Digital Garage Reaches Basic Agreement on Strategic Partnership with Ion Pacific - Promoting a Shift to 'Circular Management' of Investment Portfolio and Accelerating Achievement of Mid-Term Plan Goal of ¥30 Billion Off-Balance Sheet

Digital Garage, Inc. (TSE Prime: 4819, HQ: Shibuya-ku, Tokyo, Representative Director, President Executive Officer and Group CEO: Kaoru Hayashi, hereinafter “Digital Garage”) announces that it has signed a Memorandum of Understanding (MOU) with Ion Pacific Holdings Limited (hereinafter “Ion Pacific”), a global asset management firm and one of the world's largest secondary fund managers specializing in venture companies. The MOU outlines a strategic partnership aimed at advancing the secondary market, primarily in Japan, expanding liquidity provision functions, and building next-generation investment and analysis platforms.

This initiative will accelerate the transition to a circular management model for our investment portfolio, which we have been promoting, and will advance the ¥30 billion off-balance sheet target set in our mid-term management plan ahead of schedule.

It also includes discussions concerning the main investment assets held by DG Ventures, Inc. (DGV), which constitute the majority of investments held on our balance sheet. If realized, we believe this will reduce the “management volatility” associated with the direct holding of investment assets and lead to a more stable and predictable management foundation, less susceptible to individual deals or valuation fluctuations.

Through this initiative, Digital Garage will further establish a structure that allows for more focused allocation of management resources to the group's core areas of payment business, data utilization, and next-generation financial infrastructure, while also contributing to strengthening the liquidity supply base for unlisted shares and other assets in the Japanese market.

1. Background of this MOU

For many years, Digital Garage has been committed to the social implementation of next-generation technologies through startup investment and business incubation. However, under the conventional model based on direct holding of investment assets, “management volatility” due to market fluctuations, fair value changes, and other factors has been one of our challenges.

In response to this situation, our group is reviewing how we hold and manage investment assets, transitioning from a direct holding model to a “circular, asset-efficiency-focused model” that utilizes funds and other vehicles. This MOU is a significant step towards making that a reality.

Furthermore, this matter is not limited to improving asset efficiency and optimizing the balance sheet in our investment business; it also signifies a clearer focus of management on core businesses and a redesign of the entire group's business portfolio. We position this as one of the key measures for the sustainable improvement of corporate value.

From left: Jonathan Chia (Partner, Ion Pacific), Junichi Nakajima (Senior Executive Officer, Digital Garage)

2. Overview of this MOU

(1) Strategic Partnership in the Secondary Market

Digital Garage and Ion Pacific will jointly explore and develop business opportunities to vitalize secondary transactions, primarily in the Japanese market. Through this, we aim to achieve more flexible and sustainable liquidity provision for a diverse range of asset classes, including unlisted shares.

By combining our expertise in investment and business development in the Japanese market with Ion Pacific's track record, network, and execution capabilities in the global secondary market, we will work to form a new market foundation.

(2) Discussions on Formation of Joint Funds and Strategic Transfer of Investment Portfolio

Digital Garage and Ion Pacific will proceed with discussions on the formation and operation of multiple funds and vehicles aimed at vitalizing the secondary market and providing liquidity. Concurrently, we are in discussions regarding the strategic transfer of the main investment assets held by DGV, which make up the majority of our group's investments held on the balance sheet, to these funds and vehicles.

If this is realized, we believe it will enable us to reduce the balance sheet burden and valuation fluctuation risks associated with long-term holding of investment assets. It will also allow us to transition from a structure where management is easily swayed by investment profit/loss fluctuations and individual deals to a more stable and predictable management foundation. This is a significant initiative that concretely advances our stated policy of moving our investment portfolio off-balance sheet and is a key step towards achieving the ¥30 billion off-balance sheet target of our mid-term management plan ahead of schedule.

We also believe this will reduce the “management volatility” stemming from the burden of explaining investment assets and valuation fluctuations, allowing us to more clearly concentrate management resources and focus on our core areas of payments, data, and next-generation financial infrastructure, where we aim for sustainable growth.

There is a considerable degree of agreement on the target assets and expected amount.