Tencent and Sony Interactive Entertainment jointly acquire 30.34 percent of FromSoftware

1. Purpose and Reason for Third-Party Allocation

The Kadokawa Group advocates a “global media mix with technology” as a fundamental strategy that combines the stable creation of intellectual property (IP) consisting of a variety of portfolio content, mainly in the publishing, video, games, web services and education businesses as well The adoption of this intellectual property on a global scale through the extended use of technology to achieve sustainable growth and increase shareholder value in the medium to long term. FromSoftware is driving the game business as it has continuously brought out world famous works such as: Sekiro: Shadows die twice and elden ring, by leveraging its advanced game IP development power. Looking ahead to further expansion of the games business, the Group considers improving the ability to create, develop and deliver games intellectual property as one of the Group’s top priorities. In accordance with this policy, the Company has decided to have FromSoftware implement the fundraising through a third party grant to Sixjoy and SIE, the scheduled grantees, for the reasons set out below.

Tencent acquired capital in Guangzhou Tianwen Kadokawa Animation and Comics Co., Ltd., a consolidated subsidiary of the company, in 2016, and the two companies have jointly advanced their media mix strategy for the Chinese market. In addition, from October 2021, the company, Sixjoy and Tencent Japan entered into a capital and business alliance agreement to strengthen their strategic alliance in anime and games. Tencent and its subsidiaries and affiliated companies (hereinafter, the “Tencent Group”) is a global internet company that provides communications, social media, games, digital content, advertising, fintech and cloud services and is the leading communications and social platform in the internet industry operates in China.

Sony and its subsidiaries (hereinafter, the “Sony Group”) and the Company have developed a cooperative business relationship in a variety of areas, related to the global Direct-to-Consumer (DTC) businesses, branded hardware business and game business Sony Group related . In February 2021, the Company completed a third-party grant with Sony as the grantee to strengthen its long-term relationship with Sony Group, create new Company intellectual property, and maximize the use of its existing intellectual property in anime and playfields.

By implementing the fundraising, FromSoftware will aim to proactively invest in the development of more powerful game IP for itself to strengthen FromSoftware’s development capabilities, and will seek to create a framework that will allow expanding the scope of its own release in the Significantly growing area enables global market. In addition to these purposes, FromSoftware has decided to carry out the third-party allocation to Sixjoy within the Tencent Group in order to increase the number of users in the global gaming IP market, which FromSoftware creates and develops, who have strong skills develop and implement mobile games and other network technologies in the global market, including China, and SIE within the Sony Group, which is strong in its ability to simultaneously and separately deploy IP in games, videos and various other media in the global market.

2. Third Party Allocation Outline

• Payment term: From September 7, 2022 to September 12, 2022
• Number of new shares to be issued: 3,179 common shares
• issue price: 11,450,000 yen per share
• Capital to be raised: 36,399,550,000 yen
• Subscription or allocation method (appointment subscriber): By way of a third-party allocation (Sixjoy 1,703 shares, SIE 1,476 shares)
• Share ratio after issue:
  • Kadokawa Group: 69.66%
  • Sixjoy Hong Kong Limited: 16.25%
  • Sony Interactive Entertainment Inc.: 14.09%

(Notice) The payment related to the third-party allocation, which is expected to be made on September 7, 2022, may be made on another day during the above payment period due to, among other things, procedures required for international wire transfers.

3. Use of capital (Total paid-up capital: 36,399,550,000 yen)

• Concrete use of funds:
  • For strengthening FromSoftware’s ability to create and develop game IP.
  • For creating a framework that allows expanding the scope of FromSoftware’s own release to the global market.

4. Structure of the subsidiary with capital increase

• • Title: FromSoftware, Inc.
  • Location: 2-26-2 Sasazuka, Shibuya-ku, Tokyo
  • Title / Name of Representative: Hidetaka Miyazaki, Deputy Director and President
  • Business content:
    • Planning, development, distribution of game software.
    • Planning and development of internet content.
  • Capital city: 268,500,000 yen

• Founding date: Nov. 1, 1986
• Main shareholders and their shareholdings:
• Relationship between the listed company and the relevant company:
  • Capital Structure The Company holds 100% of the Company’s outstanding shares.
  • Personnel Relations Two Company officers are seconded to each Company.
  • Business relationships The company and the respective company maintain business relationships.

5. Overview of planned 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, director; Ai Ximin, director; Byun Jung-won Elizabeth, Director; and Tse Cheuk Yin Tiffany, Director
• Business content: Licensing and publishing of mobile games.
• Capital city: 1,000 Hong Kong dollars
• Founding date: February 28, 2011
• Main shareholders and their shareholdings:
  • Tencent Holdings Limited:
• Relationship between the listed company and the relevant company:
  • capital relations:
    • The relevant company holds 9,724,400 shares (voting rights: 6.86%) of the shares of the company (Note 1).
  • Personal relationships:
  • Business relationships:
    • The company and Tencent Group have maintained a strategic partnership in the publishing business since 2016 through a joint venture company in Guangzhou, China. In addition, the company, Tencent Japan and shareholder Sixjoy entered into a business alliance agreement on October 29, 2021 to strengthen their strategic alliance in animation business.

(Note 1): This article is based on the major shareholder report filed 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 guarantee from Sixjoy that it is not an antisocial force and that it has no affiliation with any antisocial force . The company also hired JP Research & Consulting, Inc.

(Address: 3-7-12 Toranomon, Minato-ku, Tokyo; Representative: Keisuke Furuno, Representative Director), an independent research organization to conduct an investigation. The report they prepared states that there are no facts to suggest that Sixjoy is involved with antisocial forces. Based on the foregoing, the Company determined that Sixjoy, Tencent, their officers and major shareholders have no ties to 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 distribution of hardware, software, content and network services for PlayStation.
  • Planning, development and distribution of “toio”, software and content.
• Capital city: 110,000,000 yen
• Founding date: April 1, 2010
• Main shareholders and their shareholdings:
• Relationship between the listed company and the relevant company:
  • capital relations:
    • Sony, the parent company of the company in question, holds 2,844,950 shares (voting rights: 2.01%) of the company’s shares (as of the end of March 2022).
  • Personal relationships:
  • Business relationships:
    • The Company conducts transactions such as the sale and purchase of finished products and services with Sony and its affiliates.

(Note) In the Stock Subscription Agreement entered into with SIE, the Company and FromSoftware received a representation and guarantee from SIE that it and its officers are not antisocial and that they have no affiliation with antisocial forces in relation to the Stock Subscription Agreement. Sony, SIE’s parent company, is listed on the Tokyo Stock Exchange. By confirming its basic stance on eliminating anti-social forces and establishing related systems, which were identified as internal control system issues in the corporate governance report that Sony submitted to Tokyo Stock Exchange, Inc. on July 5, 2022 Company found that Sony and its executives had no connection with anti-social forces.

6. Third Party Allocation Schedule

• Resolution of the Board of Directors and the AGM of FromSoftware: August 31, 2022
• Date of Share Subscription Agreement relating to third party allotment: August 31, 2022
• Payment term: From September 7, 2022 to September 12, 2022

(Notice) Payment for this third-party allocation is scheduled to be made on September 7, 2022.

7. Future Outlook

The Company believes that the third party attribution will contribute to the medium to long-term improvement of the Group’s enterprise value, while the third party attribution will have an impact on the Company’s consolidated financial results for the year ended March 31, 2023 at the date of production of this report is expected to be minor. If disclosure of information is required, the Company will promptly provide the information.