As filed with the Securities and Exchange Commission on March 30, 201829, 2019

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form20-F

(Mark One)

OR

For the fiscal year ended December 31, 20172018

OR

OR

Date of event requiring this shell company report                    

For the transition period from                     to                    

Commission file number001-37821

LINE Kabushiki Kaisha

(Exact name of Registrant as specified in its charter)

JR Shinjuku Miraina Tower, 23rd Floor

4-1-6 Shinjuku

Shinjuku-ku, Tokyo,160-0022, Japan

(Address of principal executive offices)

Satoshi Yano

Telephone:+81-3-4316-2050;E-mail: ir@linecorp.com; Facsimile:+81-3-4316-2131

(Name, telephone,e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

As of December 31, 2017,2018, there were 238,496,810240,524,642 shares of common stock outstanding

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes☒    No☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes☐☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ☒    Accelerated filer  ☐             NonNon-accelerated-accelerated filer  ☐            Emerging growth company☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

U.S. GAAP   ☐             IFRS  ☒            Other   ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐    Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).Yes  ☐     No  ☒

TABLE OF CONTENTS

i

i

ii

CONVENTIONS USED IN THIS ANNUAL REPORT

Except where the context otherwise requires or unless otherwise specified, and for purposes of this annual report on Form20-F only:

Any discrepancies in any table between the totals and the sums of the amounts listed are due to rounding.

iii

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements with respect to our current plans, estimates, strategies and beliefs. Forward-looking statements include, but are not limited to, those statements using words such as “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project,” “aim,” “plan,” “likely to,” “target,” “contemplate,” “predict,” “potential” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions generally intended to identify forward-looking statements. These forward-looking statements are based on information currently available to us, speak only as of the date hereof and are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control. As a consequence, current plans, anticipated actions and future financial position and results of operations may differ significantly from those expressed in any forward-looking statements in this annual report. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented and we do not intend to update any of these forward-looking statements. Risks and uncertainties that might affect us include, but are not limited to:

You are urged to read the sections “Item 3.D. Risk Factors”,Factors,” “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects” of this annual report for a more complete discussion of the factors that could affect our performance and the industry in which we operate.

iv

LIMITATIONS OF USER METRICS

We review a number of metrics, including MAUs, DAUs and MPUs, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. Our MAUs, DAUs and MPUs are calculated using our internal data. While these numbers are based on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring usage of our products and services across large online and mobile populations around the world. For example, each LINE account is linked to a mobile phone number, and there may be multiple LINE accounts held by the same person if the person carries multiple smartphones and has chosen to download the LINE messaging application on each smartphone. In addition, our data regarding user geographic location for purposes of reporting the geographic location of our MAUs, DAUs, and MPUs is based on the mobile phone number associated with the account when a user initially registered the account on LINE. The phone number may not always accurately reflect a user’s actual location at the time of user engagement on our platform. See “Item 3.D. Risk Factors — Certain of our user metrics are subject to inherent uncertainties in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.”

We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy. Our measures of user growth and user engagement may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology.

v

PART I

Not applicable

Not applicable

The consolidated statement of financial position data as of December 31, 20162017 and 20172018 and the consolidated statement of profit or loss data for the years ended December 31, 2015, 2016, 2017 and 20172018 have been derived from our audited consolidated financial statements and related notes included in this annual report. The consolidated statement of financial position data as of December 31, 2013, 2014, 2015 and 20152016 and the consolidated statement of profit or loss data for the years ended December 31, 20132014 and 20142015 have been derived from our audited consolidated financial statements and related notes not included in this annual report. These audited consolidated financial statements and the related notes have been prepared in accordance with IFRSInternational Financial Reporting Standards (“IFRS”) as issued by the IASB.International Accounting Standards Board (the “IASB”).

The information set forth below is not necessarily indicative of the results of future operations.

Consolidated Statement of Profit or Loss Data

Consolidated Statement of Financial Position Data

The table below sets forth, for the periods and dates indicated, the noon buying rate in New York City for cable transfers in yen as certified for customs purposes by the Federal Reserve Bank of New York, expressed in yen per US$1.00. We do not intend to imply that the yen or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or yen, as the case may be, at any particular rate, or at all.

Not applicable

Not applicable

If we fail to retain existing users or add new users, or if our users decrease their level of engagement with LINE, our revenue, financial results and business may be significantly harmed.

The size of our user base and our users’ level of engagement are critical to our success, and our financial performance has been and will continue to be significantly determined by our success in adding, retaining and engaging active users. From our inception, we experienced our largest user growth in Japan, Thailand, Taiwan Thailand

and Indonesia. TheFor example, our aggregate MAUs in Japan, Thailand and Taiwan were 127 million in December 2016, 135 million in December 2017 and 144 million in December 2018. Despite such growth, the growth rate of our users in such markets including in Japan where we generate a substantial majority of our revenues, has declined over time as the size of our user base has increased and as we achieved higher penetration rates in those markets. Our monthly active users (“MAUs”) in Japan were 58 million in December 2015, 66 million in December 2016 and 73 million in December 2017.Starting in the second quarter of 2017,In Indonesia, we have also experienced a decrease in the number of our MAUs starting in the second quarter of 2017 primarily due to intensified competition in that market, and our MAUs in Indonesia and our aggregate MAUs in Taiwan, Thailand and Indonesia were 87 million in December 2015, 10140 million in December 2016, and 9432 million in December 2017.In2017 and 20 million in December 2018. In part due to refocusing of our marketing efforts on these key countries in line with our increased emphasis on monetization in markets where we have achieved leading market positions, we have experienced a significant decrease not only in total MAUs but also in the level of user engagement outside of the four countries, and there may be further decreases in the future.

Our business performance will also become increasingly dependent on our ability to increase levels of user engagement in current and new markets. If people do not perceive our products and services to be useful, reliable or trustworthy, we may not be able to attract or retain users or otherwise maintain or increase the frequency, duration or level of their engagement. A number of other providers of mobile messaging applications and online companies that achieved early popularity have seen the sizes of their user bases or levels of engagement subsequently decline, in some cases precipitously.

Any number of factors could negatively affect user retention, growth or engagement, including if:

There is no guarantee that we will not experience erosion of our active user base or decline in engagement levels. A decrease in user retention, growth or engagement could reduce our direct sales to users and render LINE less attractive to our platform partners and advertisers, thereby reducing our revenues from them, which may have a material and adverse impact on our business, financial condition and results of operations.

We may not be successful in our efforts to monetize our products and services.

Our ability to monetize our user base and user engagement is critical to our business and financial performance. We plan to continue to invest in product development and explore additional monetization

opportunities, including those related to fintech, artificial intelligence (“AI”) and blockchain, in our largest markets such as Japan, Taiwan, Thailand and Indonesia and in other markets, but there is no guarantee that these efforts will be successful. For example, we are currently pursuing a variety of new business initiatives related to fintech, including mobile payment and online financial services, and whether we will be able to successfully monetize these new services remains uncertain. In addition, users and advertisers in certain markets are not as familiar with new forms of digital advertising, such as our Official Accounts and Sponsored Stickers, as well as LINEdisplay ads posted on Timeline Ads and LINE NEWS Ads.NEWS. In newer markets, we are investing to convince users and advertisers of the benefits of our products and services. However, we expect that monetizing efforts in many of these new markets may require a significant investment of time and resources, which may not result in sufficient, or any, returns to recover such investment.

As part of our business strategy, we are seeking ways to increase our revenue by selectively introducing commissions and other charges with respect to our existing products and services that are currently offered for free, as well as adding new advertising services and developing other new revenue generating products and services. However, there is no guarantee that our efforts to further monetize our products and services will be successful in generating significant new revenues or profits. Furthermore, our monetization efforts could have a negative effect on user engagement and user base growth if such efforts discourage users from using our products

and services. In addition, our competitors may introduce new revenue models in the future, and if such new revenue models are perceived as offering a better value proposition to users than the models that we currently use or plan to implement, our customers may switch to our competitors’ products and services. If our monetization efforts are not as successful as we anticipate, we may not be able to maintain or grow our revenues, and our business, financial condition and results of operations could be adversely affected.

Our business operates in an industry that is highly competitive, and competition presents an ongoing threat to the success of our business.

We compete against various companies to attract and engage users, some of which have greater financial resources and substantially larger user bases. We face direct competition from mobile messaging service providers such as Facebook’s WhatsApp and Messenger and Tencent’s WeChat, Snapchat, Telegram Messenger and BlackBerry Messenger, as well as mobile messaging services for specific operating platforms such as Apple’s iMessage. We also face significant competition in almost every aspect of our business, including from companies such as Facebook, Google, Snap, Twitter and Yahoo Japan, which offer a variety of social network services and products as well as online advertising services.Japan. We also face competition from game companies, mobile telecommunications and payment companies,e-commerce game companies, music and video streaming companies, artificial intelligencemobile payment companies, fintech companies, AI companies,e-commerce companies and other internet-related companies that offer products and services that may compete with specific features of the LINE messaging service or other applications that we offer.We also compete with traditional and online media businesses for a share of advertisers’ budgets and in the development of the tools and systems for managing and optimizing advertising campaigns. As we introduce new products and our existing products evolve, or as other companies introduce new products and services, we may become subject to additional competition.

Scale benefits and other advantages may allow our competitors to respond more effectively than us to a rapidly evolving environment in the mobile internet industry, including industry consolidation that may result in increased competition. Our competitors may develop products, features or services that are similar to ours or that achieve greater market acceptance, may undertake morefar-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies. In addition, platform partners may use information shared by our users through the LINE platform in order to develop products or features that compete with us. Certain competitors, including Facebook and Google, could use strong positions in one or more markets to gain competitive advantages against us in areas where we operate including: by integrating competing messaging applications or features into products they control such as social networking platforms, search engines, web browsers or mobile device operating systems; by making strategic acquisitions; or by making access to LINE more difficult. As a result, our competitors may acquire and engage users at the expense of our user base or our users’ engagement with our products and services, which may negatively affect our business, financial condition and results of operations.

We may not be successful if we are not able to develop and provide new products and services in a timely and cost-effective manner that address rapidly evolving user preferences, and any new products and services we develop and provide, including those related to fintech, AI and blockchain, may expose us to new risks.

We compete in a highly competitive industry characterized by rapidly changing products and services, evolving industry standards and continual improvements in performance characteristics and product features. Rapidly evolving user preferences may lead to certain products and services becoming less competitive, or even obsolete. Accordingly, our success depends greatly on our ability to anticipate and respond to emerging user preferences and demands by ensuring continuing and timely development and provision of new, as well as enhancements to existing, products and services. In order to respond to such preferences and demands, we may develop and introduce new products and services, including in areas where we have little or no prior development or operating experience. For example, in recent years, we have focused our business strategy on developing and strengthening our capabilities in artificial intelligence (“AI”), andMarch 2017, we launched our next-generation AI platform called “Cloud Virtual Assistant (or “Clova”),” in March 2017. Clova is a next-generation AI platform thatwhich enables voice interfaces to process a wide range ofreal-world inputs and deliver our products and services in a coherent and optimized manner. ThroughWe have

subsequently launched a series of LINE Clova-integrated smart speakers launchedstarting in October 2017 and released the fourth quarter of 2017, our users carry out a natural conversation with Clova Extensions Kit in engaging in a wide range of products and services offered by us and otherJuly 2018 to allow third-party service providers.developers to scale LINE Clova functionalities. We expect to continue to expend significant time and resources in marketing our LINE Clova-integrated smart speakersdevices in 20182019 as well as develop and launch new products and services to be offered on the LINE Clova ecosystem that are designed to further enrich our users’ daily lives.

SomeIn addition, some of our strategic initiatives that we expect will enhance our attractiveness to users and provide us with new sources of revenue may not directly or immediately generate revenue but we expect they will enhanceand may even hurt our attractiveness to users, platform partners and advertisers as well as contribute to increasing our active user base.profitability at least in the short term. Our new products and services may bring us into contact, directly or indirectly, with entities that are not within our traditional customer base or result in competing with entities that are our existing business partners. We may also enter into new business areas that require a number of licensing or registration requirements, as well as subject us to additional regulations applicable to the relevant industry. Forindustry in a number of jurisdictions.For example, in orderrecent years, we have focused our strategy on exploring a variety of new business opportunities related to pursue additional investment opportunities in financialfintech. Some of our recent fintech-related activities include, among others, expansion of services companies and other fintech businesses, we established a wholly-owned subsidiary,available to our users through LINE Financial Corporation, in January 2018. LINE Financial Corporation plans to selectively pursue investment opportunities that we believe will further enhance our capabilitiesPay, pursuit of alliances with reputable players in the financial services industry domain.to offer new services related to insurance, online securities brokerage, consumer loans and internet banking on the LINE platform, as well as the launch of BITBOX, our virtual currency exchange in Singapore. We are also pursuing business opportunities related to blockchain, such as the launch of LINK, the base digital token for our blockchain ecosystem. As most of these ventures are still in the early stages of operation, there can be no assurance that any of them will gain market acceptance and be used widely by our existing and potential users. We expect to continue to expend significant time and resources in developing, launching and marketing these ventures, and there can be no assurance that such initiatives will be successful.

Any of these activities could expose us to new risks, including additional regulatory scrutiny as well as andcredit-related and other operational risks, includingsuch as inventory risk for our unsold products. We have previously developed and introduced new products and services or entered into new business areas that did not lead to the results we anticipated, which may again occur in the future. There can be no assurance that we will succeed in developing products and services that eventually become widely accepted, that we will be able to timely release products and services that are commercially viable, or that we will establish ourselves as a successful player in a new business area. Our inability to do so would have an adverse impact on our business, financial condition and results of operations.

Our acquisitions and investments may not be successful in achieving their intended goals and could harm our business, financial condition and results of operations.

Our success will depend, in part, on our ability to expand our products and services, and grow our business in response to changing technologies, user and advertiser demands, and competitive pressures. In some circumstances, we may decide to do so through the acquisition of complementary businesses and technologies or the investment in attractive business opportunities through partnerships with established players in the target industry, rather than through internal development. The identification of suitable acquisition candidates or business partners can be difficult, time-consuming and costly, and we may not be able to successfully consummate the identified acquisition or investment transactions.

We have limited experience acquiring other businesses, and our ability to acquire and integrate other companies and assets, particularly larger or more complex companies, products, or technologies, in a successful manner remains subject to uncertainty. In addition, any completed acquisitions may not achieve their intended goals and could be viewed negatively by users, platform partners, advertisers or investors. For example, we acquired assets of MixRadio, a mobile music streaming service, from Microsoft in March 2015, but after careful assessment of the overall performance of MixRadio, the financial challenges posed by the music streaming market, changing market conditions, an increase in the cost of maintaining the business and a shift in our overall priorities, our board of directors approved the liquidation of our MixRadio business that became effective in March 2016. For more information, see Note 23 of the notes to our annual consolidated financial statements. We

also make investments by creating joint ventures with third parties, which may subject us to risks that are outside of our control, including changes in our partners’ own businesses and strategies, fraudulent or failed transactions, and the impact on our relationships with existing users, platform partners, employees or third parties.

The risks we face in connection with acquisitions and investments also include:

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions or investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, or could otherwise harm our business generally. Future acquisitions or investments could also result in dilutive issuances of our equity securities or the incurrence of debt, contingent liabilities, amortization expenses or incremental operating expenses.

Japan is our largest market in terms of revenue, and our current business and future growth could be materially and adversely affected if we experience a decline in users or user engagement in Japan.

We are incorporated in Japan, and Japan is our largest market in terms of revenue. We also have the broadest product and service offerings in Japan, and we generated 70.4%71.7%, 71.7%72.6% and 72.6%71.6% of our revenues in Japan in 2015, 2016, 2017 and 2017,2018, respectively. We expect to continue to derive a substantial portion of our revenues from Japan in the near future. In general, a higher proportion of LINE users in Japan are paying users than LINE users in other countries, and our continuingcontinued growth will depend, at least in part, on maintaining or increasing revenues from users in Japan. In recent quarters, our active user growth rate in Japan has slowed, and our

business performance in Japan will increasingly depend on our ability to increase the level of user engagement and our ability to further monetize users’ engagement with LINE. Our current business and future growth could be materially and adversely affected if we experience a decline in users or user engagement in Japan.

Due to the importance of the Japanese market to our business, we are also subject to macroeconomic risks specific to Japan. See “— A downturn in macroeconomic conditions may result in reduced demand for our products and services.”

We generate aA substantial portion of our revenues is derived from our advertising products. The loss of our advertisers, reduction in spending by our advertisers or failure to achieve market acceptance of new advertising products and services could negatively affect our business.

We generate aA substantial portion of our revenues is derived from third partiesour advertising on the LINE platform, as well as from advertising on our livedoorproducts and NAVER Matome (“Matome”) portals.services. As is common in the industry, our advertisers typically do not have long-term advertising commitments with us. Many of our advertisers spend only a relatively small portion of their overall advertising budget with us. In addition, some of our advertisers may view our products, such as Official Accounts, as experimental or unproven. Advertisers may not continue to do business with us, or they may reduce the prices or spending they are willing to pay to advertise with us, if we do not deliver advertisements and other commercial content in an effective manner, or if they do not believe that their investment in our advertising products and services will generate a competitive return relative to alternative methods of advertising.

In addition, our ability to increase our revenue will depend in large part on our ability to create successful new advertising products as well as improving features of existing products and services on our platform that further enhance the media value for our advertising business. For example, we have recently completed a series of enhancements to various functionalities of our display ads platform, which we believe would lead to improved operational capabilities, upgraded targeting technology and enhanced user experience. Although we expend a significant amount of time and resources in these efforts, such initiatives may not always lead to the anticipated benefits. We may also introduce new and unproven advertising products and services, using advertising technology with which we have little or no prior development or operating experience. If new advertising products and services fail to engage advertisers, we may fail to generate sufficient revenue to justify investment and our business may be adversely affected.

Our advertising revenue could also be adversely affected by a number of other factors, including:

The occurrence of any of these or other factors could result in a reduction in demand for advertisements, which may reduce the prices we receive for our advertisements or cause advertisers to stop advertising with us altogether, either of which would negatively affect our business, financial condition and results of operations.

We generate a substantial portion of our revenues fromdepend on a small number of mobile games offered on the LINE platform whether developed internally or by third-partyfor a majority of our mobile game developers.revenues. We must continue to offer games that attract and retain a significant number of users, or otherwise our business, financial condition and results of operations could be negatively affected.

We offer various games on our LINE platform through Apple App Store and Google Play, and they accounted for a significantsubstantial portion of our revenues in 2015, 2016, 2017 and 2017.2018. As of December 31, 2017,2018, we offered 4550 games, of which 4044 games were developed by third-party game developers and fivesix games were developed by us. Accordingly, we believe that maintaining successful partnerships with, and the ability to attract and select from, third-party game developers are critical toimportant for our success. Existing and prospective mobile game developers may not be successful in developing games that create and maintain user engagement. Additionally, although our general policy is to enter into new contractual arrangements with third-party game developers to become the exclusive distributor of their games in a particular market, to the extent such arrangements are not yet in place, developers may choose to provide their content on other platforms, including mobile platforms controlled by our competitors, rather than offering them on the LINE platform. Our failure to maintain good relationships with third-party game developers or attract new developers could adversely affect our business, financial condition and results of operations.

Historically, we have depended on a small number of games for a majority of our mobile game revenues, and we expect that this dependence will continue for the foreseeable future. Our growth in this area depends on our ability to consistently launch new games whether developed internally or by third-party game developers, that achieve significant popularity, as well as to upgrade popular games with new features that our users find attractive. It is difficult to anticipate user preferences or demand, particularly as we procure new games in new genres or new markets, and constant enhancement requires the investment of significant resources. We plan to continue to focus on game development not only through internal development but also through investments in associates by entering into strategic partnerships with experienced players in the game industry. Our success in part will depend on our ability to find, and collaborate effectively with, such partners. See “— Our acquisitions and investments may not be successful in achieving their intended goals and could harm our business, financial condition and results of operations.”

In recent years, our revenues from LINE Games have declined, with total MAUs steadily decreasing from 39 million in December 2014 to 2018 million in December 2017.2018. As a relatively small portion of our players account for a large portion of our revenues from LINE Games, we must constantly seek new ways to convertnon-paying players into paying players and attract and retain paying players. However, the success and performance of new and existing games is volatile and difficult to predict. If we fail to offer attractivein-game items, make unpopular changes to existingin-game items or offer games that do not encourage purchases ofin-game items or upgrades of game versions, or if we fail to successfully launch new games that attract and retain a significant number of users or if upgrades and launches of new titles are delayed, revenues from our games will decrease and our business, financial condition and results of operations could be materially harmed.

In order to more effectively respond to rapidly changing industry trends, we adjusted our strategy in recent years to devote additional resources to game development and publishing in addition to providing game distribution services. In June 2017, to further enhance our mobile game development and publishing capabilities, we established a wholly-owned subsidiary in Korea dedicated to game development and publishing called LINE Games Corporation. In July 2017, LINE Games Corporation acquired a 51.0% interest in NextFloor Corporation, a mobile game development company in Korea. As of December 31, 2017, NextFloor Corporation has published or developed ten games that are distributed through Apple App Store and Google Play. See Note 29 of the notes to our annual consolidated financial statements. We may not be able to effectively execute our game development and publishing strategy, which requires anticipating changing consumer tastes and preferences, retaining and motivating talented online game developers and adopting new technologies. The development,

We generate a substantial portion of our revenues from communication services from our sale of Stickers, the market for which is an evolving market,continues to evolve, and if the popularity of Stickers declines, from its current level in Japan or is not widely replicated in other markets, our business and future growth could be negatively affected.

We generate a substantial portion of our revenues from communication services from the sale of Stickers featuring characters developed by us as well as licensed from third parties, including our users who design Stickers to be sold on LINE Creators Market. The market for the sale of Stickers is an evolving market,continues to evolve, and the growth of thesuch market for Stickers and the level of demand for, and market acceptance of, our Stickers are subject to a high degree of uncertainty. In particular, a substantial majority of revenues from the sale of our Stickers has been derived from sales in Japan, and there can be no assurance that such products will achieve a similar level of market acceptance elsewhere. Over time, users in Japan may also lose interest in purchasing new Stickers. Accordingly, revenueIn recent years, our revenues from the sale of Stickers have remained relatively stagnant. Revenue growth from our sale of Stickers depends to a large extent on our ability to consistently launch new and different types of Stickers that achieve significant popularity and effectively respond to changes in consumer demographics and public tastes and preferences. We also depend on third-party character developers and licensors for content that accounts for a substantial portion of our Sticker sales, and we expect that this dependence will continue for the foreseeable future. A decline in the popularity of our Stickers, or the failure to further grow our Stickers business, would negatively affect our business, financial condition and results of operations.

We plan to continue expanding our global operations into markets in which we have limited operating experience and, as a result, may become subject to increased business and economic risks, which could adversely affect our business, financial condition and results of operations.

We believe LINE is the leading mobile messaging application in Japan, TaiwanThailand and ThailandTaiwan in terms of number of users, and we have obtained substantial numbers of users in other parts of the world, including Indonesia, Korea, the United States, Korea, Vietnam, Saudi Arabia and Malaysia. We expect to continue to expand our offerings of products and services in our key markets. However,markets.However, expansion of our operations abroad may be difficult due to the presence of established competitors in such markets. In addition, managing our business and expanding our operations globally require considerable management attention and resources and are subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems and commercial markets. Global expansion has required and will continue to require us to invest significant funds and other resources, and there can be no assurance that we will successfully achieve our growth objectives.

Operating globally subjects us to new risks and may increase risks that we currently face, including risks associated with:

If we are unable to manage the complexity of our global operations successfully, our business, financial condition and results of operations could be adversely affected.

If we are not able to maintain and enhance our LINE brand, or if events occur that damage our reputation and brand, our relationships with our users, platform partners and advertisers may be harmed, which may negatively affect our business, financial condition and results of operations.

Since its introduction in June 2011, LINE has rapidly grown into a global platform for mobile messaging services and content distribution, and we believe that the LINE brand has significantly contributed to the success of our business. We also believe that maintaining and enhancing our brand is critical to expanding our user base, platform partners and advertisers. Many of our new users are referred by existing users, and therefore we strive to ensure that our users are satisfied with our products and services and otherwise remain favorably inclined toward LINE. Maintaining and enhancing our brand will depend largely on our ability to continue to provide simple, user-friendly, reliable and innovative products and services, which we may not do successfully. We may introduce new products or terms of service that users do not like, which may negatively affect our brand. It may also negatively affect our brand if users do not have a positive experience using our platform partners’ applications offered on LINE as well as websites linked with LINE. We have in the past experienced, and we may continue to experience, media, legislative or regulatory scrutiny of our decisions regarding user privacy or other issues, including our measures to protect minors, which may adversely affect our reputation and brand. We may also fail to provide adequate customer service, which could erode confidence in our brand. Our brand may also be negatively affected by attacks from our competitors, by negative publicity about the actions of users that are deemed to be hostile, illegal or inappropriate to other users, by third-party content providers acting inappropriately with respect to the LINE platform, by users acting under false identities, by any regulatory developments designed to address such risks, or due to legal proceedings. Maintaining and enhancing our brand may require us to make substantial investments and these investments may not be successful. If we fail to successfully promote and maintain the LINE brand or if we incur excessive expenses in this effort, our business, financial condition and results of operations may be adversely affected.

We rely primarily on Apple App Store and Google Play as the channels for downloads of LINE and applications offered on the LINE platform as well as processing of payments, and any deterioration in our relationship with either of them may negatively impact our business.

We rely primarily on Apple App Store and Google Play as the channels for downloads of LINE and applications offered on the LINE platform as well as the processing of payments for our products and services.

We expect that we will continue to rely on Apple App Store and Google Play for downloads of our applications as well as most of the payment processing for our products and services. Accordingly, we believe that maintaining successful partnerships with Apple and Google is critical to our success.

The operating policies of Apple or Google have an impact on the accessibility of our products and services. From time to time, we have had to adjust our monthly settlements with our payment processing service providers due to discrepancies in the recognition of user payments. If such discrepancies continue to occur frequently, it may have a material adverse impact on our results of operations and negatively affect our reputation. In addition, our pricing strategy is impacted by changes in the payment processing fees charged by Apple or Google. Our inability to pass along increases in the payment processing fees charged by Apple or Google to our users on a timely basis or a decrease in paying user engagement due to a price increase may negatively impact our net revenue or profit margin. If we fail to maintain good relationships with Apple or Google, it may adversely impact our ability to continue to offer our products and services or effect payment processing, which in turn could have a material adverse impact on our business.

We have incurred significant operating losses in the past, and our ability to maintain profitability in the future is uncertain.

We have incurred significant operating losses in the past. We recorded loss for the year of ¥7,972 million in 2015 and, although we recorded profit for the year of ¥7,104 million in 2016 and ¥8,210 million in 2017. Although2017, we again recorded loss for the year of ¥5,792 million in 2018. Even though our revenues have grown over the years, from ¥120,406 million in 2015 to ¥140,704 million in 2016 andto ¥167,147 million in 2017 and ¥207,182 million in 2018, our revenue growth rate has slowed in recent years and may do so in the future due to a variety of factors. Wefactors.We believe that our future revenue growth will depend on, among other factors, our ability to attract new users while retaining current users, increase user engagement and advertisement engagement, increase our brand awareness, compete effectively, maximize our sales efforts, demonstrate a positive return on investment for advertisers and successfully develop and operate new products and services. Accordingly, you should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future revenue growth.

We expect our operating expenses to increase in future periods as we continue to expend substantial financial resources on:

These investments, while increasing our expenses, may not result in an increase in revenues or growth in our business. For example, our marketing expenses have from time to time outpaced the growth of our revenues over the same period, which have materially impacted our results of operations. If we are unable to achieve adequate revenue growth and to manage our expenses, we may incur significant losses in the future.

We have a limited operating history in the developing and rapidly evolving market for our products and services, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

We launched our LINE messaging application in June 2011 and other LINE products and services more recently, and our limited operating history makes it difficult to effectively assess our future prospects or forecast

our future results. You should consider our business and prospects in light of the risks and challenges we encounter or may encounter in this developing and rapidly evolving market environment. These risks and challenges include our ability to, among other things:

Failure to adequately address the risks and challenges associated with this market may adversely affect our business, financial condition and results of operations.

Our acquisitions and investments may not be successful in achieving their intended goals and could harm our business, financial condition and results of operations.

Our success will depend, in part, on our ability to expand our products and services, and grow our business in response to changing technologies, user and advertiser demands, and competitive pressures. In some circumstances, we may decide to do so through the acquisition of complementary businesses and technologies rather than through internal development. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions. We have limited experience acquiring other businesses, and our ability to acquire and integrate other companies and assets, particularly larger or more complex companies, products, or technologies, in a successful manner remains subject to uncertainty.

Any completed acquisitions may not achieve their intended goals and could be viewed negatively by users, platform partners, advertisers or investors. For example, we acquired assets of MixRadio, a mobile music streaming service, from Microsoft in March 2015, but after careful assessment of the overall performance of MixRadio, the financial challenges posed by the music streaming market, changing market conditions, an increase in the cost of maintaining the business and a shift in our overall priorities, our board of directors approved the abandonment of our MixRadio business that became effective on March 21, 2016. For more information, see Note 11 and Note 23 of the notes to our annual consolidated financial statements.

The risks we face in connection with acquisitions and investments also include:

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions or investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, or could otherwise harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities or the incurrence of debt, contingent liabilities, amortization expenses or incremental operating expenses.

Our user growth and engagement on mobile devices, which are required to access and use most of our products and services, depend upon effective operation with mobile operating systems that we do not control.

We are dependent on the interoperability of LINE with popular mobile operating systems, such as AndroidiOS and iOS,Android, and, to a lesser extent, web browsers, such as those for Windows and Mac OS, that we do not control. Any changes in such operating systems or web browsers that degrade the functionality of our products or services or give preferential treatment to our competitors’ products or services could adversely affect usage of our products and services. In addition, if the number of platforms for which we develop our products or services expands, it will result in an increase in our operating expenses.

We may not be successful in developing or maintaining relationships with key participants in the mobile telecommunications industry or in developing products that operate effectively with mobile operating systems,

networks or standards. In the event that it becomes more difficult for our users to access and use LINE on their mobile devices, or if our users choose not to access or use LINE on their mobile devices or use mobile devices that do not offer access to LINE, our user growth and user engagement could be harmed, and our business, financial condition and results of operations could be adversely affected.

If we or our users experience disruptions in mobile telecommunications or internet services or if mobile telecommunications and internet service providers are able to block, degrade or charge for access to our products and services, we could incur additional expenses and the loss of users and advertisers.

We depend on the ability of our users and advertisers to access mobile telecommunications services and the internet. Currently, this access is provided by companies that have significant market power in the mobile, broadband and internet access marketplaces, including incumbent mobile telecommunications companies, telephone companies, cable companies, government-owned service providers, device manufacturers and operating system providers, any of whom could take actions that degrade, disrupt or increase the cost of user access to our products or services, which would, in turn, negatively impact our business. The adoption of any laws or regulations that adversely affect the growth, popularity or use of mobile devices or the internet or disruption of our services in important markets for any political or othernon-technical reasons could decrease the demand for, or the usage of, our products and services, increase our cost of doing business and adversely affect our business, financial condition and results of operations. We also rely on other companies to maintain reliable network systems that provide adequate speed, data capacity and security to us and our users. As mobile devices and the internet continue to experience growth in the number of users, frequency of use and amount of data transmitted, the mobile telecommunications and internet infrastructure that we and our users rely on may be unable to support the demands placed upon them. The failure of the operations of mobile telecommunications or internet infrastructure services that we or our users rely on, even for a short period of time, could undermine our operations, and our business, financial condition and results of operations could be adversely affected.

Certain of our user metrics are subject to inherent uncertainties in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

We use our internal data to calculate our MAUs, DAUs and MPUs. See “Conventions Used in This Annual Report” for definitions of such user metrics. While these numbers are based on what we believe to be reasonable estimates of our active user and paying user base for the applicable period of measurement, there are inherent challenges in measuring usage of our products and services across large online and mobile populations around the world. For example, each LINE account is linked to a mobile phone number and there may be multiple LINE accounts held by the same person if the person carries multiple smartphones and has chosen to download a LINE application on each smartphone.

We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy. Our measures of user growth and user engagement may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology. If advertisers, platform partners or prospective investors do not perceive our user metrics to be accurate representations of our user base or user engagement, or if we discover material inaccuracies in our user metrics, our reputation may be harmed and platform partners and advertisers may be less willing to allocate their budgets or resources to our products and services.services, which may negatively affect our business.

Our business and operating results may be harmed by a disruption in our service due to failures in or changes to our systems, or by our failure to timely and effectively expand and adapt our technology and infrastructure.

Our reputation and ability to attract, retain, and serve our users is dependent in large part upon the reliable performance of LINE and our underlying technical infrastructure. Our systems may not be adequately

designed with the necessary reliability and redundancy to avoid performance delays or outages that could be

harmful to our business. We have experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, hardware failure, capacity constraints due to an overwhelming number of people accessing our products and services simultaneously, computer viruses, denial of service or fraud or security attacks. Our technical infrastructure is also vulnerable to the risk of damage from natural disasters, such as earthquakes and typhoons, as well as from acts of terrorism or other criminal acts. Our services and products also incorporate software that is highly technical and complex. Our software has contained, and may now or in the future contain, undetected errors, bugs or vulnerabilities. Some errors in our software code may only be discovered after the code has been released. In particular, the operation of some of our new fintech businesses as well as our LINE Clova AI platform and blockchain-related initiatives implicates complex technological and operational considerations, including technical or systematic issues that may arise in the ordinary course of business. In order to address such technical difficulties, we may need to make fundamental changes to the configurations or specifications of the underlying systems we use or expend a significant amount of time and resources to obtain the technical skills or expertise needed to adequately address such issues. Any such difficulties could have a material impact on our ability to deliver the products and services we intend to offer, reduce our reliability and harm our reputation.

In addition, a substantial portion of our network infrastructure is provided by third parties. Any disruption or failure in the services we receive from these providers could harm our ability to handle existing or increased traffic and could significantly harm our business. Any financial or other difficulties these providers face may also adversely affect our business, and we exercise little control over these providers, which increases our vulnerability to problems with the services they provide. In the event of a significant issue with the third-party network infrastructure supporting our network traffic, some of our products and services may become inaccessible or users may experience difficulties accessing our products and services. Any disruption or failure in our infrastructure could hinder our ability to handle existing or increased traffic on our platform, which could significantly harm our business.

As the number of our users increases and as our users generate and transmit increasing volumes of content, including photos, videos and music, we may be required to expand and adapt our technology and infrastructure to continue to reliably store and service such content. It may become increasingly difficult to maintain and improve the performance of our products and services, especially during peak usage times, as our products and services become more complex and our user traffic increases. In addition, we cannot provide assurance that we will be able to expand our data center infrastructure to meet user demand in a timely manner, or on favorable economic terms. If our users are unable to readily access LINE or access is disrupted, users may seek other service providers instead, and may not return to LINE or use LINE as often in the future. This would negatively impact our ability to attract users, platform partners and advertisers and increase engagement of our users. We expect to continue to make significant investments to maintain and improve the capacity, capability and reliability of our infrastructure. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed or continually develop our technology and infrastructure to accommodate actual and anticipated changes in our users’ needs, our business, financial condition and results of operations may be harmed.

If our security measures are breached, or if our products and services are subject to attacks that disrupt or deny the ability of users to access our products and services, our products and services may be perceived as not being secure and users and advertisers may curtail or stop using our products and services.

Our products and services involve the storage and transmission of large amounts of users’ and advertisers’ confidential information, and security breaches expose us to a risk of loss ofunauthorized access to this information, which may lead to improper use or disclosure of such information, ensuing potential liability and litigation, any of which could harm our reputation and adversely affect our business. From time to time, we experience cyber-attacks of varying degrees. Although there has been no material instance where an unauthorized party was abledegrees, including ones that may involve hackers planting malicious codes into our servers that remain dormant until initiated at some point in the future, making it difficult to obtain accessmeasure the potential damage that could result from such attack or to our data or our users’ or advertisers’ data, there can be no assurancedetect such breach altogether. In particular, some of the

fintech businesses that we will not be vulnerablehave recently begun to cyber-attacksoperate, or plan to operate, including insurance, online securities brokerage, consumer loans, internet banking and virtual currency exchange, as well as our LINE Clova AI platform and blockchain-related initiatives, among others, are likely to increase the amount and sensitivity of user information that we collect, which in turn would increase the future. risk of cyber-attacks.

Our security measures may also be breached due to employee error, malfeasance or otherwise.Given the rapid development and scope of the services we offer, including those developed in conjunction with third parties, instituting appropriate access controls and safeguards across all our services is challenging. Furthermore, outside parties may attempt to fraudulently induce employees, users or advertisers to disclose sensitive information in order to gain access to our data or our users’ or advertisers’ data or accounts, or may otherwise obtain access to such data or accounts. In addition, some platform partners may

store information provided by our users through applications on the LINE platform or websites linked with LINE. If these third parties or platform partners fail to adopt or adhere to adequate data security practices or fail to comply with our terms and policies, or in the event of a breach of their networks, our users’ data may be improperly accessed or disclosed.

Since our users and advertisers may use their LINE accounts to establish and maintain online identities, unauthorized communications from LINE accounts that have been compromised may damage their reputations and brands as well as ours. Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation and a loss of confidence in the security of our products and services, which could have an adverse effect on our business, financial condition and results of operations. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and there are often unknown vulnerabilities that are not recognized until launchedexploited against a target, we may be unable to anticipate these techniques and vulnerabilities or to implement adequate preventative measures. If an actual or perceived breach of our security occurs or the market perception of the effectiveness of our security measures is harmed, we could lose users and advertisers and we may incur significant legal and financial exposure, including legal claims and regulatory fines and penalties.

Our financial results are likely to continue to fluctuate from quarter to quarter, which makes ourperiod-to-period results volatile and difficult to predict.

We emphasize growth and the increase in engagement of our user base over short-term financial results. Due in part to such focus, our quarterly financial results have fluctuated in the past and are likely to fluctuate in the future. As a result, you should not rely upon our past quarterly financial results as indicators of future performance. You should also take into account the risks and uncertainties frequently encountered by companies in rapidly evolving markets. Our financial results in any given quarter or fiscal period can be influenced by numerous factors occurring in a particular period, many of which we are unable to predict or are outside of our control, including:

We may not be able to effectively manage our growth, which would harm our business and profitability.

We continue to experience growth in our personnel and operations, which will continue to place significant demands on our management and operational and financial infrastructure. We face significant competition for qualified staff, particularly software engineers, designers and product managers, from other internet and high-growth technology companies, and we may not be able to hire new employees quickly enough to meet our needs. As we continue to grow, we are subject to the risks of over-hiring, overcompensating our employees and over-expanding our operating infrastructure, and to the challenges of integrating, developing and motivating a rapidly growing employee base in various countries around the world. As our organization continues to grow and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the strengths of our corporate culture, including our ability to quickly develop and launch new products and services. If we fail to effectively manage our hiring needs and successfully integrate our new hires, our employee morale, productivity and retention could suffer.

We also expect to continue to invest in our infrastructure in order to enable us to provide our products and services rapidly and reliably to users around the world, including in countries where we do not expect significant near-term monetization. Continued growth could strain our ability to maintain reliable service levels for our users and advertisers, develop and improve our operational, financial, legal and management controls, and enhance our reporting systems and procedures. As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. Managing our growth will continue to require significant expenditures and allocation of valuable management resources. If we fail to achieve the necessary level of efficiency in our organization as it grows, our business, financial condition and results of operations would be harmed.

Our LINE mobile payment serviceThe products and services we offer, including those relating to fintech, AI and blockchain, may subject us to additional regulatory requirements and other risks that could be costly and difficult to comply with or that could harm our business.

As partThe products and services we offer, including those relating to fintech, AI and blockchain, subject us to a variety of our efforts to diversify payment options available to LINE users, we launchedlaws and regulations in Japan and elsewhere. For example, LINE Pay, our mobile payment service application, in December 2014. LINE Pay enables our users to register their credit cards and make payments, regardless of their mobile carrier, on LINE Store and a number of select online and offline partner retail stores. Depending on location, our users canWe have also transmit funds to each other or withdraw cash from certain banks within their respective countries through LINE Pay by linking their accounts at select banksentered into, and are currently in their respective countries or adding money to their LINE Pay accounts at convenience stores or ATMs or through internet banking. We plan to continue to expand the scopeprocess of LINE Pay by selectively incorporating it into our applications and exploring, local partnership and joint venture opportunities with reputable players in orderthe financial services industry to enhanceoffer new services related to insurance, online securities brokerage, consumer loans and internet banking, among others, on the convenience of our users.LINE platform. See “Item 4.B. Business Overview — Our Products and Services — Strategic Business Segment — Others — Fintech” and “Item 4.B. Business Overview — Our Investments.”

Depending on how our products and services as well as payment processes evolve, we may become subject to a variety of laws and regulations in Japan and elsewhere, including those governing money transmission, payment settlement,e-commerce, electronic funds transfers, anti-money laundering, identificationandidentification, counter-terrorist financing.financing and cryptocurrencies. In some jurisdictions, the application or interpretation of these laws and regulations is not clear. WeFor example, we are registered as a funds transfer service provider and issuer of prepaid payment instruments for third-party businesses in Japan and elsewhere through LINE Pay Corporation, our subsidiary engaged in mobile payment service, which will generally require us to demonstrate compliance with many domestic laws in these areas. In addition, we act as an intermediary in some of our new fintech services, such as LINE Insurance and LINE Smart Invest, which subjects us to a number of registration and other operational laws in Japan. See “Item 4.B. Business Overview — Regulation.” In the event that we are found to be in violation of any suchof these or other similar legal or regulatory requirements, or there is a delay in the implementation of internal systems and controls necessary to ensure

compliance with such requirements, we may be subject to monetary fines or other penalties or sanctions such as a cease and desist order, or we may be required to make product changes, any of which could have an adverse effect on our business and financial results.results.

In addition, we may be subject to a variety of additional risks as a result of providing mobile paymentproducts and services relating to fintech, AI and blockchain, including:

We depend on key senior management to operate our business and execute our business strategy, and if we are unable to attract, retain and motivate our senior management and other key personnel, our operations may be negatively affected.

Our ability to execute our strategy efficiently is dependent upon contributions from our key senior management. Our future success will depend on the continued service of our key executive officers and managers who possess significant expertise and knowledge of our industry. A limited number of individuals have primary responsibility for the management of our business, including our relationships with key platform partners. From time to time, there may be changes in our senior management team that may be disruptive to our business, and we may not be able to find replacement key personnel in a timely manner. In addition, acquiring and retaining qualified personnel, such as systems engineers and designers, will be necessary to our achieving sustainable growth. Any loss or interruption of the services of these individuals, whether from retirement, loss to competitors or other causes, or failure to attract and retain other qualified new personnel, could prevent us from effectively executing our business strategy, cause us to lose key platform partner relationships, or otherwise materially affect our operations.

A downturn in macroeconomic conditions may result in reduced demand for our products and services.

Our business is sensitive to global economic conditions and depends on demand from our user base. In addition, demand for our advertising services is primarily driven by advertising spending levels of our advertising customers in our four key markets, particularly Japan. There are many macroeconomic factors that influence consumer confidence and spending behavior, including the level of inflation and unemployment, fluctuations in energy prices and conditions in the real estate markets. While globalGlobal economic conditions have generally stabilized and improveddeteriorated in recent years, the overall prospects for thewith global economyfinancial and the industry in which we operate remain uncertain. Financialcapital markets experiencing substantial volatility and disruption. Such developments have experienced significant volatility in recent years as a result of,been caused by, and continue to be exacerbated by, among other things, the slowdown of economic growth in China and other major emerging market economies, adverse economic and political conditions in Europe and Latin America and continuing geopolitical and social instability in North Korea and various parts of the Middle East, including Syria, Iraqas well as uncertainty regarding the timing and Yemen, as

well asmethod of the United Kingdom’s decision in June 2016 to exit from the European Union, (“Brexit”).or Brexit, and a deterioration in economic and trade relations between the United States and its major trading partners, including China. The outlookoverall prospects for the global economy and the industries in 2018which we operate in 2019 and beyond remainsremain uncertain.

In recent years, the economic indicators in Japan, our largest market in terms of revenue and user base, have also shown mixed signs, and future growth of the Japanese economy is subject to many factors beyond our control. The current administration of Prime Minister Shinzo Abe, formed in late December 2012 andre-elected in October 2017, has introduced policies to combat deflation and promote economic growth. In addition, the Bank of Japan introduced a plan for quantitative and qualitative monetary easing in April 2013 and announced a negative interest rate policy in January 2016. However, the long-term impact of these policy initiatives on Japan’s economy remains uncertain. The impact of Brexit on the Japanese economy and on the value of the Japanese yen against currencies of other countries in which we generate revenue, in both the short and long term, is also uncertain. In addition, the occurrence of large-scale natural disasters, such as the March 2011 Great East Japan Earthquake and the related Fukushima Daiichi nuclear disaster, as well as an increase in the consumption tax rate, which is expected to become effective in October 2019, may also adversely impact the Japanese economy, potentially impacting consumer spending and advertising spending by businesses. Any future deterioration of the Japanese or global economy may result in a decline in consumption that would have a negative impact on demand for our products and services and their prices.

We may require additional capital to support our operations and the growth of our business, and we cannot be certain that financing will be available on reasonable terms when required, or at all.

From time to time, we may need additional financing to operate or grow our business. If our cash resources are insufficient to satisfy our cash requirements, we may seek to issue additional equity or debt securities or obtain new or expanded credit facilities. For example, in September 2018, we issued zero coupon convertible bonds due 2023 and 2025 in the aggregate principal amount of approximately ¥146.3 billion (the “Convertible Bonds”) through an offering pursuant to Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and a private placement to NAVER Corporation, our largest shareholder. Our ability to obtain additional financing, if and when required, will depend on investor and lender demand, our operating performance, the condition of the capital markets and other factors, and we cannot assure you that additional financing will be available to us on favorable terms, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support the operation and growth of our business could be significantly impaired and our operating results may be adversely affected.

Our business is subject to complex and evolving Japanese and foreign laws and regulations. These laws, regulations and actions are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations or declines in user growth, user engagement or advertising engagement, restricted access to LINE or otherwise harm our business.

We are subject to a variety of laws and regulations in Japan and elsewhere that involve matters central to our business, including privacy, rights of publicity, data protection and protection of personal information, content regulation, intellectual property, competition, protection of minors, consumer protection and taxation. Many of these laws and regulations are still evolving and could be interpreted or applied in ways that could limit our business or require us to make certain fundamental and potentially detrimental changes to the products and services we offer, particularly in the new and rapidly evolving industryindustries in which we operate.operate, including the fintech, AI and blockchain technology domains. The introduction of new products or services in our existing markets and the expansion of our business to other countries may subject us to additional laws and regulations.regulations, among others resulting from the need to obtain additional licenses and approvals to conduct our businesses as envisioned. In addition, the application or interpretation of these laws and regulations is not clear in some jurisdictions, which could make compliance more costly. Moreover, if third parties we work with, such as platform and other business partners, violate applicable laws or our policies, such violations may result in joint or secondary liability for us.

A number of proposals are pending before legislative and regulatory bodies that could significantly affect our business. For example, there have been a number of recent legislative proposals in Japan that would impose new obligations in areas such as privacy and liability for copyright infringement by third parties that could affect liabilities associated with websites that publish user-generated content. An amendment to the Act on the Protection of Personal Information of Japan, (the “Act on the Protection of Personal Information”) was enacted in September 2015 and was put into full effect on May 30, 2017. This amendmentwhich includes establishment of a new regulatory authority and introduction of new regulations on handling of anonymous personal data and transfer of personal information to foreign countries.countries, went into full effect in May 2017.

We collect personal information from our users and may expand our collection of personal information in order to comply with new and additional regulatory demands or we may independently decide to do so.so, particularly as we enter into new business areas. Having additional personal information may subject us to additional regulation, and governmental regulators have been applying increased scrutiny to social media companies in this respect. For example, the EU General Data Protection Regulation, which extends the applicability of stringent data protection laws to all foreign companies processing the data of EU residents, will becomebecame effective in May 2018. Additionally, if third parties we work with, such as advertisers or platform partners, violate applicable laws or our policies, such violations may also put our users’ informationprivacy at risk and could in turn have an adverse effect on our business. Further, it is difficult to predict how existing laws and regulations will be applied to our business and the new laws and regulations to which we may become subject, and it is possible that they may be interpreted and applied in a manner that is inconsistent with our practices. For example, we believe that our products and services are not subject to regulations under the Act on Regulation on Soliciting Children by Using Opposite Sex Introducing Service on Internet of Japan, but there can be no assurance that we will not be subject to certain processes, administrative sanctions, fines or restrictions under such regulations in the future. Existing and proposed laws and regulations in any jurisdiction can be costly to comply with and can delay or impede the development of new products and services, result in negative publicity, significantly increase our operating costs, require significant time and attention of management and technical personnel and subject us to inquiries or investigations, claims or other remedies, including fines or demands that we modify or cease existing business practices.

The Payment Services Act of Japan (the “Payment Services Act”) requires entities that engage in business activities involving advance payments from customers using prepaid payment instruments, such as virtual currencies, to set aside for such customers amounts covering at least 50% of the total amount of the unused amounts or credits represented by such instruments issued as of the end of either the first or third quarter

of any year (if such total amount is more than ¥10 million), either by making a deposit or by entering into guarantee or trust agreements, as well as to refund any remaining balance of virtual currencies issued, after providing at least 60 days’ prior public notice, if those entities stop selling such virtual currencies. If any of ourin-game items for which we have not made a deposit or entered into a guarantee or trust agreement, is deemed a prepaid payment instrument, it may become necessary to enter into additional arrangements to comply with the Payment Services Act requirement in connection with any suchin-game items. Whileitems.While we intend to enter into additional guarantee agreements to meet any additional deposit requirements, entering into additional guarantee agreements will require us to pay guarantee fees equal to the contractual amount times a guarantee fee rate, and there is no assurance that we will be able to enter into additional guarantee agreements on favorable terms when required, or at all. Any failure to enter into contractual arrangements on terms satisfactory to us when required may adversely affect our business, financial condition, results of operations and/or reputation.

It is also possible that governments or relevant regulators of one or more countries may seek to censor content offered on the LINE platform in their country, restrict access to LINE from their country entirely, or impose other restrictions that may affect the accessibility of LINE in their country for an extended period of time or indefinitely. For example, as of the date of this annual report, our messaging services generally remain blocked in China. In the event that access to LINE is restricted, in whole or in part, in one or more other countries, our ability to retain or increase our user base and user engagement may be adversely affected, we may not be able to maintain or grow our revenue as anticipated, and our business, financial condition and results of operations could be adversely affected.

We are regulated as a telecommunications company under Japanese law. If our business were deemed to be a regulated telecommunications business in multiple jurisdictions, it would significantly increase our expenses and may require us to change our products and other aspects of our business in potentially detrimental ways.

We are regulated as a telecommunications company pursuant to Japanese law, and we have submitted required notifications to the Ministry of Internal Affairs and Communication of Japan. We are subject to the risk that, due to changes in telecommunications,e-commerce and other similar laws and regulations or in the application, interpretation or enforcement of both existing and future such laws and regulations, we may be

required to comply with additional laws and regulations in Japan and in other jurisdictions. In addition, we are continually seeking ways to improve our products and services, which may involve from time to time upgrades or changes in the technological infrastructure on which our products and services are based and which could result in subjecting our activities to greater regulation in multiple jurisdictions. If we are required to comply with telecommunications,e-commerce and other similar laws and regulations in multiple jurisdictions, we would need to meet a number of obligations, which could vary from jurisdiction to jurisdiction, including new or enhanced compliance in the following areas:

If we are required to comply with telecommunications,e-commerce and other similar laws and regulations in multiple jurisdictions, it could affect our business in many ways and areas, including the following:

Our intellectual property rights are valuable, and our inability to protect them could reduce the value of our products, services and brand.

Our trade secrets, trademarks, copyrights, patents and other intellectual property rights are important assets for us. We rely on, and expect to continue to rely on, a combination of confidentiality and license agreements with our employees, consultants and third parties with whom we have relationships, as well as trademark, trade dress, domain name, copyright, trade secret and patent laws, to protect our brand and other intellectual property rights. However, various events outside of our control may pose a threat to our intellectual property rights, as well as to our products, services and technologies. For example, we may fail to obtain effective intellectual property protection, or effective intellectual property protection may not be available in every country in which our products and services are available. In particular, the legal regimes relating to intellectual property rights in many of the countries in which we operate are limited and it is often difficult to effectively protect and enforce such rights in those countries. Also, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. There can be no assurance that our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to ours and compete with our business.

We also rely onnon-patented proprietary information and technology, such as trade secrets, confidential information,know-how and technical information. While in certain cases we have agreements in place with

employees and third parties that place restrictions on the use and disclosure of this intellectual property, these agreements may be breached, or this intellectual property may otherwise be disclosed or become known to our competitors, which could cause us to lose competitive advantages resulting from this intellectual property. We are also pursuing registration of trademarks and domain names in Japan and in many jurisdictions outside of Japan. Effective protection of trademarks and domain names is expensive and difficult to maintain, both in terms of application and registration costs as well as the costs of defending and enforcing those rights. We may be required to protect our rights in an increasing number of countries, in a process that is expensive and may not be successful or which we may not pursue in every country in which our products and services are distributed or made available.

We are party to numerous agreements that grant licenses to third parties to use our intellectual property, including our trademarks. For example, some third parties distribute their content through LINE, embed LINE content in their applications, and make use of our trademarks in connection with their services. If the licensees of our trademarks are not using our trademarks properly, it may limit our ability to protect our trademarks and could ultimately result in our trademarks being declared invalid or unenforceable. There can be no assurance that we will be able to protect against the unauthorized use of our brand, trademarks or other assets. There is also a risk that one or more of our trademarks could become generic, which could result in them being declared invalid or unenforceable.

We also seek to obtain patent protection for some of our technology, and we have filed various applications in Japan and abroad for protection of certain aspects of our intellectual property and currently hold a number of issued patents in multiple jurisdictions. We may be unable to obtain patent or trademark protection for our technologies and brands, and our existing patents and trademarks, and any patents or trademarks that may be issued in the future, may not provide us with competitive advantages or distinguish our products and services from those of our competitors. In addition, any patents and trademarks may be contested, circumvented, or found unenforceable or invalid, and we may not be able to prevent third parties from infringing, diluting or otherwise violating them. Effective protection of intellectual property rights is expensive and difficult to maintain, both in

terms of application and maintenance costs, as well as the costs of defending and enforcing those rights. Significant impairments of our intellectual property rights, and limitations on our ability to assert our intellectual property rights against others, could harm our business and our ability to compete.

We may become party to intellectual property rights claims in the future that are expensive and time consuming to defend, and, if resolved adversely, could have a significant impact on our business.

Technology companies own large numbers of patents, copyrights, trademarks and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation or other violations of intellectual property or other rights. Many such companies, including many of our competitors, have substantially larger patent and intellectual property portfolios than we do, which could make us a target for litigation as we may not be able to assert counterclaims against parties that sue us for patent or other intellectual property infringement. In addition, various“non-practicing entities” that own patents and other intellectual property rights often attempt to aggressively assert claims in order to extract payments from technology companies. From time to time we have received, and may receive in the future, claims from third parties which allege that we have infringed upon their intellectual property rights. Furthermore, from time to time we may introduce new products and services, including in areas where we currently do not have an offering, which could increase our exposure to patent and other intellectual property claims from competitors andnon-practicing entities. Some of our agreements with advertisers, platform partners and data partners require us to indemnify them for certain intellectual property claims against them, which could require us to incur considerable costs in defending such claims, and may require us to pay significant damages in the event of an adverse ruling. Such advertisers, platform partners and data partners may also discontinue use of our products, services and technologies as a result of injunctions or otherwise, which could result in loss of revenue and adversely impact our business.

As we face increasing competition and gain an increasingly high profile, patents and other intellectual property claims against us may grow. There may be intellectual property or other rights held by others, including issued or pending patents, that cover significant aspects of our products and services, and we cannot be sure that we are not infringing or violating, and have not infringed or violated, any third-party intellectual property rights or that we will not be held to have done so or be accused of doing so in the future. Any claim or litigation alleging that we have infringed or otherwise violated intellectual property or other rights of third parties, with or without merit, and whether or not settled out of court or determined in our favor, could be time-consuming and costly to address and resolve, and could divert the time and attention of our management and technical personnel. Some of our competitors have substantially greater resources than we do and are able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. The outcome of any litigation is inherently uncertain, and there can be no assurance that favorable final outcomes will be obtained. In addition, plaintiffs may seek, and we may become subject to, preliminary or provisional rulings in the course of any such litigation, including potential preliminary injunctions requiring us to cease some or all of our operations. We may decide to settle such lawsuits and disputes on terms that are unfavorable to us. Similarly, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that may not be reversed upon appeal. The terms of such a settlement or judgment may require us to cease some or all of our operations or pay substantial amounts to the other party. In addition, we may have to seek a license to continue practices found to be in violation of a third party’s rights. If we are required or choose to enter into royalty or licensing arrangements, such arrangements may not be available on reasonable terms, or at all, and may significantly increase our operating costs and expenses. As a result, we may also be required to develop or procure alternativenon-infringing technology or discontinue use of the technology. The development or procurement of alternativenon-infringing technology could require significant effort and expense or may not be feasible. An unfavorable resolution of any disputes and litigation could adversely affect our business, financial condition and results of operations.

Fluctuation of the value of the Japanese yen against certain foreign currencies may have a material adverse effect on the results of our operations.

Some of our foreign operations’ functional currencies are not the Japanese yen, and the financial statements of such foreign operations prepared initially using their functional currencies are translated into Japanese yen. Since the currency in which sales are recorded may not be the same as the currency in which expenses are incurred, foreign exchange rate fluctuations may materially affect our results of operations. In 2015, 2016, 2017 and 2017, 29.6%2018, 28.3%, 28.3%27.4% and 27.4%28.4%, respectively, of our revenues were derived from markets outside of Japan, and we expect that an increasing portion of our revenues and expenses in the future will be denominated in currencies other than the Japanese yen. Accordingly, our consolidated financial results and assets and liabilities may be materially affected by changes in the exchange rates of foreign currencies in which we conduct our business. We strive to naturally offset our foreign exchange risk by matching foreign currency receivables with our foreign currency payables, and our overseas subsidiaries seek to conduct business transactions in the local currency of the respective market in which the transactions occur. When deemed appropriate, we also selectively use derivative contracts, primarily foreign currency forward contracts. However, there can be no assurance that our hedging activities will be successful in protecting us from adverse impacts from currency exchange rate fluctuations, and fluctuation of the Japanese yen against certain foreign currencies may have a material adverse effect on our results of operations. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk” for a discussion of our foreign currency exposure and sensitivity analysis.

We may have exposure to greater than anticipated tax liabilities.

Our income tax obligations are based on our corporate operating structure and intercompany arrangements, including the manner in which we develop, value, and use our intellectual property and the valuations of our intercompany transactions. The tax laws applicable to our business activities, including the laws of Japan and other jurisdictions, are subject to interpretation. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements,

which could increase our worldwide effective tax rate and harm our financial position and results of operations. In addition, our future income taxes could be adversely affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations or accounting principles. We are subject to regular review and audit by tax authorities of various jurisdictions in which we operate. Any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. For example, LINE Plus Corporation, our wholly-owned subsidiary in Korea, paid approximately ¥2.2 billion in additional taxes as a result of a tax audit conducted by the National Tax Service in Korea in September 2018. LINE Plus Corporation is currently in the process of appealing the results of the tax audit. In addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate tax determination is uncertain. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

Due to the global nature of our business, we are subject to trade, economic sanctions and export laws and regulations in various jurisdictions that may govern or restrict our business and we, our directors and officers, may be subject to fines or other penalties fornon-compliance with applicable trade, economic sanctions and export laws and regulations.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) administers and enforces certain laws and regulations (“OFAC Sanctions”) that impose restrictions upon U.S. persons regarding dealings with or related to certain countries and territories, governments, entities and individuals. Even thoughnon-U.S. persons generally are not always directly bound to comply with OFAC Sanctions, in recent years, OFAC has asserted that suchnon-U.S. persons can be held liable for violations of OFAC Sanctions on various legal grounds, such as with respect to dealings in U.S. goods, services, or technology, or involving U.S. parties, causing violations by U.S. persons, or by engaging in transactions completed in part in the United States. In addition to the OFAC Sanctions, the United States maintains numerous secondary sanction programs that provide authority for the imposition of U.S. sanctions on foreign parties that engage in certain dealings with Iran and

other U.S. sanctions targets regardless of whether there is a nexus to the United States. Following the occurrence on January 16, 2016 of “Implementation Day” of the Joint Comprehensive Plan of Action between the “P5+1” countries (including the United States) and Iran, pursuant to which Iran agreed to limits on its nuclear program and the P5+1 countries agreed to provide certain sanctions relief, secondary sanctions targeting Iran have been narrowed but not eliminated. For example,non-U.S. persons can still be sanctioned for engaging in dealings with certain persons on OFAC’s Specially Designated Nationals (“SDN”) list.

The European Union also enforces certain laws and regulations (“EU Sanctions”) that impose restrictions upon nationals and entities of, and business conducted in, European Union member states with respect to activities or transactions with certain countries, governments, entities and individuals that are the subject of EU Sanctions. The United Nations Security Council and other governmental entities also impose similar sanctions.

The global nature of our business subjects us to the laws and regulations of various jurisdictions. Our significant international operations also expose us to economic sanctions risk and our continued expansion may increase the risk of violation of applicable economic sanctions laws and regulations. We intend our operations to comply with all applicable economic sanctions. Personal communications services are generally given favorable treatment under a number of economic sanctions regimes. However, given the global nature of our business, the fact that our business extends beyond personal communications services and the complexity and lack of certainty regarding the scope of some countries’ laws, there can be no assurance that our efforts to comply with all applicable economic sanctions and embargo laws and regulations will be completely effective to detect and prevent violations. There can also be no assurance that we will be in compliance with all applicable economic sanctions laws and regulations in the future. Such a violation could result in reputational damage, civil or criminal penalties or the imposition of sanctions against us or our affiliates, all of which could have a material adverse effect on our business, financial condition and reputation.

LINE can be used in some countries and regions that are the subject of trade embargos and other economic sanctions (such as Iran), and we may have individual users who are the target of sanctions. We screen

our counterparties, banks, agents, suppliers and other business supporters against OFAC’s SDN list prior to engaging or dealing with them, but we do not have a system in place to screen users of our services against OFAC’s SDN list and, accordingly, cannot guarantee that our services are not and will not be provided to SDNs.

We had approximately 1.70.8 million MAUs in Iran in December 2017,2018, and our business with Iran represented approximately 0.02%0.006% of our revenues in 2017,2018, which consisted primarily of sales of Stickers andin-game items in the ordinary course of business. On May 5, 2016, we launched aOur website containing media content directed at users in Iran.Iran, which we had launched in May 2016, was closed in November 2018. In February 2017, LINE PLAY Corporation, which is owned by LINE Plus Corporation, our wholly-owned subsidiary in Korea, established a local branch in Iran, which subsequently ceased all operations and remains closed as of December 31, 2017. LINE Plus Corporation met with officials from a governmental research institute in Iran in conjunction with our market research initiatives in Iran, and in January 2017, entered into a two-month research contract with the Iran Telecommunication Research Center (ITRC) to gain a better understanding of the Iranian mobile market and relevant regulatory considerations. We did not generate any revenue from the contract, which expired in 2017.2018.

NAVER Corporation, which owns more than 70% of the outstanding shares of our common stock, has substantial control over important corporate matters, and its interest may differ from those of our other shareholders.

As of December 31, 2017,2018, NAVER Corporation owned approximately 73.4%72.8% of the outstanding shares of our common stock. As a result, NAVER Corporation exercises substantial control over matters requiring approval by our shareholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. NAVER Corporation may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of our company,

could deprive our shareholders of an opportunity to receive a premium for their shares of our common stock as part of a sale of our company and might ultimately affect the market prices of shares of our common stock and American Depositary Shares (“ADSs”). In addition, through a private placement in September 2018, NAVER Corporation acquired half of the Convertible Bonds, which may be converted into shares of our common stock. See “Item 5.B. Liquidity and Capital Resources — Liquidity and Capital Resources — Cash Flows — Net Cash Provided by Financing Activities” and Note 15 of the notes to our annual consolidated financial statements.

We also engage in a number of other related party transactions with NAVER Corporation and our affiliates. See “Item 7.B. Related Party Transactions” for a discussion of our transactions with such entities. In the event NAVER Corporation, a publicly traded company, undergoes a change of control or experiences financial and other difficulties, it may materially and adversely affect our business, financial condition and results of operations.

Our parent, NAVER Corporation, offers a variety of products and services to internet users and advertisers, and the absence of contractually delineated spheres of operations means that competition and conflicts of interest between us and NAVER Corporation could arise in the future.

NAVER Corporation is publicly listed in Korea and also provides a variety of products and services to internet users, mobile application users and advertisers. NAVER Corporation operates the largest search portal site in Korea and is actively seeking to develop products and services to enhance the experience of mobile internet users. There is no contractual agreement between us and NAVER Corporation delineating our respective spheres of operation, and each company’s development team is actively introducing new services independently of one another. Current or future products and services offered by NAVER Corporation could compete with our own. NAVER Corporation’s business operations and the lack of contractualnon-competition arrangements between NAVER Corporation and us could give rise to direct competition between us and conflicts regarding allocation of business opportunities and management and investment resources.

Overlapping management and business relationships with NAVER Corporation, our parent, may adversely impact our business.

From time to time, members of our senior management have overlapping duties with NAVER Corporation. For example, Mr. Hae Jin Lee, a director and chairman of our company,board of directors, also serves as an executive

officer of NAVER Corporation. In addition, one of our three corporate auditors,Corporation.Such individuals, including Mr. Jin Hee Kim, is currently an executive officer of NAVER Corporation. Such individualsLee, have fiduciary duties to both NAVER Corporation and us under Korean and Japanese law, respectively. As a result, conflicts of interests may arise due to their dual roles, which may adversely impact our business.

The market prices of shares of our common stock and ADSs may continue to be volatile or may decline regardless of our operating or financial performance.

The market prices of shares of our common stock and ADSs may continue to be volatile. Market prices could be subject to wide fluctuations in response to various factors, many of which are beyond our control and may not be related to our operating or financial performance. Factors that could cause fluctuations in the market prices of shares of our common stock and ADSs include the following:

In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This type of litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

We may be classified as a passive foreign investment company for U.S. federal income tax purposes, which could subject U.S. investors in shares of our common stock or ADSs to adverse tax consequences, which may be significant.

We will be classified as a passive foreign investment company (a “PFIC”) in any taxable year in which, after taking into account our income and gross assets (and the income and assets of our subsidiaries pursuant to applicable “look-through rules”) either (i) 75% or more of our gross income consists of certain types of “passive income” or (ii) 50% or more of the average quarterly value of our assets is attributable to “passive assets” (assets that produce or are held for the production of passive income). We believe that we were not a PFIC for U.S. federal income tax purposes in 20172018 and do not expect to be a PFIC in subsequent taxable years. PFIC status is a factual determination made annually after the close of each taxable year on the basis of the composition of our income and the value of our active versus passive assets. Because our belief is based in part on the expected market value of our equity, a decrease in the trading price of our common stock and ADSs may result in our

becoming a PFIC. Additionally, the overall level of our passive assets will be significantly affected by changes in the amount of our cash, cash equivalents and securities held for investment, each of which may be classified as passive assets under the PFIC rules.

If we were to be or become classified as a PFIC, a U.S. Holder, as defined in “Item 10.E. Taxation — United States Federal Income Taxation,” that does not make a “mark to market” election may incur significantly increased U.S. federal income tax on gain recognized on the sale or other disposition of shares of our common stock or ADSs and on the receipt of distributions on the shares of our common stock or ADSs to the extent such distribution is treated as an “excess distribution” under the U.S. federal income tax rules. We do not intend to provide holders with the information necessary to make a “QEF election” (as described in “Item 10.E. Taxation — United States Federal Income Taxation — Passive Foreign Investment Company”). Thus, a U.S. Holder seeking to mitigate the potential adverse effects of the PFIC rules should consider making a mark to market election. Additionally, if we were to be or become classified as a PFIC, a U.S. Holder of shares of our common stock or ADSs will be subject to additional U.S. tax form filing requirements, and the statute of limitations for collections may be suspended if the U.S. Holder does not file the appropriate form. See “Item 10.E. Taxation — United States Federal Income Taxation — Passive Foreign Investment Company.”

Substantial future salesales of our common stock or the conversion into common stock of the Convertible Bonds, or the perception that these salestransactions could occur, could depress the market prices of the shares of our common stock and ADSs.

The market prices of the shares of our common stock and ADSs could decline as a result of sales of a large number of shares of our common stock or ADSs in the market or the conversion into common stock of the Convertible Bonds, and the perception that these salestransactions could occur may also depress the market prices of the shares of our common stock and ADSs. As of December 31, 2017,2018, there were 3,191,0002,701,400 shares of our common stock issuable upon exercise of outstanding stock options, and holders of our stock options may choose to exercise their options and sell all or a portion of their shares of our common stock on the Tokyo Stock Exchange or otherwise in Japan or abroad. As of December 31, 2017,2018, our equity-settled and cash-settled employee stock ownership plans also held 1,007,7101,979,775 shares of our common stock as treasury shares, which are granted from time to time as shares or cash (after sale of the underlying shares by the trust) as part of our share-basedshare-

based payments to our employees. SeeRecently, our shareholders approved a plan to grant stock options to our directors, and our board of directors approved a plan to grant stock options or other share-based compensation to our executive officers and employees pursuant to our new share-based compensation plan to be adopted in 2019.See “Item 6.B. Compensation,” “Item 6.D. Employees” and Note 27 and Note 32 of the notes to our annual consolidated financial statements.In addition, we issued the Convertible Bonds in September 2018. See “— We may require additional capital to support our operations and the growth of our business, and we cannot be certain that financing will be available on reasonable terms when required, or at all.” The conversion of some or all of these Convertible Bonds, or the anticipation of the possibility of such conversion, could also depress the market price of our common stock and ADSs. Moreover, our board of directors will be able to issue and sell additional shares of our common stock within the unissued portion of our authorized share capital, generally without any shareholder vote. Any such sales could cause the prices of the shares of our common stock and ADSs to decline.

If securities or industry analysts do not publish or cease publishing research or other reports about us, our business or our market, or if they adversely change their recommendations regarding an investment in us, the prices of the shares of our common stock and ADSs or their trading volume could decline.

The trading markets for the shares of our common stock and ADSs will be influenced by the research and other reports that securities or industry analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us adversely change their recommendation regarding an investment in us, or provide more favorable relative recommendations about our competitors, the prices of the shares of our common stock and ADSs would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the prices of the shares of our common stock and ADSs or their trading volume to decline.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.As a result, you may only receive a return on your investment if the market price of the shares of our common stock or ADSs increases.

The requirements of being a public company may strain our resources and divert management’s attention.

As a public company, we are subject to the reporting requirements of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), the U.S. Sarbanes-Oxley Act of 2002, (the “Sarbanes-Oxley Act”), the Dodd-Frank Act, the listing standards of the New York Stock Exchange as applicable to a foreign private issuer, which are different in some material respects from those required for a U.S. public company, as well as the reporting requirements under the Financial Instruments and Exchange Act of Japan (the “FIEA”) and the rules of the Tokyo Stock Exchange. We also continue to prepare annual financial statements of LINE Corporation on a standalone basis in accordance with generally accepted accounting principles in Japan for Japanese reporting purposes in addition to preparing our consolidated financial statements in accordance with IFRS as issued by the IASB. Complying with these requirements is time-consuming and costly and places significant strain on our personnel, systems and resources. As a result of disclosure of information in filings and submissions required of a public company, our business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors, shareholders or third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating results.

As a foreign private issuer, we are permitted to rely on exemptions from certain New York Stock Exchange corporate governance standards applicable to public U.S. companies as well as from certain disclosure requirements under the Exchange Act. This may afford less protection to holders of shares of our common stock or ADSs.

We are exempted from certain corporate governance requirements of the New York Stock Exchange by virtue of being a foreign private issuer. We are required to provide a brief description of the significant differences between our corporate governance practices and the corporate governance practices required to be followed by U.S. companies listed on the New York Stock Exchange. See “Item 16.G. Corporate Governance.” The standards applicable to us are considerably different from the standards applied to public U.S. companies. For instance, we are not required to:

We have relied on and intend to continue to rely on all of these exemptions for so long as we maintain our status as a foreign private issuer. In addition, we have a board of corporate auditors in lieu of an audit committee in accordance with applicable Japanese laws, which is permitted under Rule10A-3(c)(3) of the Exchange Act for foreign private issuers, subject to certain requirements. As a result, you may not be provided with the benefits of certain corporate governance standards applicable to public U.S. companies.

Our parent, NAVER Corporation, controls a majority of the voting power of the outstanding shares of our capital stock, making us a “controlled company” within the meaning of the New York Stock Exchange corporate governance rules. As a controlled company, we are eligible to, and, in the event we no longer qualify as a foreign private issuer, we intend to, elect not to comply with certain of the New York Stock Exchange corporate governance standards, including the requirement that a majority of directors on our board of directors are independent directors and the requirement that our remunerationcompensation committee and our nominating and corporate governance committee consist entirely of independent directors.

As a foreign private issuer, we are not subject to all of the disclosure requirements applicable to companies organized within the United States. For example, we are exempt from certain rules under the

Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, our directors and officers are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies. Accordingly, there may be less publicly available information concerning our company than there is for U.S. public companies.

Rights of shareholders under Japanese law may be different from rights of shareholders in other jurisdictions.

Our articles of incorporation and the Companies Act of Japan (the “Companies Act”) govern our corporate affairs. Legal principles relating to matters such as the validity of corporate procedures, directors’ and executive officers’ fiduciary duties and obligations and shareholders’ rights under Japanese law may be different

from, or less clearly defined than, those that would apply to a company incorporated in any other jurisdiction. Shareholders’ rights under Japanese law may not be as extensive as shareholders’ rights under the law of other countries. For example, under the Companies Act, only holders of 3% or more of our total voting rights or our outstanding shares are entitled to examine our accounting books and records. Furthermore, there is a degree of uncertainty as to what duties the directors of a Japanese joint stock corporation may have in response to an unsolicited takeover bid, and such uncertainty may be more pronounced than that in other jurisdictions.

Holders of ADSs have fewer rights than shareholders under Japanese law, and their voting rights are limited by the terms of the deposit agreement.

The rights of shareholders under Japanese law to take actions, including voting their shares, receiving dividends and distributions, bringing derivative actions, examining our accounting books and records, and exercising appraisal rights, are available only to shareholders of record. Because the depositary, through its custodian agents, is the record holder of the shares of our common stock underlying the ADSs, only the depositary can exercise those rights in connection with the deposited shares. ADS holders will not be able to bring a derivative action, examine our accounting books and records, or exercise appraisal rights through the depositary.

Holders of ADSs may exercise their voting rights only in accordance with the provisions of the deposit agreement. Upon receipt of voting instructions from them in the manner set forth in the deposit agreement, the depositary will make efforts to vote the shares underlying the ADSs in accordance with the instructions of ADS holders. The depositary and its agents may not be able to send voting instructions to holders of ADSs or carry out their voting instructions in a timely manner. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of ADSs may not be able to exercise their right to vote.

Holders of ADSs may not receive distributions on shares of our common stock or any value for them if it is illegal or impractical to make them available to such holders.

The depositary of our ADSs has agreed to pay holders of ADSs the cash dividends or other distributions it or the custodian for our ADSs receives on shares of common stock or other deposited securities after deducting its fees and expenses. Holders of ADSs will receive these distributions in proportion to the number of shares of our common stock that such ADSs represent. However, the depositary is not responsible for making such payments or distributions if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act, of 1933, as amended, but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration required for such distribution cannot be obtained after reasonable efforts made by the depositary. We have no obligation to take

any other action to permit distributions on our common stock to holders of ADSs. This means that holders of ADSs may not receive the distributions we make on shares of our common stock if it is illegal or impractical to make them available to such holders. These restrictions may materially reduce the value of our ADSs.

Holders of ADSs may be subject to limitations on transfer of their ADSs.

ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

We may amend the deposit agreement without consent from holders of ADSs and, if such holders disagree with our amendments, their choices will be limited to selling the ADSs or withdrawing the underlying shares of our common stock.

We may agree with the depositary to amend the deposit agreement without consent from holders of ADSs. If an amendment increases fees to be charged to ADS holders or prejudices a material right of ADS holders, it will not become effective until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, ADS holders are considered, by continuing to hold their ADSs, to have agreed to the amendment and to be bound by the amended deposit agreement. If holders of ADSs do not agree with an amendment to the deposit agreement, their choices will be limited to selling the ADSs or withdrawing the underlying shares of our common stock. No assurance can be given that a sale of ADSs could be made at a price satisfactory to the holder in such circumstances.

We are incorporated in Japan, and it may be more difficult to enforce judgments obtained in courts outside Japan.

We are incorporated in Japan as a joint stock corporation with limited liability. Most of our directors arenon-U.S. residents, and a substantial portion of our assets and the personal assets of our directors and corporate executive officers are located outside the United States. As a result, when compared to a U.S. company, it may be more difficult for investors to effect service of process in the United States upon us or to enforce against us, our directors or executive officers, judgments obtained in U.S. courts predicated upon civil liability provisions of the federal or state securities laws of the U.S. or similar judgments obtained in other courts outside Japan. There is doubt as to the enforceability in Japanese courts, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon the federal and state securities laws of the United States.

Our shareholders of record on a given record date may not receive the dividend they anticipate.

The customary dividend payout practice of publicly listed companies in Japan may significantly differ from that widely followed or otherwise deemed necessary or fair in foreign markets. We may ultimately determine any dividend payment amount to our shareholders of record as of a record date, including whether we will make any dividend payment to such shareholders at all, only after such record date. For that reason, our shareholders of record on a given record date may not receive the dividends they anticipate.

Dividend payments and the amount you may realize upon a sale of shares of our common stock or ADSs that you hold will be affected by fluctuations in the exchange rate between the U.S. dollar and the Japanese yen.

Cash dividends, if any, in respect of the shares of our common stock represented by our ADSs will be paid to the depositary in Japanese yen and then converted by the depositary into U.S. dollars, subject to certain conditions. Accordingly, fluctuations in the exchange rate between the Japanese yen and the U.S. dollar will

affect, among other things, the amounts a holder of ADSs will receive from the depositary in respect of dividends, the U.S. dollar value of the proceeds that a holder of ADSs would receive upon sale in Japan of the shares of our common stock obtained upon surrender of ADSs and the secondary market price of ADSs. Such fluctuations will also affect the U.S. dollar value of dividends and sales proceeds received by holders of shares of our common stock.

Daily price range limitations imposed by the Tokyo Stock Exchange may prevent you from selling shares of our common stock at a particular price on a particular trading day, or at all.

Share prices on the Tokyo Stock Exchange are determined on a real-time basis by the balance between bids and offers. The Tokyo Stock Exchange is an order-driven market without specialists or market makers to guide price formation. To prevent excessive volatility, the Tokyo Stock Exchange sets daily upward and

downward price range limitations for each listed stock based on the previous day’s closing price or any “special quote,” a price indicated by the Tokyo Stock Exchange to notify investors that there are orders beyond such price that may result in a large price fluctuation. Although transactions may continue at the upward or downward limit price if the limit is reached on a particular trading day, no transactions may take place outside these limits. Consequently, an investor wishing to sell shares of our common stock at a price above or below the relevant daily limit may not be able to effect a sale at such price on a particular trading day, or at all.

Investors holding less than a full “unit” of shares will have limited rights as shareholders.

Our articles of incorporation provide that 100 shares of our common stock constitute one “unit.” As a result of the unit share system, ADS holders will only be permitted to surrender ADSs and withdraw underlying shares of our common stock constituting whole units. The Companies Act imposes significant restrictions and limitations on holders of shares of our common stock that do not constitute a whole unit. In general, holders of shares of our common stock constituting less than one unit do not have the right to vote with respect to those shares. For further discussion of the unit share system and its effect on the rights of our shareholders, see “Item 10.B. Memorandum and Articles of Association.”

We were established in Japan in September 2000 as Hangame Japan Corporation, a joint-stock corporation, and subsequently changed our name to NHN Japan Corporation in August 2003. We began as an online game company and engaged in the development and distribution of online games under the Hangame brand. We subsequently expanded our business to portal services and acquired livedoor Co., Ltd., a Japanese internet portal company, in May 2010.

In June 2011, we launched the LINE messaging application to the public in Japan, followed by launches in other Asian countries. We initially focused on building our user base in Japan, but shortly afterwards began to actively conduct marketing efforts in other parts of Asia, where we believed there was significant market potential based on the relatively low level of smartphone penetration in a relatively large and growing population size. In order to more effectively pursue global expansion outside of Japan, we incorporated LINE Plus Corporation, which provides salesmarketing and marketingsales services for the LINE platform outside of Japan, in Korea in February 2013.

In February 2013, our board of directors decided to focus our business on the operation and expansion of the LINE platform and to dispose of our Hangame business along with related entities. We disposed of all of our interest in the Hangame business along with related entities in the form of anon-cash dividend to NAVER Corporation in April 2013. In April 2013, we were renamed as LINE Corporation. In September 2013, our board of directors approved a plan to dispose of our online match-making services business for the same reason. The disposition was completed in December 2013 through a sale to an unrelated third party. In September 2014, as a

part of our continued focus on the expansion of the LINE platform, our board of directors decided to dispose of our data management business, which consisted of DataHotel Co., Ltd., a wholly-owned subsidiary, and the data management business was subsequently sold to a subsidiary of NHN Entertainment Corporation, a Korean online game portal company that was spun off from NAVER Corporation in August 2013.

In July 2016, we completed our initial public offering and listed our common stock on the First Section of the Tokyo Stock Exchange under the securities identification code 3938 and our ADSs, each representing one share of our common stock, on the New York Stock Exchange under the ticker symbol “LN.”

Our legal and commercial name is LINE Corporation. Our principal executive offices are located at JR Shinjuku Miraina Tower, 23rd Floor,4-1-6 Shinjuku,Shinjuku-ku, Tokyo,160-0022, Japan, and our telephone number is+81-3-4316-2000. Our English website address ishttp://linecorp.com/en/.

The SEC maintains a web site (http://www.sec.gov), which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Our Mission and Vision

Our mission is “Closing the Distance” by bringing people closer to each other as well as to a wide variety of information and services.

Our vision is to become the “smart portal” through which users can access the people, information, services, companies and brands that they choose, from anywhere they are and anytime they need to.

Overview

We are a leading global platform for mobile messaging and communication services, content distribution and services related to daily life.life and financial services. Our mobile messaging application, which is the foundation of our “messaging services” and operates on all major mobile operating systems, enables our users to communicate through free instant messaging, Stickers and voice and video calls and serves as a smart portal to our other applications and services. We provide users with access to a wide range of social and interactivecreative content and services that satisfy our users’ individual needs for access to information and entertainment such as mobile games and music through our “content services,” as well as connected solutions that aim to satisfy increasingly sophisticatedday-to-day needs of LINE users and further enhance their life and financial welfare, including fintech services such as mobile payment and other financial services and job posting, restaurant reservation and taxi booking services,offered on the LINE platform, through our “life and financial services.” We believe that the integration on our LINE platform of content and services offers our users a convenient way to connect and have fun with their family and friends, explore and share their interests and satisfy their daily needs with greater ease, which we believe enriches the user experience and ultimately contributes to higher user loyalty, while creating value for advertisers by connecting them with their target audience using the LINE platform.

We believe LINE is the leading mobile messaging application in Japan, TaiwanThailand and ThailandTaiwan in terms of number of users, and we have obtained substantial numbers of users in other parts of Asia, including

Indonesia. We have achieved this growth through active marketing of LINE as well as customizing our content offerings to suit local preferences and needs. We believe the scale and growth of our user base in many countries provide us with powerful network effects, whereby LINE becomes more valuable with more users and creates additional incentives for existing users to encourage new users to join and to stay connected to their circle of friends. We benefit from such network effects where more activity on LINE leads to the creation and distribution of more content, which in turn attracts more users, platform partners and advertisers. We will continue to invest in new products and services and enhancements to our existing products and services, with the goal of further expanding our user base and increasing user engagement.

At the heart of our platform is the LINE mobile messaging application, which enables users to communicate with family, friends and other people they care about in the following ways:

Our user engagement is driven by such communication being coupled with activities that are an indispensable part of users’ daily lives. LINE has evolved into an extensive platform that provides not only the ability to communicate but also access to a wide range of localized entertainment content and services related to daily life, such as games, video, music camera and news applications, offering our users richer experiences. With an increasing amount of activity on the internet being conducted through mobile applications, we believe that LINE provides a fast, versatile and user-friendly platform for the discovery of content and services in the mobile era. Our broad array of mobile services, combined with our large and highly engaged user base, gives us unique opportunities to offer greater personalization in terms of the service and content offerings by introducing a range of application settings.

In recent years, we have focused our business strategy on developing and strengthening our capabilities in AI, and we launched our AI platform called Clova in March 2017. Leveraging on the strengths of our messaging technology, a wide array of products and services offered on the LINE platform, as well as the big data accumulated from the provision of such services, we have created a next-generation AI platform that enables voice interfaces to process a wide range of real-world inputs and deliver our products and services in a coherent and optimized manner. Through smart speakers launched in the fourth quarter of 2017, our users carry out a natural conversation with Clova in engaging in a wide range of products and services offered by us and other third-party service providers, including access to weather and news, connecting to LINE MUSIC, reading and sending LINE messages and utilizing their smart speaker as an infrared remote controller for TVs or as lighting equipment. We plan to pursue collaboration opportunities with third parties to develop additional content services as well as life services to be offered on the Clova ecosystem that are designed to further enrich our users’ daily lives.

We believe that our user base provides attractive marketing opportunities for our advertisers. We provide a variety of targeted and interactive marketing solutions that enableallow advertisers to promote their brandspost “display ads” (previously known as “performance ads”) on our various communication and amplify their visibility and reach. We offercontent offerings based on a wide variety of “messenger ads” or user-initiated advertising solutions that are offered through the LINE messaging application, such as Official Accounts, Sponsored Stickers and LINE Point Ads, allowing advertisers to direct their efforts and communication in a more targeted manner. In 2016, we also launched a newbid-based advertisement distribution system with data analytics capabilities designed to help advertisers better reach their target audience. We also offer impression-based “performancea wide variety of “account ads” (previously known as “messenger ads”) through the LINE messaging application, such as Official Accounts and Sponsored Stickers, allowing advertisers to direct their efforts and communication in a more targeted manner.

In recent years, we have focused our strategy on exploring a variety of new business opportunities related to fintech. Some of our recent fintech-related activities include, among others, expansion of services available to our users through LINE Timeline Ads,Pay, pursuit of alliances with reputable players in the financial services industry to offer new services related to insurance, online securities brokerage, consumer loans and internet banking on the LINE NEWS Adsplatform, as well as the launch of BITBOX, our virtual currency exchange in Singapore. Although most of these ventures are still in the early stages of operation, we believe that they have the potential to contribute to our operating results over the medium- to long-term, and we plan to continue to selectively pursue investment opportunities that we believe would further enhance our capabilities in the financial industry domain.

We are also continuing to focus our research and development efforts on emerging technologies, including AI and blockchain. Since the launch of our next-generation AI platform called LINE Clova in March 2017, we have continued to develop and strengthen our capabilities in AI. Through a series of LINE Clova-integrated smart speakers launched starting in October 2017, our users carry out a natural conversation with LINE Clova in engaging in a wide range of products and services offered by us and other advertisementsthird-party service

providers. We are currently also pursuing business opportunities related to blockchain, including the launch of LINK, the base digital token for our blockchain ecosystem.

Prior to and during our fiscal year ended December 31, 2017, we had a single reportable segment. On January 31, 2018, our board of directors approved the establishment of two reportable segments, consisting of our “core business” segment and our “strategic business” segment, in response to the expansion of our business and evolution of our business strategy.

Our reportable segments currently consist of:

Our Products and Services

We offer a wide range of products and services, and we generate revenues in a variety of ways and from various participants active on the LINE platform.

Communication and ContentCore Business Segment

In our core business segment, we plan to continue to promote user engagement on the LINE platform for mobile messaging and communications services in our four key countries of Japan, Taiwan, Thailand and Indonesia. Leveraging on such engagement, we have recorded revenue growth and positive operating margins in recent years by offering a wide range of advertising products and services as well as communication and content products and services on our LINE platform. We anticipate continued steady growth in the proportion of total advertising spending by advertisers in our key markets that are directed to digital advertising.We will continue to invest selectively in initiatives to enhance and broaden the range of communication and content products and services that we offer, which we believe will contribute to our overall growth.

Advertising

LINE offers targeted and interactive marketing products and services that provide advertisers with an attractive advertising platform. We recently completed a series of enhancements to various functionalities of our display ads platform, which we believe would lead to improved operational capabilities, upgraded targeting technology and enhanced user experience. We have also implemented modified pricing models for our account ads, which provide more attractive pricing options for both existing and new advertisers. Through such initiatives, we intend to improve our ability to deliver targeted and creative advertising products and services that are more tailored to our users’ evolving engagement on the LINE platform and enable advertisers to more effectively promote their brands and amplify their visibility and reach.

Our advertising products and services consist primarily of the following:

Display Advertising

We offer “display ads” (previously known as “performance ads”), which enable advertisers to display their advertisements to a large number of viewers on our various communication and content offerings, leveraging our large user base and data analytics capabilities. Our display ads are sold through a bid-based cost per mille (or cost per thousand) impressions (“CPM”) or cost per click (“CPC”) pricing model, depending on the type of advertisement, and our advertisers pay for qualifying impressions or click-through volume. We believe that our ability to help advertisers better target relevant users will steadily grow over time as we accumulate greater amounts of user data about their engagement activities on the LINE platform. Our display ads include:

Account Advertising

We also offer a wide variety of “account ads” (previously known as “messenger ads”) that are offered through the LINE messaging application, allowing advertisers to direct their efforts and communication in a more targeted manner. Our account ads include:

Outside of Japan, we currently charge our customers a monthly fee based on a number of factors, such as the contract period and the number of times messages are to be sent to users, among others. In Japan, we currently charge our customers based on a pay-as-you-go system pursuant to the implementation of a modified pricing model adopted in December 2018.

Other Advertising

Some of the other types of advertising products and services we offer include the following:

Communication, Content and Others

Communication

LINE enables our users to enjoy free instant messaging and voice and video calls with each other using their mobile devices (including smartphones and tablets) or personal computers through mobile networks and internet service providers, as well aslow-cost voice over internet protocol (“VoIP”) services for domestic and international calls to mobile and fixed-line phone users globally.

Our messaging application and related products and services offered on the LINE platform provide our users with a convenient and fun communication experience and include the following:

Users can also design their own Stickers to be sold on LINE Creators Market through LINE Store, our web store accessible from mobile devices and personal computers. In June 2017, we also launched the LINE Creators Studio application that enables our users to more easily create Stickers

using digital photos stored on their mobile devices, as well as user-generated drawings and writings. After a review process and subject to our approval, user-designed Stickers become available for sale on LINE Creators Market, and once purchased, become available for use on the LINE messaging application. Users receive a portion of the balance of sales proceeds as license fees after deducting fees charged by payment processors.

Content

LINE serves as a content platform for various applications for our users, offering users a wide range of entertainment and other useful and interactive tools. Such applications include:

We actively maintain the quality of games introduced on the LINE platform to promote an engaging experience for our users and enhance their overall satisfaction with LINE. To grow our inventory of high-quality games, we continually seek to enhance ourin-house game development capability as well as pursue a variety of partnerships, including in the form of

equity investments in game developers. For example, we are currently collaborating with Nintendo Co., Ltd., a video game company headquartered in Japan, and NHN Entertainment Corporation, a developer, publisher and distributor of mobile and computer games in Korea, toco-develop and jointly operate a new mobile game. In the past, we published most of the games developed by third-party game developers in the markets we serve on anon-exclusive basis. However, our general policy when

offering new games on the LINE platform is to enter into new contractual arrangements with third-party game developers to become the exclusive distributor of their games in a particular market. The selection of game titles and pricing ofin-game purchase items vary by country subject to local preferences and licensing arrangements for third party-owned intellectual property, and we adjust our portfolio of games from time to time to meet our users’ evolving preferences.

In order to more effectively respond to rapidly changing game industry trends, we have begun devoting additional resources to enhance our game development and publishing capabilities. In June 2017, we established a wholly-owned subsidiary in Korea dedicated to game development and publishing called LINE Games Corporation. In July 2017, LINE Games Corporation acquired a 51.0% interest in NextFloor Corporation. NextFloor Corporation is a leading mobile game development company with a solid track record for launching major mobile games, including Destiny Child and Dragon Flight. As of December 31, 2017, NextFloor Corporation has published or developed ten games that are distributed through Apple App Store and Google Play.

In July 2018, we entered into an alliance with NAVER WEBTOON Corporation (“NAVER WEBTOON”), Korea’s leadinge-comics provider, to establish LINE Digital Frontier Corporation (“LINE Digital Frontier”), in which we hold a 70.0% interest, with NAVER WEBTOON holding the remainder of the interest in LINE Digital Frontier. Through the joint venture, we aim to leverage NAVER WEBTOON’s technical expertise in the development, publishing and distribution ofe-comics on LINE Manga.

Others

Our other sources of revenue include, among others, royalty and Weather (weather forecast service).

Performance AdsAI

We

Blockchain

e-commerce

Investments by LINE Financial

Payment Mechanism for Our Users

Users of LINE and other applications offered on the LINE platform purchase products such as Stickers,in-game items or otherin-app items primarily through the payment processing systems established by Google Play for Android-based smartphones and Apple App Store foriOS-based smartphones and Google Play for Android-based smartphones, for which such payment processing systems charge transaction fees based on a fixed percentage of the price paid by users. In addition, users ofiOS- and Android-based smartphones may use LINE Coins as virtual credits for purchase of products and services on the LINE platform. Users may acquire LINE Coins, either by purchasing LINE Coins through their respective payment systems or converting their LINE Points into LINE Coins. We supplement such payment options with LINE Store, our web store accessible from mobile devices and personal computers, where users in select countries have the option to pay with prepaid cards or credit cards or through direct mobile billing that adds the purchase amount to their monthly phone bill. As part of our efforts to diversify payment options available for LINE users, we launched LINE Pay, our mobile payment service application, in December 2014.

Building and Maintaining User Trust

We strive to create products and services that are safe, secure and easy to use. We dedicate significant resources to the goal of building user trust through developing and implementing programs designed to protect user privacy, promote a safe online environment and assure the security of user data.

Privacy and Sharing

People come to LINE to communicate and share their experience with friends. Protecting user privacy is a critical consideration in our product and service development process. Our objective is to give users control over what they share and with whom they share. Our efforts regarding user privacy are fundamental to our business and are focused on assuring control, transparency and accountability as follows:

Safety

We generally design our products and services to include safety tools. To communicate directly with other LINE users, each user has the option to register a “LINE ID” to allow other users to find such user through a LINE ID search. Each user may choose whether his or her account is visible to other users’ LINE ID searches. We also cooperate regularly with mobile network providers and educators as well as law enforcement officers to promote proper and legal use of the LINE platform.

Security

We invest in technology, processes and people as part of our commitment to safeguarding our users’ personal information. We use both third-party developed and proprietary technologies to protect our users, including an intrusion detection system to protect the data entrusted to us, and we rely on multiple layers of network segregation using firewalls to protect against attacks or unauthorized access. Our security team actively scans for security vulnerabilities using commercial tools, penetration tests, code security reviews and internal and external audits. Our internal policy is to implement protective measures to safeguard user information, and we have acquired international certifications in both information security and privacy. Upon the occurrence of a cyber-attack or unauthorized access, we take remedial measures to prevent the recurrence of such incidents in the future by collecting and analyzing threat intelligence related to the incident, enhancing authentication mechanisms and access controls on our servers, and developing and deploying additional malware detection and prevention systems.

SalesMarketing and MarketingSales

The LINE user community has grown with users inviting their personal contacts to connect with them, supported by our internal efforts to stimulate user awareness and interest, such as advertising and marketing campaigns on television and the internet. As we seek to increase our global footprint, we engage in active advertising and promotional campaigns to build our brand and further expand our user base.

We utilize television commercials and internet and mobile advertising as well as product placements in television shows often targeting younger generation users. Primarilyas our primary advertising channels, and we continually assess the effectiveness of such channels to increase our brand recognition,ensure that we continue to expandutilize the numbers of retail stores and fixed-durationpop-up stores in various markets where shoppers can purchase official LINE merchandise or take photographs with LINE character mascots. We also engage in promotional events and salesmost suitable channel for each of the LINE characters throughvarious types of products and services we aim to promote. For example, we have focused our advertising efforts in recent years on publicizing our new products and services or major updates to our existing products or services, with a particular focus on our LINE Friends stores.Pay service. Our marketing expenses were ¥16,596 million in 2015, ¥11,833 million in 2016, and ¥15,477 million in 2017 and ¥20,311 million in 2018, excluding personnel-related costs of our marketing staff. While we believe that our ability to grow through network effects associated with the LINE platform will be fundamental to our growth in global markets, we expect to continue to invest significantly in marketing and promotional activities to further promote such growth.

We also focus on attracting and retaining advertisers. In Japan, we operate a dedicated sales force focused on providing support to advertisers throughout the stages of the advertising campaign cycle, frompre-purchase decision making to post-campaign analytics. Our direct sales activities are supplemented by third-party agencies that primarily assist with attracting large businesses that may be interested in creating Official Accounts, as well as application developers that may be interested in marketing their applications. We also invest

in customer support for our users, platform partners and advertisers, and we regularly host conferences and other events to promote our products and services to platform partners and advertisers. Outside of Japan, we engage in global sales and marketing activities through LINE Plus Corporation. LINE Plus Corporation develops marketing strategies for potential advertisers and regularly works with third-party agencies to promote advertising opportunities with LINE.

Technology

We have assembled a team of highly skilled engineers and computer scientists whose expertise spans a broad range of technical areas. We have made significant investments in scalable infrastructure to support large-scale, real-time messaging systems, data management and analysisanalytics technologies, advertising technology, game development and publishing technologies and voice and video call quality solutions. In recent years, we have invested significant time and resources in developing and strengthening our capabilities in artificial intelligence.fintech, AI and blockchain technology.

Scalable Infrastructure to Support Large-Scale Real-Time Messaging Systems

Our products and services are built on distributed computing architecture. We use a combination ofoff-the-shelf and custom software running on clusters of commodity computers to amass substantial computing capability. We intend to continue to develop server infrastructure that is operationally efficient, scalable and reliable, which is designed to do the following:

Our infrastructure enables the storage and processing of large datasets and deployment of our products and services to our users on a global basis. As our user base grows and the level of engagement and activities on our platform continues to increase in tandem with our introduction of new products and services, we will continue to expand our computing infrastructure to sustain and further improve our operating efficiency and to provide our products and services quickly and reliably to all users around the world. Our core messaging system enables real-time processing of a large amount of user traffic and serves as the basis for our LINE platform operations by delivering messagesoperations. Likewise, our scalable server infrastructure allows us to quickly ramp up capacity as wellwe launch new products and services, including those that deploy increasingly sophisticated functionalities, such as other content generated from LINE Games and other applications offered on the LINE platform on a real-time basis.our new fintech-related applications.

Data Management and Analytics Technologies

In order to provide each user with a personalized LINE experience, we process and analyze a vast and growing amount of content shared by our users, developers and advertisers. Accordingly, we have invested in developing technologies and analytics in areas including the following:

Advertising Technology

We offer advertisers a powerful medium through which they can reach our large user base in a targeted manner using our array of advertising products and services. Our advertising technology enables millions of relevant, targeted advertisements to be viewed simultaneously based on content a user views on our platforms. The key elements of our advertising technology include:

Voice and Video Call Quality Solutions

We believe that audio and video quality is critical to the enjoyment of the LINE experience, and we have made significant engineering and development efforts to improve our audio and video quality. Key areas of our investments include the following:

Game Development and Publishing Technologies

In order to continue to develop and publish successful games, we have invested in developing technologies designed to allow us to monetize games throughin-game purchases, while providing players with an exciting experience. Areas of investment include:

Artificial IntelligenceAI Technology

In March 2017, we launched LINE Clova, a next-generation AI platform designed to enrich our users’ daily lives by integrating a wide array of advanced technologies based on human senses, such as voice recognition, artificial neural network and interactive engine systems. We believe that the creation of aone-stop LINE Clova ecosystem will provide a solid foundation for the delivery of our products and services in the foreseeable future. Accordingly, we plan to continue to expend significant time and resources in strengthening our capabilities in artificial intelligence. We expect that keyAI. Key areas of our investments will include:include the following:

Blockchain Technology

In August 2018, we launched LINK, the base digital token for our blockchain ecosystem, and we are currently in the process of developing and launching a variety of dApps to be offered in our blockchain ecosystem. The operation of our blockchain ecosystem, built upon the circulation of LINK as the main currency, is powered by LINK Chain, our own brand of blockchain infrastructure that consists of decentralized, distributed digital ledgers of economic transactions made in cryptocurrencies and maintained on apeer-to-peer network. We believe that LINK Chain, given its resistance to manipulation of data and other technological benefits, provides a solid foundation for the growth of our blockchain ecosystem, and as such, plan to continue to expend a significant amount of resources in strengthening our capabilities in blockchain-related technologies. Key areas of our investments include the following:

Competition

We compete against various companies to attract and engage users, some of which have greater financial resources and substantially larger user bases. We face direct competition from other mobile messaging service providers such as Facebook’s WhatsApp and Messenger and Tencent’s WeChat, Snapchat, Telegram Messenger and Blackberry Messenger, as well as mobile messaging services for specific operating platforms such as Apple’s iMessage. We also face significant competition in almost every aspect of our business, including from companies such as Facebook, Google, Twitter and Yahoo Japan and Snap, which offer a variety of social network services and products as well as online advertising services.Japan.

We face competition from game companies, mobile telecommunications companies,e-commerce game companies, music and video streaming companies, mobile payment companies, fintech companies, AI companies,e-commerce companies and other internet-related companies that offer products and services that may compete with specific features of the LINE messaging service or other applications that we offer. We also compete with traditional and online media businesses for a share of advertisers’ budgets and in the development of tools and systems for managing and optimizing advertising campaigns. As we introduce new products and our existing products evolve, or as other companies introduce new products and services, we may become subject to additional competition.

The key areas in which we compete include:

•

Personnel. We experience significant competition for highly skilled personnel, including senior management, engineers, designers, product managers and product managers.professionals with expertise in the fintech, AI and blockchain technology domains. Our growth strategy depends in part on our ability to retain our existing personnel and recruit highly skilled employees. Competition for highly skilled personnel is intense, particularly in Japan where our headquarters is located, and we compete for qualified personnel with online and mobile businesses, other companies in the technology industry and traditional media businesses. We believe that our ability to compete effectively for highly skilled personnel depends on many factors, including a work environment that encourages independence, creativity and innovation; opportunities to work on challenging, meaningful and important products; and compensation.

Regulation

We are subject to a number of Japanese and other foreign laws and regulations that affect companies conducting business on the internet, many of which are still evolving and being, or have not yet been, tested in courts, and could be interpreted in ways that could harm our business. These may involve user privacy, rights of publicity, data protection, telecommunications, liability of providers of online services for activities of their users

and other third parties, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation and online payment services. Because our services are accessible worldwide in a variety of countries, certain jurisdictions may claim that we are required to comply with their laws, including even jurisdictions where we have no local entity, employees or infrastructure.

Regulations regarding Privacy and Protection of Personal Information and User Data

We are subject to laws and regulations, as well as pending legislative and regulatory proposals, regarding privacy and protection of user data and personal information, which could affect us in many jurisdictions throughout the world. The application and interpretation of these and other similar international laws and regulations concerning data protection and personal information is often uncertain, particularly in the new and rapidly evolving industry in which we operate, and in certain countries where the scope and interpretation of such laws and their application to the internet is in a state of flux. There is a risk that such laws may be interpreted and applied in conflicting ways in different states, countries, or regions, and in a manner that is not consistent with our current data protection practices. There also may be limited precedent in certain jurisdictions with regard to enforcement or interpretation of these laws.

In Japan, the Act on the Protection of Personal Information and its related guidelines impose various requirements on businesses, including us, that use databases containing personal information. Under this Act, we are required to lawfully use personal information we have obtained within the purpose of use we have specified and take appropriate measures to maintain security of such information. We are also restricted from providing personal information to third parties. An amendment to this Act was put into full effect on May 30, 2017. This amendment includes establishment of a new regulatory authority and introduction of new regulation on handling of anonymous personal data and transfer of personal information to foreign countries.

Privacy Policies

We post a privacy policy and terms of service with our applications, in which we describe our practices concerning the use, processing and disclosure of user data. Any failure by us to comply with our posted privacy policy or privacy related laws and regulations could result in proceedings against us by governmental authorities or others, which could harm our business. Our compliance with our privacy policy may be subject to regulation by governmental agencies in various jurisdictions. For example, the U.S. Federal Trade Commission may bring enforcement actions against unfair and deceptive trade practices, including the violation of privacy policies, and European authorities may take actions against violations of privacy policies as well.

Regulations of Telecommunications and Portal Businesses

The Telecommunications Business Act of Japan (the “Telecommunications Business Act”) generally requires that those who plan to provide telecommunications services be registered as telecommunications business operators. However, as long as the scale of the telecommunications circuit facilities to be installed for the telecommunication services and the scope of service area to be covered do not exceed certain thresholds set forth in an ordinance of the Ministry of Internal Affairs and Communications of Japan, or fall within a certain category of radio facilities, submission of a notice to the Minister of Internal Affairs and Communications of Japan, rather than registration, is required. We believe that our facilities and services do not exceed such thresholds, and we are subject to notification requirements.Although it is not expressly clear, we believe that our telecommunications service related to LINE Out is not subject to the Telecommunications Business Act since it is provided by LINE Plus Corporation, an overseas entity.

As a telecommunications business operator, we are prohibited from acquiring, using without permission, or leaking private communications (including, but not limited to, the contents of communications, the dates and places of the communications, the names and addresses, telephone numbers and IP addresses). The Telecommunications Business Act also requires a telecommunications business operator to, among other things,

provide its service in a fair manner and, in certain emergency situations such as a natural disaster, prioritize important public communications. If, among other things, the acquisition, use without permission or leakage of private communications occurs or is not appropriately prevented in connection with the operation of the telecommunications business, a telecommunications business operator does not satisfy the foregoing requirements, or its business operation is otherwise inappropriate or unreasonable, such telecommunications business operator may be subjected to administrative or criminal sanctions.

The Provider Liability Limitation Act of Japan regulates a provider of communications services (the “specified communications services provider”) that circulates electronic information publicly through the internet, and our portal services are subject to such regulations. While this act limits the scope of liability of a specified telecommunications services provider that will be incurred when anyone’s rights are infringed upon as a result of the circulation of electronic information in connection with its communications services, it requires a specified communications services provider to disclose certain information related to those who engage in such infringement.

Payment Services Regulations

The Payment Services Act regulates prepaid payment instruments such as the prepaid cards and virtual currencies that we sell in Japan. Because we issue such prepaid instruments, we must comply with certain requirements, including an obligation to deposit or enter into certain guarantee or trust agreements for at least 50% of the total amount of unused amounts or credits represented by the instruments issued as of the end of either the first or third quarter of any year, if such total amount is more than ¥10 million; an obligation to refund any remaining amount of money or virtual currencies issued, after providing at least 60 days’ prior public notice, if we stop selling prepaid cards or virtual currencies, and general restrictions on refunds in other situations; and an obligation to secure any private information obtained in connection with our prepaid cards and virtual currencies. We may be subjected to administrative or criminal sanctions if we fail to fulfill such obligations.

We must also register with the director of the competent local finance bureau of the Ministry of Finance if our prepaid payment instruments can be used to purchase goods or services that are offered not only by ourselves or other closely related parties, including our affiliates, but also by third parties. We issue such instruments, and we are registered with the Director of the KLFB. The Director is authorized to issue a business improvement order or business suspension order, or cancel our registration if we fail to comply with such regulations.

The Payment Services Act also regulates funds transfer services. As our service allows our users to remit funds to each other or withdraw or deposit cash at convenience stores, ATMs or through internet banking,

in each case up to ¥1 million, by linking their accounts at select banks, we are required to register and have registered with the Director of the KLFB. We must also comply with certain other requirements, including an obligation to deposit or enter into certain credit guarantee or trust agreements for the greater of ¥10 million or the full amount of our outstanding obligations as service provider payable to transferees in Japan plus the costs associated with exercise of their rights as creditors of our funds transfer service. The Director of the KLFB is authorized to issue a business improvement order, a business suspension order or cancel our registration if we fail to comply with such regulations.

As a result of a recent amendment to the Banking Act of Japan (the “Banking Act”), providers of Electronic Settlement Services (as defined under the Banking Act) are subject to the Banking Act starting on June 1, 2018. Any business operator which, upon entrustment from customers (such as depositors), acquires information from banks concerning deposit accounts and provides such information to customers through an application programming interface (“API”) provided by such banks needs to be registered with the competent local finance bureau of the Ministry of Finance as an Electronic Settlement Agent (as defined under the Banking Act). We are registered as an Electronic Settlement Agent in connection with our LINE Kakeibo service. An Electronic Settlement Agent is also required to enter into contracts with banks in connection with the use of APIs

by no later than May 31, 2020. Such contracts must include, among others, provisions relating to the allocation of liability for any loss or damage that may arise in connection with Electronic Settlement Services. Furthermore, an Electronic Settlement Agent is required to provide its customers with certain important information relating to the applicable Electronic Settlement Service, including policies regarding compensation for loss or damage suffered by customers. The FSA has the authority to issue a business improvement order or a business suspension order, or cancel our registration if we fail to comply with such regulations.

Various laws and regulations in the United States, such as the Bank Secrecy Act, the Dodd-Frank Act, the USA Patriot Act, and the Credit Card Act, impose certain anti-money laundering requirements on companies that are financial institutions or that provide financial products and services. Under these laws and regulations, financial institutions are broadly defined to include money services businesses such as money transmitters, check cashers, and sellers or issuers of stored value. Requirements imposed on financial institutions under these laws include customer identification and verification programs, record retention policies and procedures and transaction reporting. We do not believe that we are a financial institution subject to these laws and regulations. However, it is possible that payments and other transactions on the LINE platform could deem us a financial institution subject to applicable U.S., state or foreign regulations.

Regulations on Advertising

The Premiums and Representations Act of Japan stipulates the restricted methods and means of various advertisements, representations and sales promotions, in a broad sense. When we advertise our products or services, such as games, on the internet, we must provide appropriate information under this Act, so as not to mislead our users.

In addition, regulations promulgated under the Premiums and Representations Act of Japan prohibit the inclusion in our games of certain mechanisms that are considered to excessively promotein-game purchases. These mechanisms typically feature a system in which users may pay for the chance to win anin-game item by random selection from different items, with certain combinations of items won providing users with special premiumin-game items.

Regulations to Protect Minors

The Act on Establishment of Enhanced Environment for Youths’ Safe and Secure Internet Use of Japan regulates an administrator of servers publicly accessible through the internet (the “specified server administrator”), aiming to protect youths under the age of eighteen. Under this act, if the specified server administrator learns of any situation where harmful information that materially impairs the sound growth of youths has been provided, or it makes such information available to the public through the internet by the use of its servers, it will be required to make efforts to take measures to prevent youths from accessing such information. The specified server administrator is also required to make efforts to establish a system to receive information or inquiries from the public regarding any harmful information it sends, and to prepare and keep records of any measures that it has taken to prevent underage access to harmful information.

The Act on Regulation on Soliciting Children by Using Opposite Sex Introducing Service on Internet of Japan requires that those who operate an opposite sex introduction service through the internet submit a notification to the Public Safety Commission, and strive to take certain actions to prevent sexual offenses against children conducted through an opposite sex introduction service through the internet. Although we believe that none of our products or services fall within the definition of an “opposite sex introduction service,” it is not expressly clear whether our interpretation is correct. In the event that any regulatory authority or court adopts a different interpretation, we may become subject to the regulations applicable to opposite sex introduction services under this Act, including the administrative or criminal sanctions thereunder.

Regulations on Money Lending Businesses

The Money Lending Business Act of Japan (the “Money Lending Act”) governs the operation of money lending businesses. In accordance with the Money Lending Act, and in preparation for the launch of LINE Pocket Money, our loan service, we have registered as a Money Lender (as defined under the Money Lending Act) with the KLFB in December 2018, and are currently subject to certain strict regulations that govern money lending operations. We are supervised by the FSA, which has the authority to review our operations and inspect our records in order to monitor our compliance with the relevant regulations. The FSA is authorized to issue a business improvement order or a business suspension order, or cancel our registration if we fail to comply with the Money Lending Act.

The Money Lending Act requires registered Money Lenders to provide borrowers (and any guarantors) with a written notice of, or an electronic communication containing (subject to the borrowers’ prior consent), the following: (a) the terms and conditions of the loan at the time of, or promptly after, the execution of the loan agreement or any guarantee agreement; and (b) repayment amounts received and the application of those amounts to the principal and interest owed, as well as the customer’s remaining balance, at the time of each repayment. In addition, prior to issuing a loan, registered Money Lenders are required to evaluate, using information available from designated third-party information providers, the borrowers’ ability to repay the principal and interest amounts of the loans. Lending by registered Money Lenders is generally prohibited if an individual borrower’s aggregate amount of outstanding loans from all registered Money Lenders after the extension of an additional loan will exceedone-third of such borrower’s annual income.

Regulations on Financial Instruments Intermediary Businesses

The FIEA governs, and the FSA regulates, the financial instruments intermediary business, such as LINE Smart Invest, our investment management-related service that allows our users to engage in investment services offered by FOLIO, an online investment management company. Such business is conducted solely under entrustment by FOLIO, which is licensed as a financial instruments business operator, and our activities are performed on behalf of FOLIO. Our scope of business is limited to intermediary services and does not extend to brokerage or agency services. In addition, with regard to our financial instruments intermediary service, we are prohibited from receiving deposits of money or securities from customers. The FSA is authorized to require us to file certain reports, and may issue a business improvement order or business suspension order, or cancel our registration if we fail to comply with the relevant regulations.

Regulations on Solicitation Regarding Insurance Policies

Under the Insurance Business Act of Japan (the “Insurance Act”),non-life insurance solicitors, including sales representatives, must be registered with the director of the relevant local finance bureau of the Ministry of Finance. In order to operate LINE Insurance, ournon-life insurance service based on an alliance between LINE Financial and Sompo Japan, LINE Financial has registered with the Director of the KLFB. The Insurance Act prohibits certain solicitation activities or omissions, such as the provision of false notice ornon-disclosure of important matters, and we are required to (i) ascertain the customer’s needs and propose insurance products that are in line with such customer’s needs and (ii) provide customers with information on insurance products and other necessary information during the process of insurance solicitation. The Director of the KLFB is authorized to issue a business improvement order or a business suspension order, or cancel our registration if we fail to comply with such regulations.

The following table sets out the jurisdiction of incorporation and our ownership interests of our significant subsidiaries as of December 31, 2017:2018:

For further details on our subsidiaries, see Note 30 of the notes to our annual consolidated financial statements.

As of December 31, 2017,2018, we had ¥15,125¥24,726 million of property and equipment, which primarily consisted of our servers and networking equipment, and leased office facilities in Japan and other countries, including approximately 19,799 square meters for our corporate headquarters in Tokyo, Japan. In April 2017, we relocated our head offices to a new location in Shinjuku, Tokyo, pursuant to a lease agreement.

Item 4A.

Unresolved Staff Comments

We do not have any unresolved comments from the Securities and Exchange CommissionSEC staff regarding our periodic reports under the Exchange Act of 1934.Act.

Overview

We are a leading global platform for mobile messaging and communication services, content distribution and services related to daily life.life and financial services. Our mobile messaging application, which is the foundation of our “messaging services” and operates on all major mobile operating systems, enables our users to communicate through free instant messaging, Stickers and voice and video calls and serves as a smart portal to our other applications and services. We provide users with access to a wide range of social and interactivecreative content and services that satisfy our users’ individual needs for access to information and entertainment such as mobile games and music through our “content services,” as well as connected solutions that aim to satisfy increasingly sophisticatedday-to-day needs of LINE users and further enhance their life and financial welfare, including fintech services such as mobile payment and other financial services and job posting, restaurant reservation and taxi booking services,offered on the LINE platform, through our “life and financial services.” We believe that the integration on our LINE platform of content and services offers our users a convenient way to connect and have fun with their family and friends, explore and share their interests and satisfy their daily needs with greater ease, which we believe enriches the user experience and ultimately contributes to higher user loyalty, while creating value for advertisers by connecting them with their target audience using the LINE platform.

We believe LINE is the leading mobile messaging application in Japan, TaiwanThailand and ThailandTaiwan in terms of number of users, and we have obtained substantial numbers of users in other parts of Asia, including Indonesia. We have achieved this growth through active marketing of LINE as well as customizing our content offerings to suit local preferences and needs. We believe the scale and growth of our user base in many countries provide us with powerful network effects, whereby LINE becomes more valuable with more users and creates additional incentives for existing users to encourage new users to join and to stay connected to their circle of friends. We benefit from such network effects where more activity on LINE leads to the creation and distribution of more content, which in turn attracts more users, platform partners and advertisers. We will continue to invest in new products and services and enhancements to our existing products and services, with the goal of further expanding our user base and increasing user engagement.

We generate revenue in a variety of ways and from various participants active on our global platform. Our revenues are primarily generated from our advertising products and services, LINE Games and Stickers. While our revenue growth prior to 2016 has been led primarily by LINE Games and Stickers, our revenue growth in 2016, 2017 and 20172018 was primarily driven by our advertising products and services, particularly the growth of our “performance“display ads.” We generated revenues of ¥120,406 million in 2015, ¥140,704 million in 2016, and ¥167,147 million in 2017 and ¥207,182 million in 2018, representing revenue growth of 16.9% from 2015 to 2016 and 18.8% from 2016 to 2017.2017 and 24.0% from 2017 to 2018.

As ofPrior to and during our fiscal year ended December 31, 2017, we had a single reportable segment. On January 31, 2018, our board of directors approved a planthe establishment of two reportable segments, consisting of our “core business” segment and our “strategic business” segment, in response to bifurcate thisthe expansion of our business and evolution of our business strategy.

Our reportable segments currently consist of:

Factors Affecting Our Financial Condition and Results of Operations

Our financial condition and results of operations have been and will continue to be materially affected by a number of factors and developments, some of which are outside of our control, including the following:

User Growth

MAUs are a measure of the size of our active user base. We define MAUs in a given month as the number of user accounts that (i) accessed the LINE messaging application or any LINE Game through mobile devices; (ii) sent messages through the LINE messaging application from personal computers; or (iii) sent messages through any other LINE application from mobile devices, in each case at least once during that month. MAUs for the months indicated were as follows: