Tencent and Sony Interactive Entertainment collectively acquire 30.34 percent of FromSoftware

1. Purposes and reason for the Third-Party Assignment

Kadokawa Group advocates a “global mix of media with technology” as its core strategy that combines the stable creation of intellectual property (IP) consisting of a variety of portfolio content mainly in Publishing, Video, Games, Services businesses Web and Education as well as the deployment of this IP on a global scale through the widespread use of technology, seeking to achieve sustained growth and enhance corporate value from medium and long-term perspectives. FromSoftware is driving the game business as it has been continuously creating world famous works such as Sekiro: Shadows Die Twice Y elden ring, leveraging its advanced gaming IP development strength. With an eye on further expansion of the gaming business, the Group recognizes enhancing capabilities for the creation, development and deployment of gaming IP as one of the Group’s top priorities. In accordance with this policy, the Company has decided that FromSoftware implement the acquisition of funds through a third party assignment to Sixjoy and SIE, the scheduled beneficiaries, for the reasons described below.

Tencent acquired equity in Guangzhou Tianwen Kadokawa Animation and Comics Co., Ltd., a consolidated subsidiary of the Company, in 2016, and the two companies have been jointly promoting their media mix strategy targeting the Chinese market. In addition, the Company, Sixjoy and Tencent Japan entered into a capital and business alliance agreement starting in October 2021 to strengthen their strategic alliance in the fields of anime and games. Tencent and its subsidiaries and affiliates (hereinafter the “Tencent Group”) are a global Internet group that provides communication, social, gaming, digital content, advertising, fintech and cloud services, and operates the social and gaming platform leading communication in the Internet industry. in China.

Sony and its subsidiaries (hereinafter referred to as the “Sony Group”) and the Company have developed a collaborative business relationship in a wide range of areas related to the Sony Group’s global Direct-to-Consumer (DTC) business operations, the hardware business of brand and the gaming business. . In February 2021, the Company entered into a third-party assignment with Sony as the successful bidder with the aim of strengthening its long-term relationship with the Sony Group and creating new Company IP and maximizing the utilization of its existing IP in anime. and playing fields.

Through the implementation of the acquisition of funds, FromSoftware will seek to proactively invest in the development of more powerful gaming IPs for itself to strengthen FromSoftware’s development capabilities and seek to establish a framework that enables the expansion of the scope of its own publication in the significantly growing global market. In addition to these purposes, in order to increase the number of users in the global gaming IP market that FromSoftware creates and develops, FromSoftware decided to make the third party assignment to Sixjoy within the Tencent Group, which has the strength in its capabilities to develop and implement mobile games and other network technologies in the global market, including China, and SIE within the Sony Group, whose capabilities are strong to implement IP in games, videos and other media in the global market, at the same time and separately.

2. Third Party Assignment Summary

• Payment period: September 7, 2022 to September 12, 2022
• Number of New Shares to Issue: 3,179 ordinary shares
• Issue price: 11,450,000 yen per share
• capital to be AcquireD: 36,399,550,000 yen
• Subscription or Assignment Method (Scheduled Subscriber): Through the award of third parties (Sixjoy 1,703 shares, SIE 1,476 shares)
• Participation ratio after issuance:
  • Kadokawa Corporation: 69.66%
  • Sixjoy Hong Kong Limited: 16.25%
  • Sony Interactive Entertainment Inc.: 14.09%

(Note) The payment related to the Third Party Assignment, which is expected to be made on September 7, 2022, may be made on another day during the previous payment period due to the procedures required for sending international remittances, among other factors. .

3. Use of Capital (Total Paid-in Capital: 36,399,550,000 yen)

• Specific use of funds:
  • For strengthening FromSoftware’s capabilities to create and develop gaming IP.
  • For establishing a framework that allows the expansion of the scope of FromSoftware’s own publication in the global market.

4. Scheme of Subsidiary Subject to Capital Increase

• • Title: FromSoftware Inc.
  • Location: 2-26-2 Sasazuka, Shibuya-ku, Tokyo
  • Title / Name of Representative: Hidetaka MiyazakiRepresentative Director and President
  • Business Content:
    • Planning, development, sales of game software.
    • Planning and development of internet content.
  • capital: 268,500,000 yen

• Foundation date: November 1, 1986
• Main shareholders and their shareholding proportions:
• Relationship between the listed company and the corresponding company:
  • Capital Relations The Company owns 100% of the company’s outstanding shares.
  • Relations with personnel Two officers of the Company are attached to the corresponding company.
  • Business relationships The Company and the relevant company have business transactions.

5. Scheme of Scheduled Subscribers

• Title: Sixjoy Hong Kong Limited
• Location: 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong
• Title / Name of Representative: Wang Zheng, manager; Ai Ximin, director; Byun Jung-won Elizabeth, director; and Tse Cheuk Yin Tiffany, director
• Business Content: Licensing and publishing of mobile games.
• capital: 1,000 Hong Kong dollars
• Foundation date: February 28, 2011
• Main shareholders and their shareholding proportions:
  • Tencent Holdings Limited:
• Relationship between the Listed Company and the Relevant Company:
  • Capital Relations:
    • The relevant company owns 9,724,400 shares (proportion of ownership voting rights: 6.86%) of the Company’s share capital (Note 1).
  • Staff Relations:
  • Business relationships:
    • The Company and Tencent Group have maintained a strategic partnership in the publishing business through a joint venture in Guangzhou, China since 2016. In addition, the Company, Tencent Japan and the winning bidder Sixjoy signed a business alliance agreement as of October 29 . , 2021 to strengthen its strategic alliance in the animation business.

(Note 1): This article is based on the report of large shareholders submitted by Sixjoy on November 16, 2021.

(Note 2): In the share subscription agreement that the Company and FromSoftware entered into with Sixjoy, the Company and FromSoftware have received a representation and warranty from Sixjoy that it is not an anti-social force and has no dealings with anti-social forces. The Company also commissioned JP Research & Consulting, Inc.

(Address: 3-7-12 Toranomon, Minato-ku, Tokyo; Representative: Keisuke Furuno, Representative Director), an independent investigation organization, to conduct an investigation. The report they produced states that there are no facts indicating that Sixjoy is involved with anti-social forces. Based on the foregoing, the Company determined that Sixjoy, Tencent, their officers and major shareholders do not have relationships with anti-social forces.

• Title: Sony Interactive Entertainment Inc.
• Location: 1-7-1, Konan, Minato-ku, Tokyo
• Title / Name of Representative: Jim Ryan, Representative Director and President
• Business Content:
  • Planning, development and sale of hardware, software, content and network services for game station.
  • Planning, development and sale of “toio”, software and content.
• capital: 110,000,000 yen
• Foundation date: April 1, 2010
• Main shareholders and their shareholding proportions:
• Relationship between the Listed Company and the Relevant Company:
  • Capital Relations:
    • Sony, the parent company of the company in question, owns 2,844,950 shares (proportion of ownership voting rights: 2.01%) of the company’s shares (as of the end of March 2022).
  • Staff Relations:
  • Business relationships:
    • The Company engages in transactions such as the purchase and sale of finished products and services with Sony and its affiliated companies.

(Note) In the share subscription agreement entered into with SIE, the Company and FromSoftware received a representation and warranty from SIE that neither it nor its officers are an anti-social force and have no relations with anti-social forces in reference to the share subscription agreement Actions. Sony, the parent company of SIE, is listed on the Tokyo Stock Exchange. Confirming its basic position for the elimination of anti-social forces and the establishment of relevant systems for them, which were mentioned as matters related to internal control systems in the Corporate Governance Report that Sony submitted to the Tokyo Stock Exchange , Inc. on July 5, 2022, the Company determined that Sony and its officers had no connection to anti-social forces.

6. Schedule for Assignment of Third Parties

• Resolution of the Board of Directors and General Assembly of Shareholders of FromSoftware: August 31, 2022
• Date of the Share Subscription Agreement Regarding the Assignment of Third Parties: August 31, 2022
• Payment period: September 7, 2022 to September 12, 2022

(Note) Payment for this third-party allocation is scheduled for September 7, 2022.

7. Future prospects

The Company believes that the Third Party Assignment will contribute to the medium and long-term enhancement of the Group’s corporate value, while the impact of the Third Party Assignment on the Company’s consolidated financial results for the fiscal year ending March 31 2023 is expected to be lower at the time of this report. When there is a need to disclose information, the Company will provide the information promptly.