so that it reaches the Company no later than 6:00 p.m. on Friday, March 27, 2020 (JST).
1. | Date and | March 30, 2020 (Monday) 10:00 a.m. (Doors open at 9:00 a.m.) |
time | ||
2. | Venue | 3-13-1 Takanawa, Minato-ku, Tokyo |
Grand Prince Hotel New Takanawa "International Convention Center Pamir" |
3. Purpose
Matters to be 1. Report on the Business Report, the Consolidated Financial Statements,
reported and the Audit Results of the Consolidated Financial Statements by the Accounting Auditor and the Board of Corporate Auditors for the 23rd term (from January 1, 2019 to December 31, 2019)
2. Report on the Non-consolidated Financial Statements for the 23rd term (from January 1, 2019 to December 31, 2019)
Matters to be | |
resolved | |
Proposal | Election of Nine (9) Directors |
〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰 〰
・Please be advised that non-shareholders such as proxies and persons accompanying shareholders are not permitted to attend the meeting.
・When attending the meeting, please submit the enclosed Voting Rights Exercise Form at the reception.
・If the Reference Materials for the General Meeting of Shareholders, the Business Report, the Non-consolidated Financial Statements, and the Consolidated Financial Statements are amended, the amendments will be announced on the Company's website (https://www.gungho.co.jp/english/).
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Attachment
Business Report
- From January 1, 2019 ) to December 31, 2019
1. Overview of the Company Group
- Consolidated business performance for the fiscal year ended December 31, 2019
1) Business progress and results
In the Japanese game market, the mobile game market continued to gradually expand, and the home console game software market also remained firm. As a result, the domestic game market in 2018 increased by 6.1% year on year to 1.6704 trillion yen*1.
Meanwhile, the global game market has also seen continued growth, and, along with the proliferation and expansion of smartphones, the global game content market in 2018 increased by 20.9% year-on-year to 13.1774 trillion yen*1. Following this, further expansion is expected in the console game market and the PC online game market.
Amidst these conditions, our company continued to concentrate on game development with a focus on global distribution in aim of the "Creation of New Values," and in order to "Maximization of Existing Values", we have worked to maintain as well as expand MAU (Monthly Active Users: the number of users who log into the game at least once a month) and have made efforts to strengthen the brands of each of our games.
As for existing games, "Puzzle & Dragons" (referred to as "P&D" henceforth) has had continuous updates and events held, such as adding new dungeons, improving game contents, collaborating with famous characters from other companies, and holding e-sports events, all with the main objective of providing players with the ability to have continued long-term enjoyment of the game. Sales for "P&D" have been favorable due to the implementation of initiatives aimed at reinvigorating MAU as well as the continuous implementation of measures to capture new users, including the broadcast of a TV anime series. Additionally, "the latest entry in the 'P&D' series, 'Puzzle & Dragons GOLD' for the Nintendo Switch™, the Company has been developing in the fiscal year, went on sale on January 15, 2020.
As for new games, the MAU for "Ragnarok Masters," which began service in Japan on June 5, 2019, has remained firm due to the implementation of in-game events and TV commercials. "TEPPEN," a card game developed jointly with Capcom Co. Ltd. for smartphones, began service on July 4, 2019*2 in North America and Europe, and on August 8 in Asia and Japan. The total number of downloads of "TEPPEN" exceeded 4 million as of November 19, 2019, due to the active hosting of e-sports events both within and outside of Japan as well as due to the implementation of advertising campaigns, including TV commercials.
Regarding subsidiary-related business, sales of "Ragnarok M: Eternal Love" (distributed by GRAVITY Co., Ltd.) in regions where the game is currently being distributed have settled compared to its sales when first distributed, but ongoing updates and events have resulted in stable sales, and it continues to contribute to our group's consolidated results.
As a result, net sales for the fiscal year ended December 31, 2019 amounted to 101,392 million yen, (an increase of 10.1% year-on-year). Operating profit was 28,349 million yen, (an increase of 6.7% year-on-year), ordinary profit was 28,617 million yen, (an increase of 7.3% year-on-year), and profit attributable to owners of parent came to 18,146 million yen, an increase of 9.4% from a year earlier.
*1: Famitsu Game White Paper 2019
*2: Pacific Daylight Time
2) Capital expenditure
For the fiscal year ended December 31, 2019, capital expenditure totaled 3,814 million yen, consisting mainly of 2,827 million yen in game development expenditure.
3) Financing
No financing of importance was obtained by the Company in the consolidated fiscal year under review.
- Acquisition and disposal of shares, equity interest or share subscription rights in other companies Not applicable
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- Assets and income
- Consolidated
(Millions of yen) | ||||
20th | 21st | 22nd | 23rd | |
Item | From January 1, | From January 1, | From January 1, | From January 1, |
2016 to December | 2017 to December | 2018 to December | 2019 to December | |
31, 2016 | 31, 2017 | 31, 2018 | 31, 2019 | |
Net sales | 112,457 | 92,306 | 92,101 | 101,392 |
Operating profit | 46,081 | 34,384 | 26,577 | 28,349 |
Ordinary profit | 46,081 | 34,351 | 26,659 | 28,617 |
Profit attributable to | 27,911 | 22,397 | 16,585 | 18,146 |
owners of parent | ||||
Net profit per share | 322.35 yen | 314.92 yen | 233.17 yen | 258.04 yen |
Total assets | 55,032 | 78,070 | 96,032 | 105,008 |
Net assets | 40,984 | 62,412 | 78,110 | 90,765 |
Net assets per share | 546.41 yen | 834.29 yen | 1,035.90 yen | 1,218.59 yen |
(Note) Effective July 1, 2019, share consolidation was implemented at a ratio of 1 share per 10 shares of common stock. Net profit per share and net assets per share are calculated on the assumption that the share consolidation was conducted at the beginning of the 20th consolidated fiscal year.
- Non-consolidated
(Millions of yen) | ||||
20th | 21st | 22nd | 23rd | |
Item | From January 1, | From January 1, | From January 1, | From January 1, |
2016 to December | 2017 to December | 2018 to December | 2019 to December | |
31, 2016 | 31, 2017 | 31, 2018 | 31, 2019 | |
Net sales | 105,435 | 76,575 | 62,340 | 67,870 |
Operating profit | 47,629 | 33,991 | 23,906 | 24,144 |
Ordinary profit | 47,700 | 33,987 | 23,981 | 24,255 |
Net profit | 30,123 | 19,672 | 15,351 | 16,391 |
Net profit per share | 347.90 yen | 276.61 yen | 215.82 yen | 233.09 yen |
Total assets | 53,736 | 68,513 | 81,865 | 92,432 |
Net assets | 43,727 | 61,581 | 75,034 | 84,601 |
Net assets per share | 608.84 yen | 855.64 yen | 1,042.17 yen | 1,201.76 yen |
(Note) Effective July 1, 2019, share consolidation was implemented at a ratio of 1 share per 10 shares of common stock. Net profit per share and net assets per share are calculated on the assumption that the share consolidation was conducted at the beginning of the 20th consolidated fiscal year.
- Material parent company and subsidiaries
- Relationship with parent company Not applicable
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- Material subsidiaries
Company name | Capital stock | The Company's | Principal business activities |
voting right ratio | |||
Game Arts Co., Ltd. | 78 million yen | 100.00% | Planning, development and sales of PC online |
games and consumer games | |||
3,474 million | Planning, development, operation and online | ||
GRAVITY Co.,Ltd. | 59.31% | distribution of online PC games and smartphone | |
won | |||
games | |||
Acquire Corp | 100 million yen | 50.07% | Planning, development, distribution and sales of |
smartphone games and consumer games | |||
GungHo Online | Planning, development, distribution and sales of | ||
Entertainment | US$300,000 | 100.00% | |
smartphone games and consumer games | |||
America,Inc. | |||
SUPERTRICK | 50 million yen | 100.00% | Planning and development of consumer games |
GAMES,Inc. | |||
GungHo Online | |||
Entertainment | US$55,491 | 100.00% | Holding company |
Asia Pacific | thousand | ||
Pte.Ltd. | |||
GungHo Gamania | US$10,000 | 51.00% | Online distribution and operation of smartphone |
Co.,Limited | thousand | games | |
mspo, Inc. | 490 million yen | 69.14% | Operation and advertisement distribution of mobile |
game platform | |||
Grasshopper | 10 million yen | 100.00% | Planning and development of consumer games |
Manufacture Inc. | |||
Notes: PlayPhone,Inc. was removed from the list of material subsidiaries because all shares of PlayPhone Inc. held by the Group company were disposed of during the fiscal year under review.
- Specified wholly-owned subsidiaries as of the end of the fiscal year under review Not applicable
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(4) Challenges to be addressed
In the global game market, smartphone games are leading the market expansion owing to the proliferation and growth of smartphones, and further expansion is expected. Globally, both the console game market and the PC online game market not only continue to grow, but also are expected to create new markets through continuing with a technological revolution. Further, various terminals connected to the internet in an improved communication environment have enabled users to enjoy cross-platform gaming in a way that goes beyond the boundaries of terminals. Looking at game markets of different regions, the European game market remains large in scale, and the Asian game market has seen rapid expansion.
In these circumstances, the GungHo Group has been continuing to quickly and correctly ascertain the ever- changing operating environment for the game industry, identify material challenges to be addressed and pursue a business strategy befitting the endeavors.
The following outlines our specific initiatives targeting material challenges.
① Maximization of existing values
One of our corporate policies is to diversify the use of content assets, which are already established as game brands: "Ragnarok Online" is now celebrating its 17th anniversary since the launch of the service, and "Puzzle & Dragons" for smartphones celebrated its 8th anniversary in February 2020.
Aiming for the long-term enhancement of the game brand "Puzzle & Dragons," we offer the brand's through a variety of channels including "PUZZLE & DRAGONS GOLD" for Nintendo Switch, expansion to animation, character-related goods, comic books, and e-sports events, in order to satisfy a wide range of preference and age groups. We believe these multiple approaches will contribute to gaining loyal customers and ensuring our long-term success.
②Venturing into creation of new values
A new game market may be created by rapid technological evolution now and in the future. Besides, the online game market is expected to receive more newcomers, or to consolidate further, the competitive environment is expected to be more severe in the future. GungHo Group will make maximum use of its developmental and operational knowhow and experience, as well as planning and developmental skills, which are highly evaluated in smartphone and console game fields. Our five development policies, "Instinctive," "Innovative," "Attractive," "Continuing," and "Dramatic," are the key values we promise to offer customers, targeting a wide range of platforms.
③Pursuing growth in the global market
The online game market in general, including smartphone games, is expected to grow further while the smartphone market grows on a worldwide scale and technologies including communication environment are progressing.
Our business reach is extending to overseas markets for PC online games, smartphone games, and consumer games. These games require continual support, using content in events and campaigns regardless of platforms. We will develop a customized operational system of PC online games, smartphone games, and consumer games for global expansion, offer quality games to loyal customers worldwide, and enhance profitability.
④Strengthening corporate governance
Identifying maximization of enterprise value as one of significant business challenges for the Company, we think it is important to build a good relationship with stakeholders and continue growing steadily on a long-term basis. To achieve this goal, we will run the organization in a flexible, transparent manner and enhance corporate governance.
⑤Securing consumer safety
The online game industry is required to provide an environment where every user, including young people, can play online games safely because a wide range of age groups of smartphone users can play online games due to improvement of the internet environment, spreads of smartphones and evolution of game devices.
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As a member of Japan Online Game Association, the Company is fully committed to protecting consumers from any disadvantages and to resolving issues through information exchanged among industry players. We believe this should contribute to society's economic growth.
⑥Strengthening corporate structure including product development
The video game market has been experiencing rapid changes and technological innovations. To achieve sustainable growth, we are in the process of establishing a solid foundation for our business and a responsive operating system, while improving management efficiency. Game development capabilities, which are the source of the group's revenue, are provided with flexibility based on an amoeba development concept and appropriate personal allocation.
- Principal business activities (as of December 31, 2019)
- Planning, development, operation and online distribution of PC online computer games and smartphone games
- Planning, development, operation, distribution and sales of consumer games
- Principal offices (as of December 31, 2019)
- The Company's business office
Chiyoda-ku, Tokyo, Japan
2) Principal subsidiaries' business offices
Game Arts Co., Ltd. | Chiyoda-ku, Tokyo, Japan |
GRAVITY Co.,Ltd. | Seoul Special City, South Korea |
ACQUIRE Corp. | Chiyoda-ku, Tokyo, Japan |
GungHo Online Entertainment America,Inc. | California, United States of |
America | |
SUPERTRICK GAMES,Inc. | Chiyoda-ku, Tokyo, Japan |
GungHo Online Entertainment Asia Pacific | Singapore |
Pte.Ltd. | |
Hong Kong Special Administrative | |
GungHo Gamania Co.,Limited | Region of the People's Republic of |
China | |
mspo, Inc. | Chiyoda-ku, Tokyo, Japan |
Grasshopper Manufacture Inc. | Chiyoda-ku, Tokyo, Japan |
- Employees (as of December 31, 2019) 1) Employees of the corporate group
Number of employees | Change from the end of the previous |
consolidated fiscal year | |
1,252 [142] | Increase of 100 |
Note: Number of employees in the brackets denotes average number of temporary employees for the fiscal year
2) Employees of the Company
Number of | Change from the end | Average number of | |
of the previous fiscal | Average age | ||
employees | service years | ||
year | |||
395 [86] | Increase of 1 | 39 years and | 7 years and |
8 months | 7 months | ||
Notes: | 1. Number of employees in the brackets denotes average number of temporary employees for the fiscal year | |
2. Number of employees excludes GungHo employees on loan to other companies and includes other companies' | ||
employees on loan to GungHo. |
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(8) Principal lenders (as of December 31, 2019)
Lender | Outstanding |
borrowings | |
Resona Bank Limited | 161 million yen |
- Other material matters related to the current state of the corporate group Not applicable
2. Matters relating to shares of the Company
(1) Shares (as of December 31, 2019) | |
1) Total number of authorized shares | 321,200,000 shares |
Note: Effective July 1, 2019, share consolidation was implemented at a ratio of 1 share per 10 shares of common stock. Total
number of authorized shares decreased by 2,890,800,000 shares compared with the end of previous fiscal year.
2) Total number of shares outstanding | 95,210,316 shares |
Note: Total number of shares outstanding includes the treasury shares (25,529,818 shares).
Note: Effective July 1, 2019, share consolidation was implemented at a ratio of 1 share per 10 shares of common stock. Total number of shares outstanding decreased by 856,892,844 shares compared with the end of previous fiscal year.
3) Number of shareholders | 83,015 | ||
4) Major shareholders | |||
Shareholder name | Number of shares held | Shareholding ratio | |
SON Financial Inc. | 17,895,700 shares | 25.68% | |
Taizo Son | 3,385,000 shares | 4.85% | |
Japan Trustee Services Bank, Ltd. (Trust | 2,764,800 shares | 3.96% | |
Account) | |||
The Master Trust Bank of Japan, Ltd. (Trust | 2,188,000 shares | 3.14% | |
Account) | |||
THE BANK OF NEW YORK 133972 | 1,422,790 shares | 2.04% | |
Japan Trustee Services Bank, Ltd. (Trust | 1,307,900 shares | 1.87% | |
Account 9) | |||
MSCO CUSTOMER SECURITIES | 1,093,545 shares | 1.56% | |
Kazuki Morishita | 1,009,600 shares | 1.44% | |
Japan Trustee Services Bank, Ltd. (Trust | 958,100 shares | 1.37% | |
Account 5) | |||
UBS AG LONDON A/C IPB SEGREGATED | 741,603 shares | 1.06% | |
CLIENT ACCOUNT | |||
Note: Shareholding ratio was calculated by excluding the treasury shares (25,529,818 shares).
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- Share subscription rights
- Outline of share subscription rights held by the Company's Directors as of December 31, 2016
2016 4th | 2017 5th | 2018 6th | 2019 7th | |
share subscription | share subscription | share subscription | share subscription | |
rights | rights | rights | rights | |
Date of issue | August 18, 2016 | May 15, 2017 | April 10, 2018 | April 9, 2019 |
Number of share | 8,361 rights | 7,245 rights | 4,291 rights | 2,967 rights |
subscription rights | ||||
Number of holders | ||||
The Company's | 5 persons | 5 persons | 5 persons | 5 persons |
Directors (excluding | ||||
outside Directors) | ||||
Type and number of | ||||
shares to which | Common shares | Common shares | Common shares | Common shares |
share subscription | 83,610 shares | 72,450 shares | 42,910 shares | 29,670 shares |
rights apply | ||||
Issue price of | 2,293.9 yen per | 2,507.8 yen per | 3,404.7 yen per | 3,444.5 yen per |
subscription rights | share | share | share | Share |
Value of capital to | ||||
be contributed at the | ||||
time of exercise of | 1 yen per share | 1 yen per share | 1 yen per share | 1 yen per share |
share subscription | ||||
rights | ||||
Exercise period for | From August 18, | From May 15, 2018 | From April 10, | From April 9, |
share subscription | 2017 to August 17, | 2019 to April 9, | 2020 to April 8, | |
to May 14, 2033 | ||||
rights | 2032 | 2034 | 2035 | |
Main terms and | ||||
conditions of | (Note) | (Note) | (Note) | (Note) |
exercise of share | ||||
subscription rights |
- Outline of share subscription rights granted to employees of the Company during the fiscal year under review
2019 7th | |
share subscription rights | |
Date of issue | April 9, 2019 |
Number of share subscription rights | 1,115 rights |
Number of grantees | |
The Company's Corporate Officers (excluding | 5 persons |
any Corporate Officer concurrently in service | |
as Director of it) | |
Type and number of shares to which share | Common shares |
subscription rights apply | 11,150 shares |
Issue price of share subscription rights | 3,444.5 yen per share |
Value of capital to be contributed at the time | 1 yen per share |
of exercise of share subscription rights | |
Exercise period for share subscription rights | From April 9, 2020 to April 8, 2035 |
Main terms and conditions of share | (Note) |
subscription rights | |
Notes: 1. Any exerciser of the share subscription rights is required to be in the position of a Director, Corporate Auditor or employee of GungHo or a related company of it (referring to any of its subsidiaries and other companies having a capital relationship with GungHo) when exercising the rights in question. This, however, does not apply to cases where the exerciser resigns from GungHo due to the expiration of his/her service term or old-age retirement or if there is any other legitimate reason for the intended exercise.
2. In the event of the death of a share subscription right holder, his/her inheritor is allowed to exercise the share subscription rights solely in one single bulk transaction.
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- No share subscription right less than one unit of the share subscription rights is allowed to be exercised.
- In the event of a share subscription right holder relinquishing his/her share subscription rights, these rights are not allowed to be exercised.
* Since the Company implemented a share consolidation at a ratio of 1 share per 10 shares of common stock as of July 1, 2019, "Type and number of shares to which share subscription rights apply" and "Issue price of share subscription rights" in 1) and 2) above were adjusted accordingly.
3. Matters relating to Directors of the Company
(1) Director and Auditors (as of December 31, 2019)
Position | Name | Assignment, and Significant Concurrent Positions |
President & | President & Representative Director of Game Arts Co., Ltd. | |
Representative | Kazuki Morishita | |
Executive Director of GRAVITY Co., Ltd. | ||
Director | ||
Executive General Manager of Finance Accounting Division and CFO of the | ||
Company | ||
Director of Game Arts Co., Ltd. | ||
Director | Kazuya Sakai | Executive Director of GRAVITY Co., Ltd. |
Director of Acquire Corp. | ||
Director of GungHo Online Entertainment Asia Pacific Pte. Ltd. | ||
Director of GungHo Gamania Co.,Limited | ||
Director | Yoshinori Kitamura | Executive General Manager of GV business division of the company |
Executive Director of GRAVITY Co., Ltd. | ||
Director | Masato Ochi | Executive General Manager of Customer Service Division of the company |
Executive General Manager of Business Administration Division and CCO of | ||
Director | Koji Yoshida | the Company |
Director of Acquire Corp. | ||
Director of GungHo Online Entertainment Asia Pacific Pte. Ltd. | ||
Director | Taizo Son | Representative Director of Belleisle Japan Inc. |
Representative Director of SON Financial Inc. | ||
General Manager of the Finance Planning Department of SoftBank Group | ||
Director | Norikazu Oba | Corp. |
Representative Director & Vice President, CFO of J.Score CO., LTD. | ||
Director of SoftBank Group Japan Corporation | ||
Director | Hidetsugu Onishi | Co-CEO, Integrity Partners LLC |
CEO, Avergence Incorporated | ||
Director | Keiji Miyakawa | Senior Advisor of Japan of Lincoln International |
Full-time Auditor | Yoichiro Ando | Auditor of Game Arts Co., Ltd. |
Auditor of Acquire Corp. | ||
Auditor | Hiroto Uehara | Representative of Uehara Hiroto Certified Public Accountant Firm |
Representative of Shiroyama-Tower Law Office | ||
Director of TOIN GAKUEN EDUCATIONAL ASSOCIATION | ||
Dean of TOIN LAW SCHOOL | ||
Auditor | Kaba Toshiro | Outside Director of CAVE Interactive CO., LTD. |
Outside Auditor of T-Gaia Corporation | ||
Outside Auditor of J.Score CO., LTD | ||
Outside Auditor of PIALA Inc. | ||
Notes: 1. Hidetsugu Onishi, Director; Keiji Miyakawa, Director fell under the category of outside directors stipulated in Article 2, Item 15 of the Companies Act, and the Tokyo Stock Exchange was notified that they are independent director.
- Yoichiro Ando, Full-time Auditor; Hiroto Uehara, Auditor; and Toshiro Kaba, Auditor fell under the category of outside auditors stipulated in Article 2, Item 16 of the Companies Act, and the Tokyo Stock Exchange was notified that they are independent directors.
- Being a Certified Public Accountant, Hiroto Uehara, Auditor is equipped with a reasonable level of knowledge in finance and accounting.
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(2) Outline of liability limitation agreement
An agreement has been entered into by and between the Company and Directors, Taizo Son, Norikazu Oba, Hidetsugu Onishi and Keiji Miyakawa, and Auditors, Yoichiro Ando, Hiroto Uehara and Toshiro Kaba, Outside Auditor on limitation of damage compensation liability pursuant to Article 427, Paragraph 1 of the Companies Act. The upper limit of damage compensation liability under this agreement shall be the higher of 1 million yen and an amount equivalent to one stipulated as the minimum liability value in Article 425, Paragraph 1.
(3) Amounts of remunerations for Directors and Auditors
Category | Number of recipients | Amount of payment |
Director | 8 | 292 million yen |
Auditor | 3 | 29 million yen |
Total | 11 | 322 million yen |
Notes: | 1. The amounts paid for the fiscal year under review do not include employee salaries for | Directors concurrently in service as |
employees. | ||
Shown below are the employee salaries for Directors concurrently in service as employees. | ||
Directors concurrently in service as employees: 4 persons, 156 million yen |
- As of December 31, 2019, the number of Directors stood at 9 and that of Auditors at 3. The difference between the combined total of these numbers and the above-mentioned total number of recipients resulted from the fact that one non- remuneration Director existed.
- Of the above-mentioned total remunerations, the amount of remunerations for Outside Directors totaled 12 million yen for two Directors and 29 million yen for three Auditors.
- The above-mentioned amounts for remuneration include the expenses (115 million yen for 5 Directors) incurred and recorded during the fiscal year under review in connection with share subscription rights granted as stock options.
- Matters relating to Outside Directors
① Relationship between the Company and significant organization concurrently served in by Director
- Hidetsugu Onishi, Director concurrently serves as Co-CEO of Integrity Partners LLC, CEO of Avergence Incorporated, neither of which has any particular relationship with GungHo.
- Keiji Miyakawa, Director concurrently serves as Senior Advisor of Japan of Lincoln International, neither of which has any particular relationship with GungHo.
- Yoichiro Ando, Auditor concurrently serves as Outside Auditor of Game Arts Co., Ltd., and Acquire Corp. which is a subsidiary of GungHo.
IV. Hiroto Uehara, Auditor concurrently serves as Representative of Uehara Hiroto Certified Public Accountant Firm, which doesn't have any particular relationship with GungHo.
- Toshiro Kaba, Auditor concurrently serves as Representative of Shiroyama-Tower Law Office, Director of TOIN GAKUEN EDUCATIONAL ASSOCIATION, Dean of TOIN LAW SCHOOL, Outside Director of CAVE Interactive CO., LTD., Outside Auditor of T-Gaia Corporation, Outside Auditor of J.Score CO., LTD and Outside Auditor of PIALA Inc., neither of which has any particular relationship with GungHo.
- Relationship with specified business operators such as main business connections
Yoichiro Ando, Full-time Auditor, is also an auditor of Game Arts Co., Ltd. and Acquire Corp., subsidiaries of the Company.
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- Principal activities during the fiscal year under review
a. Attendance at Board of Directors meetings and Board of Corporate Auditors meetings
Board of Directors meeting | Board of Corporate Auditors | |||
(held 13 times) | meeting (held 14 times) | |||
Number of | Attendance rate | Number of | Attendance rate | |
attendances | attendances | |||
Hidetsugu Onishi, Director | 13 times | 100% | - times | - % |
Keiji Miyakawa, Director | 12 times | 92% | - times | - % |
Yoichiro Ando, Auditor | 13 times | 100% | 14 times | 100% |
Hiroto Uehara, Auditor | 13 times | 100% | 14 times | 100% |
Toshiro Kaba, Auditor | 13 times | 100% | 14 times | 100% |
b. Remarks at Board of Directors meetings
Hidetsugu Onishi, Director, has sufficient experience and extensive knowledge gained mainly as a corporate executive. Keiji Miyakawa, Director, has sufficient experience and expertise gained mainly as an executive of financial service business. Yoichiro Ando, Auditor, has knowledge, wide-ranging views and sufficient experience gained mainly through his banking business activities as a former banker. Hiroto Uehara, Auditor, has sufficient experience and extensive knowledge gained mainly as a certified public accountant. Toshiro Kaba, Auditor, has sufficient experience and advanced knowledge gained as an attorney-at-law. They have provided the Company with advice and proposals from their respective viewpoints so that the legitimacy and validity of decisions made by the Board of Directors can be ensured.
These three Auditors have also made necessary remarks at the Board of Corporate Auditors meetings.
4. Accounting Auditor
(1) Name | PricewaterhouseCoopers Aarata LLC | |
(2) Fee | ||
Amount of fee | ||
Fee for the Accounting Auditor for the fiscal year under review | 37 million yen | |
Total amount of money and other compensation reward obliged to | ||
be paid to the Accounting Auditor by the Company and its | 37 million yen | |
subsidiaries | ||
Notes: | 1. The audit contract between the Company and the Accounting Auditor neither distinguishes between the audit fee for an |
audit under the Companies Act and the audit fee for an audit under the Financial Instruments and Exchange Act, nor is able | |
to do so practically. Therefore, the total fee is shown above. |
2. Bearing in mind the "Practical Guidelines on Collaboration with Accounting Auditor" published by the Japan Audit & Supervisory Board Members Association, the Board of Corporate Auditors ascertained the results of audit hours by audit item and hierarchical level under the previous fiscal year audit plan as well as the audit fee trend and the state of execution of duties by the Accounting Auditor. It then examined the reasonableness of the audit plan and fee for the fiscal year under review. As a result, the Board of Corporate Auditors consented to the fee for the Accounting Auditor pursuant to Article 399, Paragraph 1 of the Companies Act.
- Matters concerning audits of subsidiaries
GRAVITY Co., Ltd., a subsidiary of the Company, is subject to audit by an accounting auditor other than the Company's Accounting Auditor.
(4) Policy on decision to dismiss or not reappoint the Accounting Auditor
The Board of Corporate Auditors conducts overall an assessment of the Accounting Auditor's qualifications, independence, communication with Corporate Auditors, etc. in accordance with internal assessment procedures. If considered necessary (e.g. cases where it is difficult for the Accounting Auditor to perform his/her duties), the Board of Corporate Auditors determines an agenda to dismiss or not reappoint the Accounting Auditor, and has the Board of Directors submit it to the General Meeting of Shareholders.
―11―
If any of the items of Article 340, Paragraph 1 of the Companies Act is deemed to apply to the Accounting Auditor, the Board of Corporate Directors will dismiss the former after obtaining the consent of all Auditors. In such event, an Auditor selected by the Board of Corporate Auditors will report on the dismissal in question and the reason for it at the first General Meeting of Shareholders to be held after the dismissal.
―12―
5. System to secure the appropriateness of operations and an outline of the system operation
Pursuant to the Companies Act and the Companies Act Enforcement Regulations, the Company has in place a basic policy to develop a system to secure the appropriateness of its operations (the Basic Policy on Development of Internal Control System). The contents of it and an outline of its operation are as shown below.
- System to secure the appropriateness of operations
- System to ensure that the execution of duties of Directors and employees adheres to laws and ordinances and the Articles of incorporation
- In addition to ensuring the sharing of the corporate philosophy of the GungHo Group, we have established the GungHo Online Entertainment Group Charter, a charter that stipulates matters relating to the enhancement of its corporate governance platform and compliance, as well as the GungHo Group Compliance Code for Directors and Employees as compliance-related behavior guidelines obliged to be adhered to by all Directors and employees, as well as other relevant regulations.
- The Company elects a Chief Compliance Officer (CCO) as manager charged with promoting compliance.
- The Company develops whistleblowing internal/external contact points (hotline) to which a compliance-related whistleblowing report can be submitted by Directors or employees and at which any of them can have the relevant consultation. Moreover, the Company ensures that no such whistleblowing or consulting members become subjected to disadvantageous treatment.
- The Company's Internal Auditing Department performs an audit on the effectiveness of the organization's framework to comply with laws and ordinances and the Articles of Incorporation, and reports the audit results to the President & CEO. Moreover, the Internal Auditing Department reports the audit results to Auditors, thereby collaborating with the latter.
- System for storage and management of information related to the execution of duties of the Company's Directors
- In addition to putting in place standards required for storing and managing documents, the Company develops a system to appropriately store and manage documents and other material information that are related to Directors' execution of duties, including minutes of Board of Directors meetings and approval procedure documents, pursuant to the Document Storage Management Regulations, regulations aimed to ensure the efficient operation of duties to store and manage documents.
- The Company elects the Chief Information Security Officer (CISO) as an officer to lead its information security activities pursuant to the Basic Information Security Regulations. Moreover, the Company puts in place the Information Security Committee chaired by CISO, thereby pursuing its information security activities.
- Regulations on and other system for management of loss risk
- The Company prescribes the Regulations on Risk Management System in order to avoid, mitigate and take necessary actions against various risks for its business operation. As for risk prevention, the Company establishes, pursuant to these regulations, the Risk Management Committee as a deliberation body to address risks. Further, individual business units, each responsible for handling different types of risks, perform risk management, striving to mitigate risks and prevent them from occurring.
- In the event of an unforeseen incident or an emergency, the Company will immediately establish the countermeasure headquarters pursuant to the Regulations on Risk Management System. In turn, the Chief Crisis Management Officer (CCMO), the top crisis manager under the Chairman of the headquarters (President & CEO), will lead the efforts to put in place a system to deal with the situation in a well-supervised manner.
- The Internal Auditing Department performs an audit on the state of the Company's risk management
before reporting the audit results to President & CEO and Auditors. ―13―
4) System to ensure that the duties of Directors are executed efficiently
The Company has established the Regulations on Segregation of Duties and the Regulations on Official Authority, in addition to the Regulations on Board of Directors. Thus, the Company strives to clarify the scope of procedure for entity-leveldecision-making and that of duties required for executing operations as well as authority and responsibilities, thereby developing a system for Directors to execute their duties efficiently.
- System to secure the appropriateness of operations of the corporate group comprising the Company and its subsidiaries
- The Company has established the Related Company Management Regulations to secure the appropriateness of its group companies' operations under the GungHo Online Entertainment Group Charter. Moreover, the Company develops a system to manage each of its subsidiaries in a manner befitting its size and importance.
- Subsidiaries of the Company prescribe to various regulations obliged to be complied with by Directors and employees, and develop a system in which, for determining a significant matter for its business management, the subsidiary engages in prior consultation with the Company while keeping the former's operational autonomy and independence respected. Each of the subsidiaries also develops a system in which its operating results and financial position are periodically reported to the Company with any significant event experienced by its operations being reported to the latter when appropriate.
- The Company guides each of its subsidiaries to develop a system equivalent to the former's risk management system according to the latter's size and importance in order to avoid, mitigate and take necessary steps against risks. Further, the Company develops a system in which each
subsidiary's risk management-related information is delivered to the former appropriately.
- The Company installs compliance officers at each of its subsidiaries in light of its size and importance, thereby solidifying and bolstering the group's compliance platform. Moreover, the Company arranges for the subsidiary to develop its unique whistleblowing internal/external contact points (hotlines) to which a compliance-related whistleblowing report can be submitted by its Directors or employees and at which relevant consultation can be obtained by them. At the same time, the Company ensures that no such whistleblowing or consulting members become subjected to disadvantageous treatment.
- The Company checks its subsidiaries with respect to the appropriateness of the financial reporting of the former and the latter, thus securing the appropriateness of the contents of the Company's Securities Report while developing its internal controls. If any internal control problem occurs, the organization will strive to develop its structure in an effort to improve the situation.
- The Company's Internal Auditing Department performs an internal audit on each of its subsidiaries according to its past internal audit results and to its size and importance.
- Matters on employees obliged to assist Auditors' duties and matters on the securing of such employees' independence from Directors as well as the effectiveness of instructions issued to the employees
- The Company may install employees as assistants dedicated to assisting Auditors' duties or appoint employees in the Internal Auditing Division as such assistants with regard to individual audit items upon consulting with the Internal Auditing Division.
- If the Company has installed dedicated assistants for Auditors' duties or appointed such assistants with regard to individual audit items, the Company has audit duties-related directions and orders issued by Auditors, thereby securing the appropriateness of the relevant instructions. Personnel change and employee evaluation for such assistants require the consent of Auditors.
- System for reporting to Auditors and a system to ensure that no members reporting to them becomes subjected to disadvantageous treatment on account of having provided the report
- The Company secures a system in which Directors and employees of it and its subsidiaries report the following matters to Auditors:
―14―
- Material matter relating to the business management, finances and business execution of the Company and its subsidiaries;
- Matter that is feared to cause serious damage to the Company;
- Information on the state of development of internal control system;
- Matter breaching laws or ordinances or the Articles of Incorporation;
- Matter associated with compliance system and information on the state of reporting to the hotline;
- Internal audit results;
- Any matter deemed by any of Auditors necessary to be reported for the purpose of executing its duties.
- The Company ensures that no member reporting to any Corporate Auditor as mentioned above becomes subjected to disadvantageous treatment on account of having provided the report.
- System to ensure that Auditors' audits are carried out effectively
- The Company provides an opportunity for the President & CEO and Auditors to exchange opinions with each other on a periodic basis, as well as an opportunity to hold hearing sessions with subsidiary Directors and employees if deemed necessary by any Auditor. Auditors have an opportunity to exchange information with the Accounting Auditor and Auditors of significant subsidiaries of the Company, thus collaborating with them.
- Expenses deemed necessary for Auditors to execute their duties are borne by the Company through a prescribed procedure.
- System for excluding anti-social forces
The GungHo Group Compliance Code for Directors and Employees declares the Company's intention to maintain a sound relationship with local communities and battle anti-social forces in a resolute manner. If the Company receives any unfair demand from an anti-social force entity, the former's relevant business unit responds to it sternly and resolutely rejects the demand by collaborating with the police and other external specialized agencies.
- Outline of the operation of the system to secure the appropriateness of the Company's business operations
-
Execution of Directors' duties
Pursuant to the Regulations on Board of Directors, the Company holds an Ordinary Meeting of Directors on a monthly basis and an Extraordinary Meeting of Directors as required. In this way, it makes decisions on matters stipulated in laws or ordinances or the Articles of Incorporation as well as matters for execution of significant duties while overseeing the execution of duties by Directors. - Compliance system
-
Execution of Directors' duties
The Company periodically provides compliance training to Directors and employees to enhance their understanding and awareness about compliance. As for its whistleblowing system, the Company has in place contact points (hotlines) composed partly of outside lawyers while running the system with whistleblower protection stipulated in its relevant internal regulations.
3) Risk management
In addition to having in place the Regulations on Crisis Management System, the Company strives to reduce and prevent risks through the process of identifying risks, devising countermeasures and periodically revising them. Moreover, the Company implements a disaster scenario-based training program when appropriate.
4) Business management of subsidiaries
As for business management of the Company's subsidiaries, it arranges for its Director or employees to be appointed as a Director or Auditor of each subsidiary, thereby securing the appropriateness of the subsidiary. Under the Related Company Management Regulations, material business management information of subsidiaries is reported to the Company's Board of Directors in an appropriate manner.
―15―
5) Auditors
Auditors periodically exchange opinions with the President & CEO and collaborate with the Accounting Auditor and the Internal Auditing Department, thus securing the effectiveness of audits. The Auditors ascertain the state of development and operation of the Company's internal controls and provide advice for securing a sounder business management structure by attending Board of Directors meetings, having Full- time Corporate Auditors attend significant meetings and having hearing sessions with Directors and employees.
6. Policy for decision on dividends from retained earnings
Believing that returning profits to shareholders is a significant managerial challenge, the GungHo Group has in place a basic policy to enhance its enterprise value and maximize its competitiveness in future. This also relates to distributing profits in a manner commensurate with its operating results and with due regard for internal reserves, intended for bolstering its business structure. The Company intends to utilize the internal reserves effectively to strengthen its financial structure and business foundation and pursue operations aggressively towards future growth.
In accordance with the above-mentioned dividend policy, the company conducts 30 yen per share as an ordinary dividend of the fiscal year ended December 31, 2019.
The Company's Articles of Incorporation provide that it may pay dividends from retained earnings by the resolution of the Board of Directors, without a resolution of the General Meeting of Shareholders.
―16―
Consolidated Balance Sheets
(As of December 31, 2019)
(Millions of yen) | |||
Account Items | Amount | Account Items | Amount |
Assets | Liabilities | ||
Current assets | 94,840 | Current liabilities | 13,327 |
Cash and deposits | 86,225 | Notes and accounts | 3,303 |
payable-trade | |||
Accounts receivable-trade | 6,775 | Current portion of | 125 |
long-term loans payable | |||
Short-term investment | 282 | Income taxes payable | 4,086 |
securities | |||
Merchandise | 3 | Provision for bonuses | 8 |
Work in progress | 43 | Other | 5,803 |
Other | 1,525 | Non-current liabilities | 914 |
Allowance for doubtful | (16) | Long-term loans payable | 148 |
accounts | |||
Non-current assets | 10,168 | Other | 766 |
Property, plant and equipment | 746 | Total liabilities | 14,242 |
Intangible assets | 3,678 | Net assets | |
Software | 265 | Shareholders' equity | 85,194 |
Software in progress | 3,287 | Capital stock | 5,338 |
Other | 124 | Capital surplus | 5,487 |
Investments and other assets | 5,742 | Retained earnings | 159,046 |
Investment securities | 72 | Treasury shares | (84,678) |
Deferred tax assets | 2,669 | Accumulated other | (282) |
comprehensive income | |||
Other | 3,000 | Foreign currency | (282) |
translation adjustment | |||
Stock option | 862 | ||
Non-controlling interests | 4,991 | ||
Total net assets | 90,765 | ||
Total assets | 105,008 | Total liabilities and net assets | 105,008 |
(Note) Figures shown in millions of yen are rounded down to the nearest million.
―17―
Consolidated Statements of Income
From January 1, 2019 | |||
(to December 31, 2019 ) | |||
(Millions of yen) | |||
Account Items | Amount | ||
Net sales | 101,392 | ||
Cost of sales | 48,168 | ||
Gross profit | 53,223 | ||
Selling, general and administrative expenses | 24,874 | ||
Operating profit | 28,349 | ||
Non-operating profit | |||
Interest income | 157 | ||
Foreign exchange gains | 106 | ||
Other | 52 | 316 | |
Non-operating expenses | |||
Interest expenses | 28 | ||
Treasury stock acquisition costs | 13 | ||
Other | 5 | 48 | |
Ordinary profit | 28,617 | ||
Extraordinary income | |||
Gain on liquidation on Investment securities | 89 | 89 | |
Extraordinary losses | |||
Impairment loss | 1,029 | 1,029 | |
Profit before income taxes and minority interests | 27,677 | ||
Income taxes, residential taxes and enterprise taxes-current | 8,363 | ||
Income taxes and others-deferred | (271) | ||
Profit | 19,586 | ||
Profit attributable to non-controlling interests | 1,440 | ||
Profit attributable to owners of parent | 18,146 |
(Note) Figures shown in millions of yen are rounded down to the nearest million.
―18―
Consolidated Changes in Net Assets
( | January 1, 2019 through | ) | |||||||||||||
December 31, 2019 | |||||||||||||||
(Millions of yen) | |||||||||||||||
Shareholders' equity | |||||||||||||||
Retained | Treasury | Total | |||||||||||||
Capital stock Capital surplus | shareholders' | ||||||||||||||
earnings | shares | ||||||||||||||
equity | |||||||||||||||
Balance at the beginning of | 5,338 | 5,487 | 143,051 | (80,027) | 73,850 | ||||||||||
current period | |||||||||||||||
Changes of items during the | |||||||||||||||
period | |||||||||||||||
Dividends paid | (2,134) | (2,134) | |||||||||||||
Profit attributable to owners of | 18,146 | 18,146 | |||||||||||||
parent | |||||||||||||||
Subscription rights to | (15) | 192 | 176 | ||||||||||||
shares | |||||||||||||||
Acquisition of treasury shares | (0) | (4,845) | (4,845) | ||||||||||||
Disposal of treasury shares | 16 | 1 | 17 | ||||||||||||
Transfer of disposal losses of | (16) | (16) | |||||||||||||
treasury shares | |||||||||||||||
Net changes of items other | |||||||||||||||
than shareholders' equity | |||||||||||||||
Total changes of items during | - | - | 15,995 | (4,651) | 11,344 | ||||||||||
the period | |||||||||||||||
Balance at the end of current | 5,338 | 5,487 | 159,046 | (84,678) | 85,194 | ||||||||||
period | |||||||||||||||
Accumulated other comprehensive | |||||||||||||||
income | Non- | ||||||||||||||
Stock | Total net | ||||||||||||||
Foreign currency | Accumulated other | controlling | |||||||||||||
Option | assets | ||||||||||||||
interests | |||||||||||||||
translation | comprehensive | ||||||||||||||
adjustment | income | ||||||||||||||
Balance at the beginning of | (148) | (148) | 885 | 3,522 | 78,110 | ||||||||||
current period | |||||||||||||||
Changes of items during the | |||||||||||||||
period |
Dividends paid
Profit attributable to owners of parent
Subscription rights to shares
(2,134)
18,146
176
Acquisition of treasury shares | (4,845) | ||||||
Disposal of treasury shares | 17 | ||||||
Transfer of disposal losses of | (16) | ||||||
treasury shares | |||||||
Net changes of items other | (134) | (134) | (22) | 1,469 | 1,311 | ||
than shareholders' equity | |||||||
Total changes of items during | (134) | (134) | (22) | 1,469 | 12,655 | ||
the period | |||||||
Balance at the end of current | (282) | (282) | 862 | 4,991 | 90,765 | ||
period | |||||||
(Note) Figures shown in millions of yen are rounded down to the nearest million. | |||||||
―19― |
Notes on consolidated financial statements
1. Significant matters serving as bases for the preparation for consolidated financial statements
- Matters concerning the coverage of consolidation
・Number of consolidated companies | 17 |
・Major consolidated subsidiaries GAME ARTS Co., Ltd. GRAVITY Co.,Ltd. ACQUIRE Corp.
GungHo Online Entertainment America,Inc. SUPERTRICK GAMES,Inc.
GungHo Online Entertainment Asia Pacific Pte.Ltd. GungHo Gamania Co.,Limited
mspo, Inc.
Grasshopper Manufacture Inc.
Since all shares of PlayPhone,Inc. were sold during the fiscal year under review, the company was removed from the scope of consolidation as of June 30, 2019, the deemed date of the sale.
・There are no non-consolidated subsidiaries.
(2) Matters concerning equity method
・Number of equity method affiliated companies None
(3) Matters concerning consolidated subsidiaries' fiscal years, etc.
Consolidated subsidiaries have a fiscal year that ends on the same date as the consolidated financial statements.
- Matters concerning accounting principles and standards
- Appraisal standards and appraisal methods for principal assets
- Marketable securities Other marketable securities
・Securities of market value Stated by using the market value method based on the market price, etc. as of the last day of the consolidated fiscal period, and valuation differences are reported as a component of shareholders' equity and costs of securities sold are calculated by the moving- average method
・Securities of no market value Stated at cost by using the moving-average method, except for securities held in some of subsidiaries overseas that are stated at cost by using the gross average method.
- Inventory assets
・Merchandise | Stated at cost by using the specific cost method |
(the carrying amount on the balance sheet is | |
reduced for decrease in profitability) | |
・Work in process | Stated at cost by using the specific cost method |
(the carrying amount on the balance sheet is | |
reduced for decrease in profitability) | |
Note that some overseas subsidiaries use the | |
lower-of-cost-or-market method by the gross | |
average method. | |
―20― |
- Methods for depreciation of significant depreciable assets
a. | Tangible fixed assets | a. Assets acquired prior to or on March 31, |
except lease assets | 2007: The former declining-balance method | |
is used. | ||
b. Assets acquired on or after April 1, 2007: | ||
The declining-balance method is used. | ||
The straight-line method is used for some of the | ||
overseas subsidiaries. | ||
However, the straight-line method is used for | ||
building fixtures and structures acquired on or | ||
after April 1, 2016. | ||
. Shown below are principal useful lives: | ||
Buildings: 2 to 18 years | ||
Others: 3 to 15 years | ||
b. | Intangible fixed | Stated by using primarily the straight-line |
assets except lease assets | method, and software for internal use is | |
depreciated over the period from one to five | ||
years based on its availability period. | ||
However, intangible fixed assets related to | ||
portable device games are depreciated based on | ||
expected proceeds from sales. | ||
c. | Lease assets | Lease assets are depreciated by using the |
straight-line method over the useful lives of the | ||
respective lease period with zero residual value. | ||
Note some overseas subsidiaries use the | ||
economic useful lives up to the lease period. |
- Accounting standards for significant allowances
a. Allowance for doubtful The Company records allowances for doubtful
accounts | accounts at an estimated uncollectable amount |
determined based on past credit loss | |
experiences for general debts, and in | |
consideration of their collectability of each. | |
b. Provision for bonuses | To provide employees with bonuses, the |
Company accrues reserves at an amount subject | |
to fiscal year 2015 based on estimated future | |
obligation. |
④Standards for translation of principal assets and liabilities denominated in foreign-currencies into yen Monetary receivables and payables denominated in foreign currencies were translated into yen at a spot exchange rate on the consolidated fiscal year settlement date and resulting exchange gains and losses were charged to profit (loss).
⑤Accounting treatment of consumption taxes
The tax exclusion method is used for accounting treatment of consumption taxes and municipal consumption taxes.
2. Notes to changing the display method
We have applied "Partial revision to 'Accounting Standard for Tax Effect Accounting'" (ASBJ Statement No. 28 February 16, 2018), etc., from the beginning of the first quarter consolidated accounting period. Deferred tax assets are shown in the category of investments and other assets, and deferred tax liabilities are shown in the category of noncurrent liabilities.
―21―
3. Notes to consolidated balance sheets
Cumulative depreciation of property,
plant and equipment
2,478 million yen
4. Notes to consolidated changes in net assets
(1) Total number of shares outstanding Number of shares as of December
31, 2019 (shares)
95,210,316 shares
- Dividends
- Dividends from retained earnings paid out in the consolidated fiscal year under review
Date of
Resolution Share class Total dividends Dividend per Record date coming into share
effect
Board of | Directors | Common | December | March 6, | ||
meeting | held on | 2,134 million yen | 3.00 yen | |||
February 1, 2019 | shares | 31, 2018 | 2019 | |||
(Note) Effective July 1, 2019, share consolidation was implemented at a ratio of 1 share per 10 shares of common stock. Accordingly, dividend per share is shown in the amount before the share consolidation.
-
Dividends that would come into effect in the next fiscal year, among dividends whose record date fell in the consolidated fiscal year under review
The Board of Directors meeting held on February 13, 2020 adopted the following proposed resolution for the payment of dividends on common shares.
1. | Total dividends | 2,090 million yen | |
2. | Dividend per share | 30.00 yen | |
3. | Record date | December 31, | 2019 |
4. | Date of coming into effect | March 16, | 2020 |
5. | Source of dividends | Retained earnings |
- The type and number of shares issuable upon the exercise of share subscription rights at the end of the consolidated fiscal year under review (excluding these rights whose start date of the exercise period has not yet arrived)
Common stock: 253,490 shares
―22―
5. Notes on financial instruments
- Matters pertaining to the state of financial instruments
- Policy on handling financial instruments
Although essentially using internal reserves to fund operations, the GungHo Group obtains bank loans to fund some of them. It invests temporarily available excess cash mainly in financial instruments offering high stability.
2) Description of financial products, risks involved and risk management platform
Accounts receivable-trade representing operating receivables are exposed to credit risk associated with potential default by customers. With respect to this type of risk, the GungHo Group continues to monitor the state of its principal customers on a periodic basis, managing payment due dates and the balance of receivables on a customer-by-customer basis. Moreover, the Group strives to detect early and rein in any potential case of low recoverability due to deterioration of customer finances, among other factors. Foreign currency-denominated accounts receivable-trade are exposed to foreign exchange fluctuation risk.
Marketable securities and investment securities are exposed to price fluctuation risk. To manage this type of risk, the GungHo Group continuously monitors market values and issuer companies' financial positions. Accounts payable-trade representing operating payables are mostly due within 1 year.
Income taxes payable represent accrued taxes and are due within 1 year.
Loans payable are chiefly intended as financing to fund operations (short term) and capital expenditure (long term). Although exposed to liquidity risk and interest fluctuation risk, loans payable are managed by creating and renewing a cash flow management plan on a timely basis.
3) Supplementary information on market prices of financial instruments
Market values of financial instruments include, in addition to those based on market prices, reasonably computed values for cases where no market price is available. With certain assumptions employed to compute market values, using different assumptions may alter the values.
―23―
(2) Information on the market prices of financial instruments
The following shows the values of financial instruments recorded on the consolidated balance sheet as of December 31, 2019, their market values on the same date and the difference between the former and latter.
(Millions of yen)
Value recorded on | Market value | Difference | ||
consolidated balance sheets | ||||
(1) | Cash and deposits | 86,225 | 86,225 | ― |
(2) | Accounts receivable- | |||
6,775 | 6,775 | ― | ||
trade | ||||
Allowance for doubtful accounts* | (15) | (15) | ― | |
6,759 | 6,759 | ― | ||
- Marketable securities & investment securities
Other securities | 282 | 282 | ― | |
Total assets | 93,267 | 93,267 | ― | |
(1) | Accounts payable-trade | 3,303 | 3,303 | ― |
(2) | Long-term loans payable | |||
125 | 125 | ― | ||
within one year | ||||
(3) | Income taxes payable | 4,086 | 4,086 | ― |
(4) | Long-term loans payable | 148 | 147 | (1) |
Total liabilities | 7,663 | 7,662 | (1) | |
* Allowance for doubtful accounts that is recorded for accounts receivable-trade is deducted.
Note 1: Information on the method for computing the market value of financial instruments and on marketable securities
Assets
(1) Cash and deposits (2) accounts receivable-trade
Market value of these accounts is stated at balance sheet value since these accounts are settled in a short period of time, making the market value almost identical to the balance sheet value.
-
Marketable securities & investment securities
Market value of shares is stated at exchange price and that of bonds at a price quoted by counterparty
financial institution. Market value of negotiable certificates of deposit is stated at balance sheet value since they are settled in a short period of time, marking the market value almost identical to the balance sheet value.
Liabilities
-
Accounts payable-trade (2) long-term loans payable within 1 year (3) income taxes payable
Market value of these accounts is stated at balance sheet value since they are settled in a short period of time, marking the market value almost identical to the balance sheet value.
- Long-termloans payable
Market value of long-term loans payable is stated at the present value determined by discounting the total amount of principal and interest at an interest rate expected to be applicable if the amount were newly borrowed in a comparable manner.
―24―
Note 2: Financial instruments whose market value is deemed to be very difficult to identify
(Millions of yen)
Category | Value recorded on consolidated balance sheets |
Unlisted shares | 72 |
No market price is available for unlisted shares whose market value is deemed to be very difficult to identify. Thus, they are not included in "(3) Marketable securities & investment securities."
Note 3: Values of monetary claims and securities with maturity expected to be redeemed after the consolidated closing date
(Millions of yen)
Over 1 year and | Over 5 years | |||
Within 1 year | and within 10 | Over 10 years | ||
within 5 years | years | |||
Cash and deposits | 86,225 | ― | ― | ― |
Accounts receivable-trade | 6,775 | ― | ― | ― |
Marketable securities and | ||||
investment securities | ||||
Of other securities, those with | 282 | ― | ― | ― |
maturity | ||||
Total | 93,282 | ― | ― | ― |
Note 4: Value of expected repayments of long-term loans payable after consolidated balance sheet date
(Millions of yen)
Over 1 year and | Over 2 years | |||||
Within 1 year | and within 3 | Over 3 years | ||||
within 2 years | years | |||||
Long-term loans payable | 125 | 104 | 44 | ― | ||
6. Notes on per-share information | ||||||
(1) | Net assets per share | 1218.59 yen | ||||
(2) | Net income per share | 258.04 yen |
Effective July 1, 2019, share consolidation was implemented at a ratio of 1 share per 10 shares of common stock. Net assets and net income per share and diluted net income per share are calculated on the assumption
that the share consolidation was conducted at the fiscal year ended December 31, 2019.
7. Notes on significant subsequent events None
―25―
Balance Sheets
(As of December 31, 2019)
(Millions of yen) | |||||
Account Items | Amount | Account Items | Amount | ||
Assets | Liabilities | ||||
Current assets | 78,687 | Current liabilities | 7,486 | ||
Cash and deposits | 73,714 | Notes and accounts | 632 | ||
payable-trade | |||||
Accounts receivable- | 3,770 | Accounts payable-other | 1,750 | ||
trade | |||||
Advance payments | 864 | Lease obligations | 12 | ||
Other | 338 | Accrued expenses | 362 | ||
Non-current assets | 13,744 | Income taxes payable | 3,827 | ||
Property, plant and | 80 | Consumption taxes | 642 | ||
equipment | payable | ||||
Buildings | 0 | Other | 257 | ||
Equipment | 80 | Non-current liabilities | 344 | ||
Intangible assets | 2,782 | Lease obligations | 7 | ||
Software | 97 | Asset disposal | 337 | ||
obligation | |||||
Software in progress | 2,579 | Total liabilities | 7,831 | ||
Other | 105 | Net assets | |||
Investments and other | |||||
10,881 | Shareholders' equity | 83,739 | |||
assets | |||||
Stock of affiliates | 1,999 | Capital stock | 5,338 | ||
Long-term loans | 5,229 | Capital surplus | 5,331 | ||
Long-term prepaid | 70 | Legal capital surplus | 5,331 | ||
expenses | |||||
Deferred tax assets | 5,733 | Retained earnings | 157,747 | ||
Deposit | 2,461 | Other retained | 157,747 | ||
earnings | |||||
Allowance for doubtful | (4,613) | Retained earnings | 157,747 | ||
accounts | brought forward | ||||
Treasury shares | (84,678) | ||||
Stock option | 862 | ||||
Total net assets | 84,601 | ||||
Total assets | 92,432 | Total liabilities and net | 92,432 | ||
assets | |||||
(Note) Figures shown in millions of yen are rounded down to the nearest million. |
―26―
Profit and Loss Statement
( | From January 1, 2019 | ) | ||
to December 31, 2019 | ||||
(Millions of yen) | ||||
Account Items | Amount | |||
Net sales | 67,870 | |||
Cost of sales | 24,981 | |||
Gross profit on sales | 42,888 | |||
Total selling, general and administrative expenses | 18,743 | |||
Operating profit | 24,144 | |||
Non-operating profit | ||||
Interest income | 162 | |||
Others | 22 | 185 | ||
Non-operating expenses | ||||
Interest expenses | 0 | |||
Foreign exchange losses | 56 | |||
Treasury stock acquisition costs | 13 | |||
Others | 4 | 75 | ||
Ordinary profit | 24,255 | |||
Extraordinary income | ||||
80 | 80 | |||
Extraordinary loss | ||||
Provision of allowance for doubtful accounts | 508 | |||
Impairment loss | 542 | |||
Loss on valuation of stocks of affiliates | 9 | 1,061 | ||
Income before income taxes | 23,273 | |||
Income taxes-current | 7,191 | |||
Income taxes-deferred | (309) | |||
Net profit | 16,391 | |||
(Note) Figures shown in millions of yen are rounded down to the nearest million.
―27―
Changes in Net Assets
- January 1, 2019 through ) December 31, 2019
(Units: Million yen) | ||||||||||
Shareholders' equity | ||||||||||
Capital surplus | Retained earnings | |||||||||
Other capital | Other | |||||||||
retained | Total | |||||||||
surplus | ||||||||||
Capital | Legal | Total | earnings | Total | Treasury | share- | ||||
stock | capital | capital | retained | shares | holders' | |||||
Gains on | Retained | |||||||||
equity | ||||||||||
surplus | sales of | surplus | earnings | earning | ||||||
treasury | brought | |||||||||
shares | forward | |||||||||
Balance at the | 5,338 | 5,331 | - | 5,331 | 143,506 | 143,506 | (80,027) | 74,149 | ||
beginning of current period | ||||||||||
Changes of items during the period | ||||||||||
Dividends paid | (2,134) | (2,134) | (2,134) | |||||||
Net Income | 16,391 | 16,391 | 16,391 | |||||||
Subscription rights toshares | (15) | (15) | 192 | 176 | ||||||
Acquisition of treasury shares | (4,845) | (4,845) | ||||||||
Disposal of treasury shares | (0) | (0) | 1 | 1 | ||||||
Transfer of disposal losses of | 16 | 16 | (16) | (16) | - | |||||
treasury shares | ||||||||||
Net changes of items other | ||||||||||
than shareholders' equity | ||||||||||
Total changes of items during the | - | - | - | - | 14,241 | 14,241 | (4,651) | 9,590 | ||
period | ||||||||||
Balance at the end of current period | 5,338 | 5,331 | - | 5,331 | 157,747 | 157,747 | (84,678) | 83,739 | ||
Stock option | Total net |
assets | |
Balance at the
885 75,034
beginning of current period
Changes of items during the period
Dividends paid | (2,134) | ||||
Net Income | 16,391 | ||||
Subscription rights toshares | 176 | ||||
Acquisition of treasury shares | (4,845) | ||||
Disposal of treasury shares | 1 | ||||
Transfer of | disposal | losses | of | - | |
treasury shares | |||||
Net changes of items other | (22) | (22) | |||
than shareholders' equity | |||||
Total changes | of items | during | the | (22) | 9,567 |
period | |||||
Balance at the end of current period | 862 | 84,601 | |||
(Note) Figures shown in millions of yen are rounded down to the nearest million.
―28―
Notes to non-consolidated financial statements
1. Notes on matters pertaining to significant accounting policies
- Valuation standard and method for securities
Shares in subsidiaries | Stated at cost by using the moving-average |
method |
(2) Methods for depreciation and amortization of non-current assets
1) Property, plant and equipmenta. Assets acquired prior to or on March 31,
other than lease assets2007: The former declining-balance method is used.
b. Assets acquired on or after April 1, 2007: The declining-balance method is used.
However, the straight-line method is used for building fixtures and structures acquired on or after April 1, 2016
Shown below are principal useful lives:
Buildings: 3 years
Tools and fixtures: 3 to 10 years
2) Intangible non-current assetsAmortized mainly by using the straight-line
other than lease assetsmethod. Software for in-house use is amortized based on available period (1 to 5 years); provided, however, that intangible non-current assets for portable device games are amortized based on expected sales.
3) Lease assets | Lease assets | are depreciated by using the | ||
straight-line method with the lease period as | ||||
the useful life and with the residual value at | ||||
zero. | ||||
(3) Accounting standards of allowances | ||||
Allowance for doubtful accounts | To prepare | for potential credit losses on | ||
receivables, | the | Company | records | |
allowances for doubtful accounts at an | ||||
estimated uncollectible amount | assigned | |||
based on | the | historical credit loss |
experience for general receivables, and in consideration of individual collectability for specific receivables such as doubtful receivables.
-
Standard for translation of foreign currency-denominated assets and liabilities into yen
Foreign currency-denominated monetary claims and liabilities are translated into yen by using the spot foreign exchange rate prevailing on the closing date with any translation difference accounted for as a profit or loss. - Accounting treatment of consumption taxes
The tax exclusion method is used for accounting treatment of consumption taxes and municipal consumption taxes.
―29―
2. Notes to changes in display method
We have applied "Partial revision to 'Accounting Standard for Tax Effect Accounting'" (ASBJ Statement No. 28 February 16, 2018), etc., from the beginning of the first quarter consolidated accounting period. Deferred tax assets are shown in the category of investments and other assets, and deferred tax liabilities are shown in the category of noncurrent liabilities.
3. Notes on balance sheet
(1) Cumulative depreciation of property, 1,294 million yen plant and equipment
(2) Monetary claims and liabilities to related companies
Short-term monetary claims | 176 million yen |
Long-term monetary claims | 5,229 million yen |
Short-term monetary liabilities | 596 million yen |
- Notes to profit and loss statement
-
Transactions with related companies
Operating transactions (income) Operating transactions (expenditure) Non-operating transactions (income)
- Notes to changes in net assets
Number of treasury shares as of
December 31, 2019
6. Notes on tax effect accounting Breakdown of deferred tax assets by cause
Deferred tax assets Enterprise taxes payable
Depreciation & amortization excess value
Allowance of doubtful accounts
Loss on valuation of shares in related companies
Other Subtotal Valuation provision
Total deferred tax assets
27 million yen
5,797 million yen
169 million yen
25,529,818 shares
194 million yen
581 million yen
1,412 million yen
2,770 million yen
774 million yen
5,733 million yen
―
5,733 million yen
―30―
7. Notes on transactions with interested parties Subsidiaries and affiliates
Voting rights | Transaction | Period-end | |||||
Relationship with | Transaction | value | balance | ||||
Category | Company name holding ratio | ||||||
interested party | description | (millions of | Account | ||||
(%) | (millions of | ||||||
yen) | yen) | ||||||
GungHo | Concurrent service | ||||||
Online | Provision of | Long-term | |||||
Subsidiary | 100.00 | as director | 317 | 4,399 | |||
Entertainment | loans | loan | |||||
Provision of loans | |||||||
America, Inc. | |||||||
Terms and conditions of transaction and policy on determining terms and conditions
Notes: | 1. Consumption taxes are not included in transaction values and period-end balances. |
2. Provision of loans is determined upon negotiations based on the terms and conditions (loan interest rate) proposed by the Company in consideration of market interest rates.
3. The Company recorded 3,883 million yen as an allowance for doubtful accounts related to long-term loans to GungHo Online Entertainment America, Inc.
8. Notes on per-share information
(1) | Net assets per share | 1,201.76 yen |
(2) | Net income per share | 233.09 yen |
Effective July 1, 2019, share consolidation was implemented at a ratio of 1 share per 10 shares of common stock. Net assets per share and net income per share are calculated on the assumption that the share consolidation was conducted at the beginning of this fiscal year.
- Notes on companies to which regulation on consolidated dividend applies GungHo is a company to which regulation on consolidated dividend applies.
- Notes on significant subsequent events
None
―31―
Accounting Auditor's report on consolidated financial statements
Independent Auditor's Report
February 28, 2020
To the Board of Directors of
GungHo Online Entertainment, Inc.
Designated and Engagement Partner
Yoshio Chiyoda (Seal)
Certified Public Accountant
Designated and Engagement Partner
Designated and Engagement Partner
Soichirou Hayashi (Seal)
Certified Public Accountant
Designated and Engagement Partner
We have audited, pursuant to Article 444, Paragraph 4 of the Companies Act of Japan, the consolidated financial statements of GungHo Online Entertainment, Inc. (hereinafter referred to as the "Company") for the consolidated fiscal year from January 1, 2019 to December 31, 2019, which consist of consolidated balance sheets, consolidated statements of income, consolidated statements of changes in net assets and notes to consolidated financial statements.
Management's Responsibility for Consolidated Financial Statements:
Management is responsible for the preparation and fair presentation of consolidated financial statements in accordance with accounting standards generally accepted in Japan. This responsibility includes development and operation of internal controls that are deemed necessary by management for preparing and fairly presenting consolidated financial statements that are free from material misstatements, whether due to fraud or error.
Auditors' Responsibility:
Our responsibility is to express, based on our audit, an opinion on these consolidated financial statements from an independent standpoint. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we formulate an audit plan and perform the audit according to the plan in order to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures are selected and applied at the auditors' judgment, based on an assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. Although the purpose of the audit is not to express an opinion on the effectiveness of the entity's internal controls, in making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate for the circumstances. An audit also includes evaluating accounting policies used by management, how they were applied and accounting estimates made by management, as well as examining the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Auditors' Opinion:
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position and the results of operations of the corporate group which consists of the Company and its consolidated subsidiaries for the period covered by the consolidated financial statements in conformity with accounting principles generally accepted in Japan.
Conflict of interest:
We have no interest in or relationship with the Company which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
―32―
Accounting Auditor's report on non-consolidated financial statements
Independent Auditor's Report
February 28, 2020
To the Board of Directors of
GungHo Online Entertainment, Inc.
Designated and Engagement Partner
Yoshio Chiyoda (Seal)
Certified Public Accountant
Designated and Engagement Partner
Designated and Engagement Partner
Soichirou Hayashi (Seal)
Certified Public Accountant
Designated and Engagement Partner
We have audited, pursuant to Article 436, Paragraph 2, Item 1 of the Companies Act of Japan, the non-consolidated financial statements of GungHo Online Entertainment, Inc. (hereinafter referred to as the "Company") for the 23rd fiscal year from January 1, 2019 to December 31, 2019, which consist of non-consolidated balance sheet, non-consolidated profit and loss statement, non-consolidated statement of changes in net assets, notes to non-consolidated financial statements and their supplementary schedules.
Management's Responsibility for Non-Consolidated Financial Statements:
Management is responsible for the preparation and fair presentation of non-consolidated financial statements in accordance with accounting standards generally accepted in Japan. This responsibility includes development and operation of internal controls that are deemed necessary by management for preparing and fairly presenting non-consolidated financial statements and their supplementary schedules that are free from material misstatements, whether due to fraud or error.
Auditors' Responsibility:
Our responsibility is to express, based on our audit, an opinion on these non-consolidated financial statements and their supplementary schedules from an independent standpoint. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we formulate an audit plan and perform the audit according to the plan in order to obtain reasonable assurance about whether the non-consolidated financial statements and their supplementary schedules are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the non-consolidated financial statements and their supplementary schedules. The procedures are selected and applied at the auditors' judgment, based on an assessment of the risks of material misstatement of the non-consolidated financial statements and their supplementary schedules, whether due to fraud or error. Although the purpose of the audit is not to express an opinion on the effectiveness of the entity's internal controls, in making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the non-consolidated financial statements and their supplementary schedules in order to design audit procedures that are appropriate for the circumstances. An audit also includes evaluating accounting policies used by management, how they were applied and accounting estimates made by management, as well as examining the overall presentation of the non-consolidated financial statements and their supplementary schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Auditors' Opinion:
In our opinion, the non-consolidated financial statements and their supplementary schedules referred to above present fairly, in all material respects, the financial position and the results of operations of the Company for the period covered by the non- consolidated financial statements and their supplementary schedules in conformity with accounting principles generally accepted in Japan.
Conflict of interest:
We have no interest in or relationship with the Company which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
―33―
Audit report by the Board of Corporate Auditors
Audit Report
Regarding the performance of duties by Directors for the 23rd fiscal year from January 1 to December 31, 2019, the Board of Corporate Auditors hereby submits its audit report, which has been prepared upon deliberations based on audit reports each prepared by Auditors.
1. Contents and Method of Audit by Auditors and the Board of Corporate Auditors
- The Board of Corporate Auditors determined its auditing policy, an allocation of duties and other relevant matters, and received reports from Auditors on their audit and the results, and also received reports from Directors and the Accounting Auditors regarding the performance of their duties, and sought explanations, as required.
- Auditors, in conformity to the auditing standards of Auditors established by the Board of Corporate Auditors, and obeying the auditing policy and allocation of duties, among other relevant matters, communicated with Directors and the Internal Auditing Division, other employees and any other relevant personnel, and made efforts to collect information and prepare the environment for audit, while conducting the audit by the method set forth below.
- Auditors participated in Board of Directors meetings and other important meetings, received reports from Directors, employees and other relevant personnel on the performance of their duties, sought explanations as required, examined important authorization documents and associated information, and studied the operations and financial position at the head office and principal business offices. With respect to subsidiaries, Auditors communicated and exchanged information with Directors and Auditors of subsidiaries, and received business reports from the subsidiaries, as required.
- Auditors examined the system to ensure that the performance of duties by Directors stated in the Business Report conforms to applicable laws and ordinances and the Articles of Incorporation. They also examined the system prepared based on the contents of the resolutions of the Board of Directors and on such resolutions on the development of the system stipulated in Article 100, Paragraphs 1 and 3 of the Companies Act Enforcement Regulations (internal control system), as measures required to secure the appropriateness of the operations of the corporate group comprising the Company and its consolidated subsidiaries. Auditors received regular reports from Directors, employees and other relevant personnel regarding the building and operation of the system, requested explanations as required and expressed opinions.
- In addition to monitoring and verifying whether the Accounting Auditor maintained its independence and implemented appropriate audits, Auditors received reports from the Accounting Auditor on the performance of its duties and sought explanations as required. Moreover, we received a notice from the Accounting Auditor stating that the "system for ensuring that duties are performed properly" (matters set forth in the items of Article 131 of the Company Accounting Regulations) was developed in accordance with the "Audit Quality Control Standards" (Business Accounting Council, October 28, 2005), etc., and sought explanations, as required.
Based on the above method, we examined the Business Report, its supplementary schedules, non- consolidated financial statements (non-consolidated balance sheet, non-consolidated profit and loss statement, non-consolidated statement of changes in net assets and notes to non-consolidated financial statements) and their supplementary schedules for the fiscal year ended December 31, 2019, as well as consolidated financial statements (consolidated balance sheet, consolidated statements of income, consolidated statement of changes in net assets and notes to consolidated financial statements) for the same fiscal year.
―34―
2. Results of Audit
- Results of Audit of Business Report and Other Relevant Documents
- In our opinion, the Business Report and its supplementary schedules fairly represent the Company's situation in conformity to applicable laws and ordinances and the Articles of Incorporation.
- Our audit did not discover any wrongful act or any material breach of applicable laws or ordinances or the Articles of Incorporation with respect to the performance of duties by Members of the Board of Directors.
- In our opinion, the resolutions of the Board of Directors for the Company's internal control system are appropriate. We did not discover any matter required to be pointed out concerning the contents of the Business Report and the execution of duties by Members of the Board of Directors with respect to the internal control system.
- Our audit did not discover any matter required to be pointed out with regard to any conscious effort made not to harm the Company's interests when engaging in such transactions with the parent and other relevant entity as are specified in the Business Report, and concerning judgment by the Board of Directors on whether any of such transactions would harm the Company's interests as well as the reason for the judgment.
- Results of Audit of Non-Consolidated Financial Statements and Supplementary Schedules
In our opinion, the audit method employed by PricewaterhouseCoopers Aarata and the audit results are fair and reasonable.- Results of Audit of Consolidated Financial Statements
In our opinion, the audit method employed by PricewaterhouseCoopers Aarata and the audit results are fair and reasonable.
March 6, 2020
Yoichiro Ando Full-time Auditor Hiroto Uehara Auditor Toshiro Kaba Auditor
Board of Corporate Auditors GungHo Online Entertainment, Inc.
Note: Yoichiro Ando, Auditor, Hiroto Uehara, Auditor and Toshiro Kaba, Auditor are all external auditors stipulated in Article 2, Item 16 and Article 335, Paragraph 3 of the Companies Act of Japan.
―35―
Reference Materials for the General Meeting of Shareholders
Proposals and Reference Materials
Proposal : Election of Nine (9) Directors
The terms of office of all nine (9) Directors will expire at the close of this Annual General Meeting of Shareholders. Thus, it is proposed that nine (9) Directors.
The candidates for Directors are as follows:
Name | Career Summary, Position, Assignment, and | Number of | ||
No. | Company Shares | |||
(Date of Birth) | Significant Concurrent Positions | |||
Held | ||||
April 1994 | Joined PALTEK CORPORATION | |||
July 1996 | Joined SOFTCREATE CORP | |||
March 2000 | Director of Dolphin Net Corporation | |||
December | Director of Kickers Network, Inc. | |||
2000 | ||||
May 2001 | General Manager of E Service Department of ONSale Co., Ltd | |||
(currently, GungHo Online Entertainment, Inc.) | ||||
August 2002 | COO of GungHo Online Entertainment, Inc. | 1,009,600 | ||
Kazuki Morishita | January 2004 | President & CEO of the Company (to present) | ||
1 | shares | |||
(September 16, 1973) | ||||
December | Director of Game Arts Co., Ltd. | |||
2005 | ||||
March 2008 | President & Representative Director of Game Arts Co., Ltd. (to | |||
present) |
(Significant Concurrent Positions)
President & Representative Director of Game Arts Co., Ltd.
Executive Director of GRAVITY Co., Ltd.
―36―
Name | Career Summary, Position, Assignment, and | Number of | ||
No. | Company Shares | |||
(Date of Birth) | Significant Concurrent Positions | |||
Held | ||||
April 1987 | Joined The Kyushu Sogo Bank, Ltd. (currently, The Shinwa | |||
Bank, Ltd.) | ||||
January 1993 | Joined Expression Tools, Inc. | |||
April 1996 | Director and General Manager of Administration Division of | |||
Expression Tools, Inc. | ||||
April 2000 | Vice President of Expression Tools, Inc. | |||
April 2002 | Chief Executive Officer of Expression Tools, Inc. | |||
November | Representative Liquidator of Expression Tools, Inc. | |||
2003 | ||||
April 2004 | Joined GungHo Online Entertainment, Inc. as General Manager | |||
of Management Division and CFO | ||||
March 2005 | Director of the Company (to present) | |||
January 2006 | Executive General Manager of Management Division and CFO | |||
of the Company | ||||
April 2008 | General Manager of Financial Strategy Division and CFO of the | |||
Company | ||||
April 2009 | General Manager of Business Administration Division and CFO | |||
of the Company | 100,000 | |||
Kazuya Sakai | October 2009 | Managing Executive Officer of the Company | ||
2 | shares | |||
(January 28, 1965) | August 2010 | Executive General Manager of Finance & Accounting Division | ||
and CFO of the Company | ||||
January 2011 | Managing Executive Officer and Executive General Manager of | |||
Finance & Accounting Division and Executive General Manager | ||||
of Business Administration Division and CFO of the Company | ||||
July 2011 | Managing Executive Officer and Executive General Manager of | |||
Finance & Accounting Division and CFO and IRO of the | ||||
Company | ||||
March 2012 | Executive General Manager of Finance Accounting Division and | |||
CFO and IRO of the Company | ||||
April 2014 | Executive General Manager of Finance Accounting Division and | |||
CFO of the Company (to present) | ||||
March 2017 | Director of Game Arts Co., Ltd. (to present) |
(Significant Concurrent Positions)
Director of Game Arts Co., Ltd.
Director of Acquire Corp.
Executive Director of GRAVITY Co., Ltd.
Director of GungHo Online Entertainment Asia Pacific Pte. Ltd.
Director of GungHo Gamania Co.,Limited Director
―37―
Candid | Name | Career Summary, Position, Assignment, and | Number of | |
Company Shares | ||||
ate No. | (Date of Birth) | Significant Concurrent Positions | ||
Held | ||||
April 1992 | Joined Gakusei Engokai Co., Ltd. (currently, PERSOL | |||
CAREER CO., LTD.) | ||||
January 1995 | Joined Rothmans Japan | |||
September | Joined ICC Co. Ltd. | |||
1999 | ||||
January 2002 | Joined NC Japan K.K. | |||
February 2003 | Joined GungHo Online Entertainment, Inc. as General Manager | |||
of Marketing Division | ||||
January 2006 | Executive General Manager of Marketing Division of the | |||
Company | 40,000 | |||
Yoshinori Kitamura | March 2006 | Director of the Company (to present) | ||
3 | shares | |||
(June 11, 1968) | July 2007 | Executive General Manager of International Business Division of | ||
the Company | ||||
October 2009 | Managing Executive Officer and Executive General Manager of | |||
International Division of the Company | ||||
March 2012 | Executive General Manager of International Division of the | |||
Company (to present) | ||||
October 2015 | Executive General Manager of GV business Division of the | |||
Company (to present) |
(Significant Concurrent Positions)
Executive Director of GRAVITY Co., Ltd.
April 1987 | Joined Ebisho Co. Ltd. | ||
January 1992 | Joined Daiichi Takachiho Corporation | ||
October 1995 | Joined SOFTCREATE CORP | ||
May 2000 | Director of Dolphin Net Corporation as Director | ||
December | Joined Kickers Network, Inc. | ||
2000 | |||
February 2002 | JoinedALISS-NET Co., Ltd. | ||
February 2004 | Joined GungHo Online Entertainment, Inc. | ||
February 2007 | General Manager of Marketing Division No. 3 of the Company | ||
July 2007 | Executive General Manager of Publishing Division of the | ||
Company | |||
April 2008 | Senior Executive Officer and General Manager of Online | ||
4 | Masato Ochi | Division of the Company | |
(December 17, 1968) October 2009 | Managing Executive Officer and General Manager of Game | ||
Division of the Company | |||
March 2010 | Director of the Company (to present) | ||
July 2010 | Managing Executive Officer and General Manager of Game | ||
Division and Executive General Manager of Business | |||
Administration Division of the Company | |||
January 2011 | Managing Executive Officer and General Manager of Game | ||
Division of the Company | |||
January 2012 | Managing Executive Officer and Senior General Manager of | ||
Online Division of the Company | |||
March 2012 | Senior General Manager of Online Division of the Company | ||
May 2014 | Executive General Manager of System/CustomerService | ||
Division of the Company | |||
April 2017 | Executive General Manager of CustomerService Division of the | ||
Company (to present) |
5,000 shares
―38―
Candidate | Name | Career Summary, Position, Assignment, and | Number of | |
Company Shares | ||||
No. | (Date of Birth) | Significant Concurrent Positions | ||
Held | ||||
April 1977 | Joined ARABIAN OIL COMPANY, LTD. | |||
May 2000 | Joined Nintendo Co., Ltd. | |||
January 2002 | General Manager of General Affairs Division of Nintendo Co., | |||
Ltd. | ||||
October 2005 | Executive General Manager of General Affairs Division of | |||
Nintendo Co., Ltd. | ||||
June 2006 | Director of Nintendo Co., Ltd. | |||
5 | Koji Yoshida | April 2011 | Joined GungHo Online Entertainment, Inc. as Assistant to | 11,500 |
(November 27, 1953) | Executive General Manager of Business Administration | shares | ||
Division | ||||
July 2011 | Executive General Manager of Business Administration | |||
Division and CCO of the Company (to present) | ||||
March 2012 | Director of the Company (to present) |
(Significant Concurrent Positions)
Director of Acquire Corp.
Director of GungHo Online Entertainment Asia Pacific Pte. Ltd.
April 1989 Joined The Mitsubishi Bank, Ltd. (currently, The Bank of Tokyo-
Mitsubishi UFJ, Ltd.)
December 2006 | Group Manager of Finance Planning, Finance Department of | |||
SoftBank Corp. (currently, SoftBank Group Corp.) | ||||
June 2008 | Senior Executive Officer and Executive General Manager of | |||
Norikazu Oba | Financial Strategy Division of GungHo Online Entertainment, | |||
6 | Inc. (seconded from SoftBank Corp.) | ― | ||
(August 27, 1966) | March 2011 | Director of the Company (to present) | ||
(Significant Concurrent Positions)
General Manager of the Finance Planning Department of SoftBank Group Corp
Representative Director & Vice President and CFO of J.Score CO., LTD
Director of SoftBank Group Japan Corporation
―39―
Candidate | Name | Career Summary, Position, Assignment, and | Number of | |
Company Shares | ||||
No. | (Date of Birth) | Significant Concurrent Positions | ||
Held | ||||
April 1986 | Joined Fuji Bank, Ltd. (currently Mizuho Bank) | |||
December | Investment officer, Fuji Capital Management Co., Ltd. (currently | |||
1999 | Mizuho Capital Partners Co., Ltd.) | |||
February | Director and CFO, Link Theory Holdings Co., Ltd. (currently Link | |||
2002 | Theory Japan Co., Ltd.) | |||
September | Executive Officer & CFO, FAST RETAILING CO., LTD. | |||
2009 | ||||
7 | Hidetsugu Onishi | November | Outside Director, Karita and Company, Inc. (to present) | 1,000 |
2011 | ||||
(March 7, 1964) | shares | |||
September | Outside Director, beauty experience Inc. (to present) | |||
2013 | ||||
March 2016 Director of the Company (to present) | ||||
May 2019 | Outside Auditor of Arcland Sakamoto CO., Ltd. (to present) |
(Significant Concurrent Positions)
Co-CEO, Integrity Partners LLC
CEO, Avergence Incorporated
April, 1982 | Joined Japan External Trade Organization | |
July, 1988 | Joined Bankers Trust (currently Deutsche | |
Securities Inc.) | ||
July, 1999 | Head of M&A Group of Deutsche Securities Inc. | |
November, | Vice Chairman, Global Banking Group of | |
2006 | Deutsche Securities Inc. | |
September, | Chairman of Japan of Lincoln International | |
Keiji MIyakawa | 2009 | |
June, 2012 | Outside Auditor of ASICS Corporation | |
8 | ||
(November 5, 1958) | June, 2013 | Outside Director of ASICS Corporation |
March, 2016 | Auditor of ASICS Corporation (to present) | |
March, 2018 | Director of the Company (to present) | |
January, 2019 | Senior Advisor of Japan of Lincoln International (to present) |
500 shares
(Significant Concurrent Positions)
Senior Advisor of Japan of Lincoln International
Aplil, 1976 | Joined Nintendo Co., Ltd. | |||
July, 2012 | Deputy General Manager, Licensing Division of Nintendo Co., | |||
Susumu Tanaka | Ltd. | |||
9 | June 2013 | Director and General Manager for Licensing Division of | ― | |
(March 11, 1953) | Nintendo Co., Ltd. | |||
June 2016 | Senior Executive Officer, General Manager for Licensing | |||
Division of Nintendo Co., Ltd. | ||||
June 2018 | Corporate Adviser of Nintendo Co., Ltd. of Nintendo Co., Ltd. | |||
(until June, 2019) |
(Note)
- The candidates proposed to serve as Directors do not have any special interests in the Company.
- Mr. Hidetsugu Onishi, Mr. Keiji Miyakawa and Mr.Susumu Tanaka are outside director candidates.
- The reason that the outside director candidate Mr. Hidetsugu Onishi, Mr. Keiji Miyakawa Mr.Susumu Tanaka elected as the outside director candidate are as follows.
- It will be proposed that Mr. Onishi be elected as Outside Director because, given the wealth of experience and extensive knowledge he has in corporate business administration, the Company intends to obtain his advice on its overall business administration, thereby striving to further enhance its corporate governance platform, grow the organization continuously and improve its enterprise value further. Please note that the term of office for this individual as an Outside Director of the Company will be four years starting at the end of this Annual General Meeting of Shareholders.
- It will be proposed that Mr. Keiji Miyakawa be elected as Outside Director because, given the wealth of experience and expertise he has as a financial services executive, the Company intends to obtain his advice on its overall business administration, thereby striving to further enhance its corporate governance platform, grow the organization continuously, and further improve its enterprise value. Please note that the term of office for this individual as an Outside Director of the Company will be two years starting at the end of this Annual General Meeting of Shareholders.
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- It will be proposed that Mr. Tanaka be elected as Outside Director because, given the long-standing wealth of experience and advanced knowledge he has in corporate business administration at Nintendo Co., Ltd., the Company intends to obtain his advice on its overall business administration, thereby striving to further enhance its corporate governance platform, grow the organization continuously and improve its enterprise value further. Please note that the term of office for this individual as an Outside Director of the Company will be three years starting at the end of this Annual General Meeting of Shareholders.
- The Tokyo Stock Exchange (TSE) was notified that Mr. Hidetsugu Onishi and Keiji Miyakawa were independent directors stipulated by the TSE. Mr. Susumu Tanaka also satisfies the TSE's qualifications as an independent director, and the Company will notify the TSE that he is an independent director.
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Outline of liability limitation agreement
A liability limitation agreement has been entered into by and between the Company and Directors, Mr. Taizo Son, Mr. Norikazu Oba, Mr. Hidetsugu Onishi and Mr. Keiji Miyakawa. If the elections of director candidates are approved, the Company will enter into a liability limitation agreement. Regarding outline of liability agreement, please refer to page10. If the election of Mr. Susumu Tanaka is approved, the Company will enter into the same agreement.
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Gungho Online Entertainment Inc. published this content on 12 March 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 March 2020 07:58:02 UTC