NAVER Corporation and Subsidiaries Consolidated Interim Financial Statements September 30, 2019 and 2018

NAVER Corporation and Subsidiaries Index September 30, 2019 and 2018

Page(s)

Report on Review of Interim Financial Statements ·················································· 1 - 2

Consolidated Interim Financial Statements

Consolidated Interim Statements of Financial Position ··················································· 3

Consolidated Interim Statements of Comprehensive Income ··········································· 4 - 5

Consolidated Interim Statements of Changes in Equity ·················································· 6

Consolidated Interim Statements of Cash Flows ··························································· 7

Notes to the Consolidated Interim Financial Statements ················································· 8 - 45

Report on Review of Interim Financial Statements

(English Translation of a Report Originally Issued in Korean)

To the Shareholders and Board of Directors of NAVER Corporation

Reviewed Financial Statements We have reviewed the accompanying consolidated interim financial statements of NAVER Corporation and its subsidiaries (collectively referred to as the “Group”). These financial statements consist of the consolidated interim statement of financial position of the Group as at September 30, 2019, and the related consolidated interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2019 and 2018, and consolidated interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2019 and 2018, and a summary of significant accounting policies and other explanatory notes, expressed in Korean won.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated interim financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”) 1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to issue a report on these consolidated interim financial statements based on our review.

We conducted our review in accordance with quarterly or semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion Based on our review, nothing has come to our attention that causes us to believe the accompanying consolidated interim financial statements are not presented fairly, in all material respects, in accordance with Korean IFRS 1034 Interim Financial Reporting.

Other Matters We have audited the consolidated statement of financial position of the Group as at December 31, 2018, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, in accordance with Korean Standards on Auditing. We expressed an unqualified opinion on those financial statements, not presented herein, in our audit report dated March 11, 2019. The consolidated statement of financial position as at December 31, 2018, presented herein for comparative purposes, is consistent, in all material respects, with the above audited statement of financial position as at December 31, 2018.

Review standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries.

November 14, 2019 Seoul, Korea

This report is effective as at November 14, 2019, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

2 NAVER Corporation and Subsidiaries Consolidated Interim Statements of Financial Position September 30, 2019 and December 31, 2018

(in Korean won) Notes September 30, 2019 December 31, 2018 (Unaudited) Assets Current assets Cash and cash equivalents ₩ 3,254,602,471,212 ₩ 3,322,884,102,567 Short-term financial instruments 590,638,474,268 444,702,261,235 Financial assets at fair value - profit or loss 4 35,056,302,151 230,774,469,760 Trade and other receivables 1,241,328,882,393 1,101,551,045,302 Financial assets at fair value - other comprehensive income 4 51,235,194,141 62,725,505,906 Inventories 74,367,441,746 57,440,292,749 Current tax asset 32,205,125,508 8,044,073,349 Other current assets 217,760,876,692 157,447,835,597 5,497,194,768,111 5,385,569,586,465 Non-current assets Property and equipment 6 1,604,428,888,826 1,457,302,209,262 Right-of-use assets 18 713,769,153,487 - Intangible assets 7 349,999,065,700 306,963,470,197 Long-term financial instruments 24,140,351,166 25,990,573,425 Financial assets at fair value - profit or loss 4 929,400,648,171 553,399,539,414 Trade and other receivables 132,653,625,623 113,160,988,276 Financial assets at fair value - other comprehensive income 4 685,113,275,039 666,651,322,237 Investments in associates and joint ventures 8 1,462,461,374,141 1,001,362,122,331 Deferred tax assets 384,752,785,864 340,178,774,174 Other non-current assets 22,802,808,590 30,612,323,543 6,309,521,976,607 4,495,621,322,859

Total assets ₩ 11,806,716,744,718 ₩ 9,881,190,909,324

Liabilities Current liabilities Trade and other payables ₩ 1,136,843,887,115 ₩ 896,276,258,656 Financial liabilities at fair value - profit or loss 4 489,843,100 7,418,409,882 Short-term borrowings 9 495,050,626,608 349,846,018,275 Current portion of long-term borrowings 9 26,420,981 26,991,114 Current tax payables 147,208,681,072 277,992,093,674 Provisions 11 4,166,074,004 2,462,733,532 Current lease liabilities 18 160,492,598,943 - Other current liabilities 1,399,346,898,512 1,085,649,147,454 3,343,625,030,335 2,619,671,652,587 Non-current liabilities Trade and other payables 29,768,423,745 23,370,588,587 Financial liabilities at fair value - profit or loss 4 3,124,157,364 2,785,234,016 Long-term borrowings 9 100,045,927,751 100,061,591,213 Debentures 9 786,166,130,578 711,561,946,218 Net defined benefit liabilities 10 388,899,958,955 344,780,260,840 Provisions 11 58,136,370,721 42,423,909,342 Non-current lease liabilities 18 572,665,375,887 - Deferred tax liabilities 85,625,943,746 86,244,846,912 Other non-current liabilities 1,142,617,664 1,150,366,316 2,025,574,906,411 1,312,378,743,444 Total liabilities 5,369,199,936,746 3,932,050,396,031 Equity Equity attributable to owners of the Parent Company Share capital 12 16,481,339,500 16,481,339,500 Share premium 12 1,612,329,053,703 1,540,985,517,982 Other components of equity (1,471,648,680,571) (1,546,389,664,299) Retained earnings 5,524,748,471,067 5,229,202,813,045 Non-controlling interest 755,606,624,273 708,860,507,065 Total equity 6,437,516,807,972 5,949,140,513,293

Total liabilities and equity ₩ 11,806,716,744,718 ₩ 9,881,190,909,324

The above consolidated interim statements of financial position should be read in conjunction with the accompanying notes.

3 NAVER Corporation and Subsidiaries Consolidated Interim Statements of Comprehensive Income Three-Month and Nine-Month Periods Ended September 30, 2019 and 2018

Periods Ended Sepetember 30 (in Korean won) Notes 2019 (Unaudited) 2018 (Unaudited) Three months Nine months Three months Nine months

Operating revenues 5 ₩ 1,664,815,000,078 ₩ 4,805,951,774,755 ₩ 1,397,713,834,674 ₩ 4,070,389,652,254

Operating expenses (1,462,728,960,712) (4,269,286,520,955) (1,175,995,432,109) (3,341,107,496,540)

Operating profit 202,086,039,366 536,665,253,800 221,718,402,565 729,282,155,714

Other income 22,051,936,192 92,976,816,962 18,045,330,769 157,744,471,289 Other expenses (42,916,837,307) (98,112,622,368) (39,547,065,364) (87,813,468,997) Interest income 4,288,060,895 12,412,072,518 5,822,399,430 21,933,287,223 Other financial income 51,763,554,894 129,994,911,452 12,211,273,346 103,332,707,430 Finance costs (20,129,016,715) (104,812,913,012) (13,442,216,957) (63,099,375,460) Share of net loss of associates and joint ventures accounted for using the equity method 8 (36,895,428,370) (88,661,080,182) (17,996,611,303) (30,519,338,258)

Profit before income tax 180,248,308,955 480,462,439,170 186,811,512,486 830,860,438,941 Income tax expense 13 (94,820,805,939) (276,574,937,801) (118,416,199,536) (327,816,157,750)

Profit from continuing operations 85,427,503,016 203,887,501,369 68,395,312,950 503,044,281,191

Profit (loss) from discontinued operations 17 (159,449,928) (3,276,692,016) (8,549,042) 852,714,456

Profit for the period ₩ 85,268,053,088 ₩ 200,610,809,353 ₩ 68,386,763,908 ₩ 503,896,995,647

Profit for the period is attributable to: Owners of the Parent Company Profit from continuing operations 125,587,876,883 337,618,054,674 98,977,973,005 527,558,541,264 Profit (loss) from discontinued operations (159,449,928) (3,276,692,016) (8,549,042) 852,714,456 Non-controlling interests (40,160,373,867) (133,730,553,305) (30,582,660,055) (24,514,260,073)

Other comprehensive income Items that may be subsequently reclassified to profit or loss Gain on valuation of debt instruments at fair value - other comprehensive income 479,661,109 991,005,024 348,581,728 2,105,953,536 Exchange differences 80,122,195,171 217,232,613,400 (64,410,538,470) 21,171,962,446 Share of other comprehensive income of associates and joint ventures 8 26,050,438,313 49,961,637,893 (10,053,839,145) 5,997,213,383

4 NAVER Corporation and Subsidiaries Consolidated Interim Statements of Comprehensive Income Three-Month and Nine-Month Periods Ended September 30, 2019 and 2018

Loss on valuation of derivatives for cash flow hedge (424,683,615) (424,683,615) - - Items that will not be reclassified to profit or loss Gain (loss) on valuation of equity instruments at fair value - other (17,046,582,870) 18,401,893,175 2,818,714,731 (12,437,553,513) comprehensive income Gain on disposal of equity instruments at fair value - other 1,000,001 7,494,168,002 155,170,500 269,545,000 comprehensive income Share of other comprehensive income of associates and joint ventures 8 (10,201,703) (896,910) - (8,004,977) Remeasurements of net defined benefit liabilities - (300,554,937) - - Other comprehensive income for the period, net of tax 89,171,826,406 293,355,182,032 (71,141,910,656) 17,099,115,875

Total comprehensive income for the period ₩ 174,439,879,494 ₩ 493,965,991,385 ₩ (2,755,146,748) ₩ 520,996,111,522

Total comprehensive income (loss) for the period is attributable to: Owners of the Parent Company 158,745,690,603 502,475,999,597 57,501,114,576 534,595,388,356 Non-controlling interests 15,694,188,891 (8,510,008,212) (60,256,261,324) (13,599,276,834)

Earnings (losses) per share from continuing and discontinued operations attributable to the equity holders of the Parent Company

Basic earnings (losses) per share From continuing operations ₩ 863 ₩ 2,319 ₩ 677 ₩ 3,607 From discontinued operations (1) (23) - 6

Diluted earnings (losses) per share From continuing operations ₩ 863 ₩ 2,319 ₩ 677 ₩ 3,607 From discontinued operations (1) (23) - 6

The above consolidated interim statements of comprehensive income should be read in conjunction with the accompanying notes.

5 NAVER Corporation and Subsidiaries Consolidated Interim Statements of Changes in Equity Nine-Month Periods Ended September 30, 2019 and 2018

Attributable to owners of the parent company

Other (in Korean won) Notes Share Share Components Retained Non-controlling Total Capital Premium of Equity Earnings Interest Equity

Balance at January 1, 2018 ₩ 16,481,339,500 ₩ 1,507,878,510,842 ₩ (1,317,531,622,681) ₩ 4,555,517,868,323 ₩ 542,840,138,965 ₩ 5,305,186,234,949 Changes in accounting policies - - (64,788,048,920) 55,366,825,496 - (9,421,223,424) Restated total equity at the beginning of the financial year 16,481,339,500 1,507,878,510,842 (1,382,319,671,601) 4,610,884,693,819 542,840,138,965 5,295,765,011,525

Total comprehensive income for the period Profit (loss) for the period - - - 528,411,255,720 (24,514,260,073) 503,896,995,647 Gain on valuation of debt instruments at fair value - other comprehensive income - - 3,732,459,335 - - 3,732,459,335 Loss on valuation of equity instruments at fair value - other comprehensive income - - (9,622,077,097) - (4,441,982,215) (14,064,059,312) Gain on disposal of equity instruments at fair value - other comprehensive income - - 269,545,000 - - 269,545,000 Exchange differences - - 6,654,411,817 - 14,517,550,629 21,171,962,446 Share of other comprehensive income of associates and joint ventures 8 - - 5,157,798,558 (8,004,977) 839,414,825 5,989,208,406 Transactions with owners Dividends - - - (42,469,708,296) - (42,469,708,296) Share-based payment expenses - - - - 11,123,656,725 11,123,656,725 Acquisition of treasury shares - - (124,458,933,570) - - (124,458,933,570) Business combination - - - - 3,023,002,814 3,023,002,814 Share issuance of subsidiaries - 32,579,165,114 (6,298,622,154) - 183,312,544,922 209,593,087,882 Others - 17,254,150,244 - - (14,849,632,520) 2,404,517,724 Balance at September 30, 2018 (Unaudited) ₩ 16,481,339,500 ₩ 1,557,711,826,200 ₩ (1,506,885,089,712) ₩ 5,096,818,236,266 ₩ 711,850,434,072 ₩ 5,875,976,746,326

Balance at January 1, 2019 ₩ 16,481,339,500 ₩ 1,540,985,517,982 ₩ (1,546,389,664,299) ₩ 5,229,202,813,045 ₩ 708,860,507,065 ₩ 5,949,140,513,293 Changes in accounting policies 18 - - - (200,802,631) (71,478,344) (272,280,975) Restated total equity at the beginning of the financial year 16,481,339,500 1,540,985,517,982 (1,546,389,664,299) 5,229,002,010,414 708,789,028,721 5,948,868,232,318

Total comprehensive income for the period Profit (loss) for the period - - - 334,341,362,658 (133,730,553,305) 200,610,809,353 Gain on valuation of debt instruments at fair value - other comprehensive income - - 991,005,024 - - 991,005,024 Gain on valuation of equity instruments at fair value - other comprehensive income - - 16,093,138,686 - 2,308,754,489 18,401,893,175 Gain (loss) on disposal of equity instruments at fair value - other comprehensive income - - (113,872,100) 7,608,040,102 - 7,494,168,002 Exchange differences - - 103,690,878,595 - 113,541,734,805 217,232,613,400 Share of other comprehensive income of associates and joint ventures 8 - - 40,477,615,520 (896,910) 9,484,022,373 49,960,740,983 Remeasurements of net defined benefit liabilities - - - (300,554,937) - (300,554,937) Loss on valuation of derivatives for cash flow hedge - - (310,717,041) - (113,966,574) (424,683,615) Transactions with owners Dividends 14 - - - (45,901,490,260) (18,598,448,410) (64,499,938,670) Share-based payment expenses - - 7,602,260,234 - 12,072,372,905 19,674,633,139 Acquisition of treasury shares 12 - - (93,689,325,190) - - (93,689,325,190) Share issuance of subsidiaries - 70,317,691,288 - - 80,112,713,088 150,430,404,376 Others - 1,025,844,433 - - (18,259,033,819) (17,233,189,386) Balance at September 30, 2019 (Unaudited) ₩ 16,481,339,500 ₩ 1,612,329,053,703 ₩ (1,471,648,680,571) ₩ 5,524,748,471,067 ₩ 755,606,624,273 ₩ 6,437,516,807,972

The above consolidated interim statements of changes in equity should be read in conjunction with the accompanying notes.

6 NAVER Corporation and Subsidiaries Consolidated Interim Statements of Cash Flows Nine-Month Periods Ended September 30, 2019 and 2018

Nine-Month Period Ended September 30 (in Korean won) Notes 2019 2018 (Unaudited) (Unaudited) Cash flows from operating activities Cash generated from operations ₩ 1,283,173,578,098 ₩ 975,165,185,939 Interest received 16,048,484,888 23,825,726,715 Interest paid (26,476,445,496) (10,042,941,608) Dividends received 18,138,412,476 23,841,400,491 Income taxes paid (472,466,728,614) (399,944,028,969) Net cash inflow from operating activities 818,417,301,352 612,845,342,568

Cash flows from investing activities Net decrease (increase) in short-term financial instruments (131,956,858,868) 636,468,077,153 Increase in long-term financial instruments - (22,531,128,467) Decrease in long-term financial instruments - 20,800,000,000 Net decrease (increase) in financial assets at fair value - profit or loss (114,201,062,656) 226,831,090,695 Payments for property and equipment 6 (362,142,698,407) (348,357,272,409) Proceeds from disposal of property and equipment 4,492,482,275 4,466,726,259 Collection of lease receivables 137,795,037 - Payments for intangible assets 7 (78,258,320,200) (24,008,730,489) Proceeds from disposal of intangible assets 2,467,064,709 3,490,293,547 Payments for financial assets at fair value - other comprehensive income (33,900,920,000) (200,376,462,970) Proceeds from disposal of financial assets at fair value - other comprehensive income 80,627,994,795 59,366,356,105 Payments for investments in associates and joint ventures 8 (504,743,022,061) (474,167,598,593) Proceeds from disposal of investments in associates and joint ventures 10,080,061,438 2,399,823,991 Increase in cash due to business combination - 4,275,904,411 Proceeds from disposal of subsidiaries 26,647,955,884 (12,963,629,231) Cash outflows from other investing activities (35,068,541,784) (14,004,264,573) Net cash outflow from investing activities (1,135,818,069,838) (138,310,814,571)

Cash flows from financing activities Proceeds from short-term borrowings 164,020,719,403 326,338,768,819 Repayment of short-term borrowings (76,155,908,889) (1,290,622,679) Proceeds from long-term borrowings 28,482,112,216 50,973,796,988 Repayment of long-term borrowings (5,704,387) - Proceeds from issue of debentures - 705,013,490,134 Repayment of lease liabilities (95,454,413,546) - Acquisition of treasury shares (93,689,325,190) (124,458,933,570) Dividends paid (64,499,938,670) (42,469,708,296) Share issuance of subsidiaries 150,430,404,376 190,557,847,107 Cash inflows (outflows) from other financing activities 7,762,829,332 (3,364,485,450) Net cash infow from financing activities 20,890,774,645 1,101,300,153,053

Effects of exchange rate changes on cash and cash equivalents 228,228,362,486 (31,060,680,451) Net increase (decrease) in cash and cash equivalents (68,281,631,355) 1,544,774,000,599 Cash and cash equivalents at the beginning of the period 3,322,884,102,567 1,907,575,060,667 Cash and cash equivalents at the end of the period ₩ 3,254,602,471,212 ₩ 3,452,349,061,266

The above consolidated interim statements of cash flows should be read in conjunction with the accompanying notes.

7 NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

1. General Information

NAVER Corporation (the “Company”) was established on June 2, 1999, under the Commercial Code of the Republic of Korea to provide online search portal services. The Company’s headquarter is located at Buljeong-ro 6, Bundang-gu, Seongnam-si, Gyeonggi-do, Korea.

On October 29, 2002, the Company listed its shares on the Korean Securities Dealers’ Automated Quotations market. On November 28, 2008, the Company transferred its share listing to the Korea Composite Stock Price Index market. As at September 30, 2019, the major shareholders of the Company consist of National Pension Fund (11.10%) and others.

The Company and its subsidiaries (collectively the “Group”) engage in providing online search portal and mobile messenger platform services.

1.1 Consolidated Subsidiaries

Details of the consolidated subsidiaries as at September 30, 2019 and December 31, 2018, are as follows:

Ownership interest held by the Group (%)1 Largest September December Closing shareholder Subsidiaries Location Primary business 30, 2019 31, 2018 month

NAVER NAVER Business Platform Korea Online information distribution 100.00 100.00 December business NAVER I&S Korea Business support, workforce 100.00 100.00 December supply, employee dispatch, and software development NAVER Webtoon Korea Software development and 100.00 100.00 December distribution SNOW Korea Software development and 100.00 100.00 December distribution Drama & Company Korea Software development and 81.35 81.32 December distribution Audiensori Korea Software development and 100.00 100.00 December distribution Company AI Korea Software development and 73.90 56.50 December distribution Search Solution Korea Software development and 100.00 100.00 December distribution Nstore Korea Software development and - 100.00 December distribution Works Mobile Korea Application software development 100.00 100.00 December and distribution N-Visions Korea Exhibition and performance 100.00 100.00 December planning business NAVER Labs Korea Information services and electrical 100.00 100.00 December equipment manufacturing SB Next Media Innovation Fund Korea Investment 96.30 95.04 December TBT Global Growth FundⅠ Korea Investment 89.91 99.00 December

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

Ownership interest held by the Group (%)1 Largest September December Closing shareholder Subsidiaries Location Primary business 30, 2019 31, 2018 month

NAVER-KTB Audio Contents Korea Investment 99.00 99.00 December Fund

SpringCamp Early Stage Fund 1 Korea Investment 100.00 100.00 December LINE2 Japan Mobile service development 73.13 73.36 December NAVER J.Hub Japan Real estate 100.00 100.00 December NAVER China China Software development and 100.00 100.00 December distribution WAV Media USA Mobile service development 100.00 100.00 December Camp Mobile Inc. USA Mobile service operations 100.00 100.00 December Naver France France Investment and information 100.00 100.00 December services NAVER VIETNAM Vietnam Mobile service operations 99.00 - December NAVER Business NAVER Business Platform Asia Singapore IT infrastructure operations 100.00 100.00 December Platform Pacific NAVER Business Platform USA IT infrastructure operations 100.00 100.00 December America NAVER Business Platform Germany IT infrastructure operations 100.00 100.00 December Europe NAVER Business Platform Japan Japan IT infrastructure operations 100.00 100.00 December NAVER I&S Incomms Korea Outsourcing services 100.00 100.00 December Greenweb Service Korea Outsourcing services 100.00 100.00 December N Tech Service Korea Software consulting, development 100.00 100.00 December and distribution NIT Service Korea Software development and 100.00 100.00 December consulting CommPartners Korea Portal and other Internet services, 100.00 100.00 December call center and telemarketing services NAVER Webtoon Lico Korea Online information distribution 100.00 100.00 December business Studio N Corporation Korea Film production and distribution 100.00 100.00 December WEBTOON Entertainment USA Mobile service development 100.00 100.00 December Watong Entertainment Hong Kong Mobile service operations 100.00 100.00 December Watong Broccoli Entertainment China Mobile service operations 100.00 100.00 December Entertainment Dongman Entertainment China Mobile service operations 100.00 100.00 December Snow Spring Camp Korea Investment 100.00 100.00 December Playlist Korea Information and communication 100.00 100.00 December service Amuse Korea Cosmetics manufacturing, 100.00 100.00 December distribution and sales HEART IT Korea Mobile service development 100.00 100.00 December Semicolon Studio Korea Information and communication 100.00 - December service SNOW China Hong Kong Mobile service operations 96.22 96.22 December SNOW Japan Japan Mobile service operations 100.00 100.00 December SNOW Inc. USA Mobile service operations 100.00 100.00 December SNOW China SNOW China (Beijing) China Mobile service operations 100.00 100.00 December SNOW China Yiruike Information Technology China Mobile service operations 100.00 100.00 December (Beijing) (Beijing) Xiaying Entertainment China Mobile service operations 100.00 100.00 December 9

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

Ownership interest held by the Group (%)1 Largest September December Closing shareholder Subsidiaries Location Primary business 30, 2019 31, 2018 month

Xiaying Shine Interactive China Mobile service operations 100.00 100.00 December Entertainment Drama & myBridge Japan Mobile service operations 100.00 100.00 December Company Works Mobile Works Mobile Japan Japan Mobile service operations 100.00 100.00 December LINE LINE Plus Korea Portal and Internet services 100.00 100.00 December LINE C&I Korea Investment and Mergers & - 100.00 December Acquisitions LINE Game Investment Fund Korea Investment - 100.00 December LINE SOUTHEAST ASIA Singapore Mobile payment system planning 100.00 100.00 December and development MIXRADIO UK Mobile service development 100.00 100.00 December LFG HOLDINGS Hong kong Character and doll wholesale and 100.00 100.00 December retail LINE Ventures Japan Investment 100.00 100.00 December LINE Game Global Gateway Japan Investment - 100.00 December LINE Life Global Gateway Japan Investment - 100.00 December M.T. Burn Japan Mobile advertising service 50.49 50.49 December business FIVE Japan Mobile advertising service 100.00 100.00 December LINE Fukuoka Japan Mobile service operations 100.00 100.00 December Gatebox Japan Mobile service development 55.09 51.00 December LINE Part Time Job Japan Mobile service development 100.00 60.00 December LINE Growth Technology Japan Mobile service development 100.00 100.00 December LINE Digital Frontier Japan Software development and 100.00 100.00 December distribution LINE Conomi (Formerly, LINE Japan Software development and 100.00 100.00 December Tapas) distribution LINE TICKET Japan Internet information services 51.00 51.00 December Next Library Japan Internet information services 100.00 100.00 December LINE Pay Japan Mobile payment system planning 100.00 100.00 December and development LINE Financial Japan Financial business 100.00 100.00 December LINE Ventures Global Limited Japan Investment 100.00 100.00 December Liability Partnership LINE Ventures Japan Limited Japan Investment 100.00 100.00 December Liability Partnership LVC Japan Financial business 100.00 100.00 December LINE Healthcare Japan Telemedicine services 51.00 - December LINE business support Japan Business support and workforce 100.00 - December Corporation supply LDI Corporation Japan Internet information services 60.00 - December LINE TECHNOLOGY VIETNAM Vietnam Mobile service operations 100.00 100.00 December LINE Plus LINE Up Korea Mobile game software 100.00 100.00 December development and distribution LINE Studio Korea Mobile game software 100.00 100.00 December development and distribution LINE Play Korea Software development 100.00 100.00 December Nemustech Korea Software development 94.29 88.57 December Grayhash Co., Ltd.3 Korea Software development 58.51 40.00 December

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

Ownership interest held by the Group (%)1 Largest September December Closing shareholder Subsidiaries Location Primary business 30, 2019 31, 2018 month

LINE Euro-Americas USA Mobile service marketing 100.00 100.00 December LINE Digital Technology China Mobile service marketing December (Shanghai) 100.00 100.00 LINE Taiwan Taiwan Mobile service operations 100.00 100.00 December LINE Company (Thailand) Thailand Mobile service operations 99.95 99.95 December PT.LINE PLUS INDONESIA Indonesia Mobile service operations 99.99 99.99 December LINE Company LINE Man (THAILAND) Thailand Information and communication 100.00 - December (Thailand) Company Limited service LINE Digital Beijing Wangzhongwenda China Mobile service operations 100.00 100.00 December Technology Technology (Shanghai) LINE Taiwan SHINEWANT TECHNOLOGY Taiwan Internet information services 100.00 100.00 December SHINEWANT Silent Illumination Taiwan Software development and - 100.00 December TECHNOLOGY distribution LINE LINE VIETNAM JOINT STOCK Vietnam Online information distribution 99.11 99.00 December SOUTHEAST COMPANY business ASIA LINE MAN Corporation PTE.LTD Singapore Application software development 100.00 - December and distribution LINE Digital LINE Book Distribution Japan Mobile service development 52.00 52.00 December Frontier LINE Ventures LINE Investment Technologies Japan Investment 100.00 - December Corporation LFG HOLDINGS LINE Friends Korea Character and doll wholesale and 100.00 100.00 December retail LINE Friends Japan Japan Character and doll wholesale and 100.00 100.00 December retail LINE Friends Inc. USA Character and doll wholesale and 100.00 100.00 December retail LINE Friends Taiwan Taiwan Character and doll wholesale and 100.00 - December retail LINE Friends(Shanghai) China Character and doll wholesale and 100.00 100.00 December Commercial Trade retail LINE Friends Markt Korea Software development and 51.00 51.00 December wholesale and retail LINE Pay Line Biz Plus Korea Software development and 100.00 100.00 December distribution BALIE Japan Searching advertising service 60.00 60.00 December business Webpay Holdings Japan Mobile payment system planning 100.00 100.00 December and development LINE Pay hokkaido Japan Mobile payment system planning 70.00 - December and development LINE BIZ+ Taiwan Taiwan Mobile payment system planning 70.01 70.01 December and development Webpay Holdings Webpay Japan Mobile payment system planning 100.00 100.00 December and development LINE Financial LINE Financial Plus Korea Financial business 100.00 100.00 December LINE Credit Japan Financial business 51.00 100.00 December LINE Securities Preparatory Japan Financial business 51.00 100.00 December

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

Ownership interest held by the Group (%)1 Largest September December Closing shareholder Subsidiaries Location Primary business 30, 2019 31, 2018 month

LINE Bank Preparatory Japan Financial business 51.00 - December LINE Financial Asia Hong Kong Financial business 100.00 100.00 December LINE Financial LINE Financial Taiwan Limited Taiwan Financial business 100.00 100.00 December Asia LVC Unblock Korea Software development and 100.00 100.00 December distribution Unchain Corporation Korea Software development and 50.98 50.98 December distribution LVC USA USA Financial business 100.00 100.00 December LINE TECH PLUS Singapore Financial business 100.00 100.00 December LVC Hong Kong Hong Kong Financial business - 100.00 December Unblock Ventures Hong Kong Financial business 100.00 100.00 December NAVER J.Hub Mirai Fund LLP Japan Investment 100.00 100.00 December Mirai Fund LLP Mission Worldwide Group Virgin Software development and 59.06 59.06 December Limited Islands distribution Mission CHOCO Media Taiwan Mobile service operations 100.00 100.00 December Worldwide CHOCO LABS Singapore Software development and 100.00 100.00 December Group Limited distribution WAV Media WAV Recordings USA Mobile service development - 100.00 December

1 Ownership interest held by the Group includes share held by subsidiaries.

2 The ownership of the Group decreased due to issuance of shares for stock option exercised.

3 Although the Group owns less than 50% ownership of Grayhash Co., Ltd., the Group is considered to have control over the entity because the Group has a right to appoint all of its BOD members by virtue of an agreement with other shareholders.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

1.2 Changes in Scope of Consolidation

Subsidiaries newly included in the consolidation for the nine-month period ended September 30, 2019, are as follows:

Reason Subsidiaries Newly established NAVER VIETNAM, LINE Man (THAILAND) Company Limited, LINE Healthcare, LINE business support Corporation, LDI Corporation, LINE Investment Technologies Corporation, LINE Friends Taiwan, LINE MAN Corporation PTE.LTD, LINE Pay hokkaido, Semicolon Studio, LINE Bank Preparatory

Subsidiaries excluded from the consolidation for the nine-month period ended September 30, 2019, are as follows:

Reason Subsidiaries Liquidation LINE Life Global Gateway, LINE Game Global Gateway, Silent Illumination, LINE Game Investment Fund, LVC Hong Kong Merger 1 LINE C&I, Nstore, WAV Recordings

1 For the nine-month period ended September 30, 2019, LINE C&I, Nstore, and WAV Recordings were merged with the LINE Plus, NAVER Webtoon, and WAV media, respectively.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

2. Significant Accounting Policies

The principal accounting policies applied in the preparation of these consolidated interim financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

2.1 Basis of Preparation

The Group maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”). The accompanying consolidated interim financial statements have been condensed, restructured and translated into English from the Korean language financial statements.

The Group’s condensed consolidated interim financial statements for the nine-month period ended September 30, 2019, have been prepared in accordance with Korean IFRS 1034 Interim Financial Reporting. These condensed consolidated interim financial statements have been prepared in accordance with Korean IFRS which is effective as at September 30, 2019.

2.1.1 New and amended standards and interpretations adopted by the Group

The Group has applied the following standards and interpretations for the first time for their annual reporting period commencing January 1, 2019.

- Enactment of Korean IFRS 1116 Leases

Korean IFRS 1116 Leases replaces Korean IFRS 1017 Leases. Under Korean IFRS 1116, with implementation of a single lease model, lessee is required to recognize assets and liabilities for all lease which lease term is over 12 months and underlying assets are not low value assets. A lessee is required to recognize a right-of-use asset and a lease liability representing its obligation to make lease payments.

With implementation of Korean IFRS 1116 Leases, the Group has changed accounting policy. The Group has adopted Korean IFRS 1116 retrospectively, as permitted under the specific transitional provisions in the standard, and recognized the cumulative impact of initially applying the standard as at January 1, 2019, the date of initial application. The Group has not restated comparatives for the 2018 reporting period. The impact of the adoption of the leasing standard and the new accounting policies are disclosed in Note 18.

- Amendments to Korean IFRS 1109 Financial Instruments

The narrow-scope amendments made to Korean IFRS 1109 Financial Instruments enable entities to measure certain prepayable financial assets with negative compensation at amortized cost. When a modification of a financial liability measured at amortized cost that does not result in the derecognition, a modification gain or loss shall be recognized in profit or loss. The amendment does not have a significant impact on the financial statements.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

- Amendments to Korean IFRS 1019 Employee Benefits

The amendments require that an entity shall calculate current service cost and net interest for the remainder of the reporting period after a plan amendment, curtailment or settlement based on updated actuarial assumptions from the date of the change. The amendments also require that a reduction in a surplus must be recognized in profit or loss even if that surplus was not previously recognized because of the impact of the asset ceiling. The amendment does not have a significant impact on the financial statements.

- Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures

The amendments clarify that an entity shall apply Korean IFRS 1109 to financial instruments in an associate or joint venture to which the equity method is not applied. These include long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture. The amendment does not have a significant impact on the financial statements.

- Enactment of Interpretation of Korean IFRS 2123 Uncertainty over Income Tax Treatments

The Interpretation explains how to recognize and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment, and includes guidance on how to determine whether each uncertain tax treatment is considered separately or together. It also presents examples of circumstances where a judgement or estimate is required to be reassessed. The enactment does not have a significant impact on the financial statements.

- Annual Improvements to Korean IFRS 2015 – 2017 Cycle:

 Korean IFRS 1103 Business Combination

The amendments clarify that when a party to a joint arrangement obtains control of a business that is a joint operation, and had rights to the assets and obligations for the liabilities relating to that joint operation immediately before the acquisition date, the transaction is a business combination achieved in stages. In such cases, the acquirer shall remeasure its entire previously held interest in the joint operation. The amendment does not have a significant impact on the financial statements.

 Korean IFRS 1111 Joint Agreements

The amendments clarify that when a party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business. In such cases, previously held interests in the joint operation are not remeasured. The amendment does not have a significant impact on the financial statements.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

 Paragraph 57A of Korean IFRS 1012 Income Tax

The amendment is applied to all the income tax consequences of dividends and requires an entity to recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. The amendment does not have a significant impact on the financial statements.

 Korean IFRS 1023 Borrowing Costs

The amendments clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use (or sale), it becomes part of general borrowings. The amendment does not have a significant impact on the financial statements.

2.1.2 New standards and interpretations not yet adopted by the Group

There are no new accounting standards and interpretations that have been published that are not mandatory for annual reporting period commencing January 1, 2019 and have not been adopted by the Group.

2.2 Significant Accounting Policies

Significant accounting policies and methods of computation used in the preparation of the condensed consolidated interim financial statements are consistent with those of the consolidated financial statements for the year ended December 31, 2018, except for the changes due to the application of amendment and enactments of standards and interpretations described in Note 2.1.1 and the one described below.

2.2.1 Income tax expense

Income tax expense for the interim period is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate is applied to the pre-tax income.

The Company is implemented consolidated tax payment scheme which presumes the Parent Company and its subsidiaries in Korea as a single taxpayer. The Company calculated the estimated average annual tax rate based on the taxable unit per the consolidated tax payment scheme.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

3. Critical Accounting Estimates and Assumptions

The preparation of financial statements requires the Group to make estimates and assumptions concerning the future. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results.

Significant accounting estimates and assumptions applied in the preparation of these condensed consolidated interim financial statements are the same as those applied to the consolidated financial statements for the year ended December 31, 2018, except for the estimates used to determine income tax expense, and accounting estimates and assumptions for implementation of Korean IFRS 1116 Leases.

4. Fair Value

There are no significant changes in the business and economic environments that affect the fair value of financial assets and liabilities of the Group for the nine-month period ended September 30, 2019.

4.1 Fair Value Hierarchy

To provide an indication about the reliability of the inputs used in determining fair value, the Group classifies its financial instruments into the three levels prescribed under the accounting standards. Financial instruments that are measured at fair value are categorized by the fair value hierarchy, and the defined levels are as follows:

- Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives and equity securities) is based on quoted market prices at the end of the reporting period. The quoted marked price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.

- Level 2: The fair value of financial instruments that are not traded in an active market (for example, unlisted derivatives) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

- Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity and debt securities.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

The following table presents the Group’s financial assets and financial liabilities measured and recognized at fair value as at September 30, 2019 and December 31, 2018:

(in thousands of Korean won) September 30, 2019 Level 1 Level 2 Level 3 Total

Financial assets Financial assets at fair value - profit or loss \ 338,232 \ 57,825,195 \ 906,293,523 \ 964,456,950 Debt instruments at fair value - other comprehensive income - 202,690,062 493,236 203,183,298 Equity instruments at fair value - other comprehensive income 406,086,938 - 127,078,233 533,165,171 Financial liabilities Financial liabilities at fair value - profit or loss 412,649 - 3,201,351 3,614,000

(in thousands of Korean won) December 31, 2018 Level 1 Level 2 Level 3 Total

Financial assets Financial assets at fair value - profit or loss \ 223,025 \ 52,371,324 \ 731,579,660 \ 784,174,009 Debt instruments at fair value - other comprehensive income - 214,932,920 448,839 215,381,759 Equity instruments at fair value - other comprehensive income 396,397,609 - 117,597,460 513,995,069 Financial liabilities Financial liabilities at fair value - profit or loss - 7,256,077 2,947,567 10,203,644

The Group recognizes transfers between levels of the fair value at the end of the reporting period. There are no transfers between level 1 and level 2 of the fair value hierarchy during the nine-month period ended September 30, 2019.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

4.2 Fair value measurements using significant unobservable inputs (Level 3)

The following table presents the changes in level 3 financial instruments for the nine-month periods ended September 30, 2019 and 2018:

(in thousands of Korean won) 2019 2018 Financial Financial Financial assets at fair Financial assets at fair assets at fair value - other assets at fair value - other value - profit or comprehensive value - profit or comprehensive loss income loss income

Beginning balance1 \ 731,579,660 \ 118,046,299 \ 171,812,839 \ 362,028,591 Effect of changes in accounting policies - - 544,553,205 (266,233,858) Beginning balance (After adjustments) 731,579,660 118,046,299 716,366,044 95,794,733 Total profit or loss Amounts recognized in profit or loss 40,274,948 - 21,438,216 - Amounts recognized in other comprehensive income - 29,299,871 - (4,749,304) Acquisitions 188,988,531 3,824,888 269,452,512 83,137,341 Disposals (66,903,889) (30,429,161) (303,505,605) (1,131,742) Exchange differences 12,354,273 6,829,572 (10,786,135) (2,185,566) Ending balance \ 906,293,523 \ 127,571,469 \ 692,965,032 \ 170,865,462

1As at January 1, 2018, these were disclosed as financial assets at fair value - profit or loss and available-for-sale financial assets.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

4.3 Valuation Techniques and the Inputs

Valuation techniques and inputs used in the fair value measurements of major financial instruments that are classified as levels 2 and level 3 of the fair value hierarchy as at September 30, 2019 and December 31, 2018, are as follows:

(in thousands of September 30, 2019 Korean won) Range of Unobservable unobservable Fair value Level Valuation techniques Major inputs inputs inputs Financial assets at fair value - profit or loss Securities linked \ 9,999,764 3 Option pricing model Underlying asset, CDS Correlation 0 ~ 1 derivative spread, KRW IRS coefficient Curve, Recovery rate CDS SPREAD 0.103% ~ 0.553% KRW IRS Curve 1.21% ~ 1.48% Recovery rate 40% Compound financial 540,258,019 3 Option pricing model Underlying asset price, Volatility of the 4.3% ~ 53.30% instruments volatility of underlying underlying asset, discount rate assets Discount rate 1.54% ~ 1.96% Market approach and PBR, EV/SALES, PSR, PBR 1.61 ~ 5.74 others recent transaction EV/SALES 2.76 ~ 22.45 price, net asset value PSR 1.41 ~ 6.60 PER 51.92 Present value method Credit risk adjusted Discount rate 12.84% ~ 15.52% discount rate Beneficiary 35,005,528 2 Present value method Credit risk adjusted - - certificates and discount rate funds Beneficiary 356,035,740 3 Market approach and Underlying asset price (*) (*) certificates and others funds Debt securities 22,706,395 2 Present value method Credit risk adjusted - - discount rate Derivatives 113,272 2 Present value method Forward exchange rate, - - contractual exchange rate Debt instruments at fair value – other comprehensive income or loss Debt securities 202,690,062 2 Present value method Credit risk adjusted - - discount rate Debt securities 493,236 3 Present value method - - - Equity instruments at fair value – other comprehensive income or loss

Equity securities 127,078,233 3 Present value method, Discount rate, PBR, Discount rate 13.06% ~ 15.06% market approach EV/SALES, PSR, etc. PBR 1.69 ~ 13.70 EV/SALES 5.90 PSR 1.31 ~ 8.40 Financial liabilities at fair value - profit or loss Derivatives 3,201,351 3 Option pricing model Volatility of the Volatility of the 43.60% ~ 51.90% underlying assets, underlying discount rate assets Discount rate 1.70% ~ 1.76%

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

(in thousands of December 31, 2018 Korean won) Range of Unobservable unobservable Fair value Level Valuation techniques Major inputs inputs inputs

Financial assets at fair value - profit or loss Securities linked \ 43,353,829 3 Option pricing model Underlying asset, CDS Correlation 0.00~1.00 derivative spread, KRW IRS coefficient Curve, Recovery rate CDS SPREAD 0.13%~0.57%

KRW IRS Curve 1.77%~1.91% Recovery rate 40.00% Compound financial 404,520,696 3 Option pricing model Underlying asset price, Volatility of the 5.6%~54.06% instruments volatility of underlying underlying asset, discount rate assets Discount rate 1.93%~2.17% Market approach and PBR, EV/SALES, PSR, PBR 1.00~9.78 others recent transaction EV/SALES 2.8~16.60 price, net asset value PSR 0.58%~8.88 PER 51.92 Present value method Credit risk adjusted Discount rate 13.40%~16.00% discount rate Beneficiary 1,731,245 2 Present value method Credit risk adjusted - - certificates and discount rate funds Beneficiary 283,705,136 3 Market approach and Underlying asset price (*) (*) certificates and others funds Debt securities 50,563,329 2 Present value method Credit risk adjusted - - discount rate Derivatives 76,750 2 Present value method, Forward exchange rate - - Option pricing model Debt instruments at fair value – other comprehensive income or loss Debt securities 214,932,920 2 Present value method Credit risk adjusted - - discount rate, recent transaction price Debt securities 448,839 3 Present value method - - - Equity instruments at fair value – other comprehensive income or loss Equity securities 117,597,460 3 Present value method, Discount rate, PBR, Discount rate 13.03~15.17 market approach EV/SALES, PSR, etc. PBR 1.58~4.86 EV/SALES 5.98 PSR 1.32~9.13 Financial liabilities at fair value - profit or loss Derivatives 2,947,567 3 Option pricing model Volatility of the Volatility 51.90% underlying assets, Discount rate 1.76% discount rate Derivatives 7,256,077 2 Present value method Forward exchange rate - -

(*) Various inputs are used in the measurement of underlying asset price and thus, further disclosure has not been provided.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

4.4 Valuation Processes for Fair Value Measurements Categorized Within Level 3

The Group’s investment management team and treasury team performs the fair value measurement required for financial reporting purposes, including level 3 fair values. This team reports directly to the chief financial officer (CFO). Discussions of valuation processes and results are held between the CFO and this team at least once every quarter, in line with the Group’s quarterly reporting periods.

5. Operating Segment Information

The Group consists of a single operating segment. Operating information by service types is reported to chief operating decision-maker. Such reported segment information does not differ from the amount presented in the consolidated statements of comprehensive income.

Operating revenues by service types for the nine-month periods ended September 30, 2019 and 2018, are as follows:

(in thousands of 2019 2018 Korean won) Operating revenues Ratio (%) Operating revenues Ratio (%)

Advertisement 1 \ 461,547,411 9.60 \ 417,833,264 10.27 2 Business Platform 2,104,490,116 43.79 1,817,364,563 44.65 IT Platform 3 321,412,035 6.69 246,675,891 6.06 Contents Service 4 139,602,917 2.90 97,385,600 2.39 LINE & Other Platforms 5 1,778,899,296 37.01 1,491,130,334 36.63 \ 4,805,951,775 100.00 \ 4,070,389,652 100.00

1 DA, Shopping DA, NAVER TV Video Ads, Band DA and others (CPM) 2 Search, Shopping Search and others (CPC/CPS) 3 NAVER Pay, IT Services, Cloud, WORKS and others 4 NAVER Music, Webtoon, V LIVE and others 5 LINE, SNOW and others

Revenue from external customers by region for the nine-month periods ended September 30, 2019 and 2018 and non-current assets as at September 30, 2019 and December 31, 2018, are as follows:

(in thousands of Korean won) Revenue from external customers Non-current assets 1 2019 2018 September 30, 2019 December 31, 2018

Domestic \ 3,126,178,680 \ 2,795,787,053 \ 2,115,455,592 \ 1,924,694,854 Japan 1,431,713,665 1,191,146,853 1,137,503,094 526,047,919 Others 248,059,430 83,455,746 900,502,605 345,497,352 \ 4,805,951,775 \ 4,070,389,652 \ 4,153,461,291 \ 2,796,240,125

1 Excludes financial instruments and deferred tax assets.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

The revenue from contracts with customers by category for the nine-month periods ended September 30, 2019 and 2018, is as follows:

(in thousands of Korean won) 2019 2018

By timing of revenue recognition Recognized at a point in time \ 2,398,498,489 \ 2,108,093,395 Recognized over time 2,407,453,286 1,962,296,257 \ 4,805,951,775 \ 4,070,389,652

6. Property and Equipment

Changes in property and equipment for the nine-month periods ended September 30, 2019 and 2018, are as follows:

(in thousands of Korean won) 2019 2018

Beginning balance \ 1,457,302,209 \ 1,150,012,699 Acquisition and capital expenditures 342,682,121 352,536,729 Increase due to business combination - 126,986 Depreciation (219,060,851) (159,741,128) Disposals, retirement and impairment (4,329,449) (3,820,074) Disposal of a subsidiary - (48,929) Others 1 27,834,859 5,327,225 Ending balance \ 1,604,428,889 \ 1,344,393,508

1 Others include effects of changes in foreign currency exchange rates.

During the nine-month period ended September 30, 2019, the Group has capitalized borrowing costs amounting to ￦ 940 million (2018, 3Q: ￦ 369 million) on property and equipment that are qualifying assets. The capitalization rate of borrowings used to determine the amount of borrowing costs to be capitalized is 3.07% (2018, 3Q: 2.34%).

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

7. Intangible Assets

Changes in intangible assets for the nine-month periods ended September 30, 2019 and 2018, are as follows:

(in thousands of Korean won) 2019 2018

Beginning balance \ 306,963,470 \ 339,511,681 Acquisition and capital expenditures 78,229,803 23,908,380 Increase due to business combination - 6,311,287 Amortization (25,760,972) (24,812,114) Disposals, retirement and impairment (3,005,872) (5,215,558) Disposal of a subsidiary - (21,393) Others 1 (6,427,363) 8,314,823 Ending balance \ 349,999,066 \ 347,997,106

1 Others include effects of changes in foreign currency exchange rates.

8. Investments in Associates and Joint Ventures

Details of investments in associates and joint ventures of the Group as at September 30, 2019 and December 31, 2018, are as follows:

September 30, December 31, (in thousands of Korean won) 2019 2018 Percentage of Closing ownership Name of entity Primary business Location month (%) Book amount Book amount

Associates KG Allat Internet commerce Korea December 20.00 ￦ 4,996,795 ￦ 4,203,279 payment service NetMania Software development and Korea December 27.17 1,009,702 976,619 distribution Synapsoft Software development and Korea December 26.45 4,691,760 4,291,022 distribution ARO In Tech Software development and Korea December 29.85 678,870 514,709 distribution Trust Us4 Software consulting, Korea December - - - development and distribution Silicon Cube Application software Korea December 41.89 2,115,365 2,291,346 development and distribution NSPACE Space service business Korea December 49.04 495,567 217,094 One Store E-Commerce business Korea December 34.46 19,666,319 19,970,146 Meshkorea Telecom order brokerage, Korea December 20.94 10,310,884 13,299,831 e-commerce

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

September 30, December 31, (in thousands of Korean won) 2019 2018 Percentage of Closing ownership Name of entity Primary business Location month (%) Book amount Book amount

BonAngels Pacemaker Fund Investment Korea December 22.73 3,209,275 3,134,205 Korea Contents Mutual Aid Investment Korea December 58.28 9,133,680 9,247,075 Association1 Future Creation NAVER-Stonebridge Investment Korea December 40.00 5,056,330 6,109,969 Early Stage Start-up Fund Future Creation NAVER-SB Startup Investment Korea December 37.04 10,705,110 16,194,573 Investment Fund NAVER KIP Cheer up! Gamers Fund Investment Korea December 50.00 3,000,924 3,579,691 NAVER-Suprema Youth Foundation Investment Korea December 50.00 7,997,240 8,543,088 No.5 Investment Fund Mirae Asset-NAVER New Growth Investment Korea December 50.00 27,852,784 18,179,090 Fund YG NAVER Contents & Lifestyle Investment Korea December 90.91 50,703,254 50,388,242 Fund1 Soran Media Venture Fund I1 Investment Korea December 66.67 852,524 899,296 MiraeAsset MAPS Private Placement Investment Korea December 45.08 183,687,718 189,393,769 Real Estate 62 MiraeAsset-Naver Asia Growth Fund5 Investment Korea December 16.67 45,413,206 19,519,948 MIRAE ASSET-NAVER ASIA Investment Singapore December 40.00 189,416,416 76,157,930 GROWTH INVESTMENT Digital Media Partners II Investment Cayman December 30.00 2,777,106 2,598,808 Islands K-FundⅠ1 Investment France December 99.75 178,642,105 108,199,648 China Ventures Fund I, L.P. 11 Investment China December 66.67 60,502,619 3,330,600 The Grim Ent. Webtoon production Korea December 34.98 976,191 993,456 Studio Horang Webtoon production Korea December 35.00 333,796 323,373 Bigpicture Comics Webtoon production Korea December 35.00 1,014,261 961,448 Studio JHS Webtoon production Korea December 35.00 546,823 649,342 JQ COMICS Webtoon production Korea December 35.06 323,703 - ZK Stuido Webtoon production Korea December 40.00 398,890 - Soo COMICS Webtoon production Korea December 40.00 398,057 - YLAB Japan Software development and Japan December 25.21 350,815 404,055 distribution Alchera Software consulting, Korea December 20.21 2,388,968 2,294,222 development and distribution Fandom2 Software development and Korea December 20.00 - - distribution Bravepops2 Software development and Korea December 20.67 - - distribution AXIS Software development and Korea December 28.57 251,435 2,307,974 distribution Fast Cowell Private Equity Fund Investment Korea December 21.13 1,429,206 1,464,163 Laiqu Technology (Shenzhen) Software development and China December 23.85 993,721 483,202 distribution LINE Games6 Software development and Korea December 49.48 168,277,571 185,596,317 distribution Epic Voyage Mobile service Japan December 30.00 28,378 25,708 development 25

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

September 30, December 31, (in thousands of Korean won) 2019 2018 Percentage of Closing ownership Name of entity Primary business Location month (%) Book amount Book amount

LINE Music3 Mobile service Japan December 36.72 - 4,933,610 development Yume no machi Souzou Iinkai6 Mobile service Japan December 21.69 40,302,330 38,801,208 development Transcosmos Online Communication Business customer support Japan December 37.06 1,143,522 1,165,315 LENSA,LTD. Mobile advertising service Japan December 49.00 1,160,216 947,502 business LINE Mobile Telecommunications Japan December 40.05 97,267,002 74,248,707 service Venture republic6 Online information Japan December 33.98 15,759,073 16,392,944 distribution business PT. Bank KEB HANA Indonesia Bank and financial Indonesia December 20.00 169,913,942 - business Orpeo Sound Works2 Software development and Korea December 27.41 - - distribution FOLIO Holdings6 Financial business Japan December 41.36 46,357,751 52,812,854 iPASS Mobile payment system Taiwan December 29.82 12,864,328 12,589,324 planning and development 1,385,395,532 958,634,702 Joint ventures YTN PLUS4 Digital contents production, Korea December - - 4,852,402 distribution, and sales China Lab Database and online Korea December 49.00 253,531 239,795 information service JobsN Online information service Korea December 49.00 1,589,601 1,447,064

YEOPEUL Online information service Korea December 49.00 1,592,793 1,157,850 and internet contents business Cineplay Online information service Korea December 49.00 633,060 575,843 and online advertising Designpress Online information service Korea December 49.00 566,425 468,740 and internet contents business Interbiz Online information service Korea December 49.00 496,404 285,543 and internet contents business Artitian Online information service Korea December 49.00 209,083 173,322 and internet contents business Schooljam Online information service Korea December 49.00 394,451 254,011 and internet contents business Agroplus Online information service Korea December 49.00 539,537 334,721 and internet contents business Sumlab Online information service Korea December 49.00 532,065 365,538 and internet contents business

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

September 30, December 31, (in thousands of Korean won) 2019 2018 Percentage of Closing ownership Name of entity Primary business Location month (%) Book amount Book amount

Techplus Online information service Korea December 49.00 591,406 370,102 and internet contents business Animal and Human Story Online information service Korea December 49.00 231,399 138,135 and internet contents business Law and Media Online information service Korea December 49.00 185,645 182,578 and internet contents business DANAA Data Internet information service Korea December 49.00 4,890,081 4,866,664 Cinamon Games Software development and Korea December 49.98 1,943 1,979 distribution LINE Project3 Investment Japan December 49.95 - - Lantu Games Limited3, 6 Mobile service development Hong Kong December 50.00 - 192,498 RABBIT-LINE PAY COMPANY Online payment service Thailand December 33.33 20,387,239 22,198,433 Collab+LINE Investment USA December 50.00 1,757,611 1,510,946 Kasikorn LINE Software development and Korea December 49.99 42,213,568 3,111,256 distribution 77,065,842 42,727,420 ￦ 1,462,461,374 ￦ 1,001,362,122

1 Although the Group has more than 50% ownership in the investees, the Group does not have controls over these entities by virtue of agreements and classifies them as associates.

2 Recognized impairment loss during the prior period for the entities as book amounts exceeded their recoverable amounts.

3 Stopped applying equity method due to accumulated deficits.

4 Excluded from investments in associates due to the decreased Group’s ownership in these entities during the nine-month period ended September 30, 2019.

5 Although the Group has less than 20% ownership in the investees, the Group has significant effect over the entities by virtue of agreements and classified as associates.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

6 Prepared based on the its consolidated financial statements. The related subsidiaries of the associates and joint ventures are as follows:

Associates and joint ventures Subsidiaries of the associates and joint ventures LINE Games PIG, Stairs, Msquared Management, MFC, InnoAG. inc, Oozoo, Studio 4LEAF Venture republic VENTURE REPUBLIC GLOBAL, Trip101, Allstay FOLIO Holdings FOLIO, FOLIO Asset Management Yume no machi Souzou

Iinkai SATSUMAEBISUDO, PT Klik Eat Indonesia Lantu Games Beijing Lantu Times Technology Company

Changes in investments in associates and joint ventures for the nine-month periods ended September 30, 2019 and 2018, are as follows:

(in thousands of Korean won) 2019 Investments in Investments in associates joint ventures Total

Beginning balance \ 958,634,702 \ 42,727,420 \ 1,001,362,122 Acquisition 463,929,811 40,813,211 504,743,022 Disposal - (5,150,834) (5,150,834) Valuation of investment using the equity method · Share of loss of associates and joint ventures (84,668,601) (3,992,479) (88,661,080) · Share of other comprehensive income of 47,292,217 2,668,524 49,960,741 associates and joint ventures · Dividends (6,893,259) - (6,893,259) · Other changes 7,100,662 - 7,100,662 Ending balance \ 1,385,395,532 \ 77,065,842 \ 1,462,461,374

(in thousands of Korean won) 2018 Investments in Investments in associates joint ventures Total

Beginning balance \ 251,685,132 \ 29,311,991 \ 280,997,123 Acquisition 570,370,570 2,238,500 572,609,070 Disposal (2,770,194) - (2,770,194) Valuation of investment using the equity method · Share of loss of associates and joint ventures (29,058,186) (1,461,152) (30,519,338) · Share of other comprehensive income of 4,553,133 1,436,075 5,989,208 associates and joint ventures · Dividends (4,682,994) - (4,682,994) · Other changes 3,545,047 5,467,988 9,013,035 Ending balance \ 793,642,508 \ 36,993,402 \ 830,635,910

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

9. Borrowings and Debentures

Borrowings as at September 30, 2019 and December 31, 2018, are as follows:

(in thousands of Korean won, in thousands of Japanese yen, and in thousands of HKD) September 30, 2019 December 31, 2018 Annual Amount in Amount in interest foreign foreign Lender Maturity date rate (%) Book amount currency Book amount currency

Short-term borrowings Foreign September 30, Sumitomo Mitsui Banking Corporation 0.07 currency 2020 \133,608,000 JPY 12,000,000 \121,581,600 JPY 12,000,000 September 30, Mizuho Corporate Bank, Ltd. 0.14 2020 111,340,000 JPY 10,000,000 101,318,000 JPY 10,000,000 Resona Bank Co. Ltd June 30, 2020 0.28 11,134,000 JPY 1,000,000 10,131,800 JPY 1,000,000 DAG Ventures VI, L.P. 1 - 10.00 2,400,169 HKD 15,667 2,236,763 HKD 15,667 Goodwater Capital II, L.P. 1 - 10.00 1,198,909 HKD 7,826 1,117,286 HKD 7,826 Mistletoe Singapore Pte. Ltd. 1 - 10.00 2,400,209 HKD 15,667 2,236,800 HKD 15,667 SCC Growth IV Holdco A, Ltd. 1 - 10.00 35,783,956 HKD 233,577 33,347,751 HKD 233,577 SenseView Investment Limited 1 - 10.00 6,000,806 HKD 39,170 5,592,265 HKD 39,170 SNOW Limited Liability Partnership 1 - 10.00 23,892,113 HKD 155,954 22,265,516 HKD 155,954 Korean won Woori Bank May 24, 2020 2.79 167,285,785 - 50,000,000 - currency Foreign January 15, Sendai Bank 1.00 6,680 JPY 600 18,237 JPY 1,800 currency 2020 JPY 24,001,050 JPY 23,001,800 495,050,627 349,846,018 HKD 467,860 HKD 467,860 Long-term borrowings Foreign Japan Finance Corporation June 30, 2020 1.40 9,720 JPY 873 18,672 JPY 1,843 currency Dai Ichi Kangyo Credit Cooperative June 15, 2023 1.00 62,629 JPY 5,625 68,390 JPY 6,750 January 15, Sendai Bank 1.00 - - 1,520 JPY 150 2020 Korean October 31, won Shinhan Bank 2.91 50,000,000 - 50,000,000 - 2020 currency January 31, Sunny Solution 3rd 3.16 50,000,000 - 50,000,000 - 2021 Less: Current portion (26,421) JPY (2,373) (26,991) JPY (2,664) \100,045,928 JPY 4,125 \100,061,591 JPY 6,079

1 SNOW China, a subsidiary of the Company, issued Redeemable Convertible Preferred Stock (“RCPS”) in 2018. If an event that cannot be controlled by the Group, such as changes in the regulatory environment, occurs, the holder of RCPS can request a repayment to the Group at an amount that is calculated by applying a compounded annual interest rate of 10% to the issue amount. Accordingly, the Group classified this RCPS as borrowings.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

Debentures as at September 30, 2019 and December 31, 2018, are as follows:

(in thousands of Korean won and thousands of Japanese Yen) September 30, 2019 December 31, 2018 Latest Annual Amount in foreign Amount in foreign maturity interest date rate (%) Book amount currency Book amount currency

Convertible bonds in September - foreign currency1 20, 2023 \ 407,281,720 JPY 36,580,000 \ 370,621,244 JPY 36,580,000 September - 19, 2025 407,281,720 JPY 36,580,000 370,621,244 JPY 36,580,000 Less: Discount on bonds payable (28,397,309) JPY (2,550,504) (29,680,542) JPY (2,929,444) \ 786,166,131 JPY 70,609,496 \ 711,561,946 JPY 70,230,556

1 Details of convertible bonds issued on September 20, 2018, by LINE, are as follows:

Details

Par value JPY 73,160 million Value at issue JPY 74,989 million Conversion period Matured in 2023: from October 4, 2018 to September 6, 2023

Matured in 2025: from October 4, 2018 to September 6, 2025 Conversion price Matured in 2023: JPY 7,467 per share

Matured in 2025: JPY 7,518 per share Mature repayment value 100% of par value Conversion price Conversion price shall be adjusted for share split or share merger,

adjustments share exchange and issuance of convertible securities Stated interest rate 0% Early repayment by issuer 1) Clean up repayment: with notification, if remaining amount is under 10% of par value 2) 130% call-option repayment: with notification, if Line’s stock value in Tokyo stock exchange is excess of 130% of conversion price for

20 consecutive days (bond maturing in 2023: from September 21, 2021, bond maturing in 2025 : from September 20, 2023) 3) Others: If there are other causes triggered by either tax or corporate regulations

The convertible right of the respective convertible bond was classified as equity.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

10. Net Defined Benefit Liabilities

The amounts recognized in the statements of comprehensive income for the three-month and nine- month periods ended September 30, 2019 and 2018, are as follows:

(in thousands of Korean won) 2019 2018 Three Nine Three Nine

months months months months

Current service cost \ 20,036,781 \ 60,243,689 \ 18,141,403 \ 53,059,571 Net interest cost 2,199,831 6,840,155 2,533,623 6,486,852 Total expenses included in employee benefits \ 22,236,612 \ 67,083,844 \ 20,675,026 \ 59,546,423

Details of net defined benefit liabilities recognized in the statements of financial position as at September 30, 2019 and December 31, 2018, are as follows:

(in thousands of Korean won) September 30, 2019 December 31, 2018

Present value of funded defined benefit liabilities \ 23,320,008 \ 45,061,744 Present value of unfunded defined benefit liabilities 382,252,424 317,685,556 Sub total 405,572,432 362,747,300 Fair value of plan assets (16,672,473) (17,967,039) Net defined benefit liabilities \ 388,899,959 \ 344,780,261

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

11. Provisions

Details and changes in provisions for the nine-month periods ended September 30, 2019 and 2018, are as follows:

(in thousands of Korean won) 2019 Provision for customer Provision for Provision for loyalty restoration litigation program and others Total

Beginning balance \ 926,439 \ 249,054 \ 43,711,150 \ 44,886,643 Charged (credited) to the statement of profit or loss: Additional provisions - - 8,041,143 8,041,143 Unused amounts reversed - - (5,417,152) (5,417,152) Charged during the period - - 13,467,305 13,467,305 Used during the period - - (1,148,882) (1,148,882) Others1 - - 2,473,388 2,473,388 Ending balance \ 926,439 \ 249,054 \ 61,126,952 \ 62,302,445 Current \ 926,439 \ 249,054 \ 2,990,581 \ 4,166,074 Non-current - - 58,136,371 58,136,371

1 Others include effects of changes in foreign currency exchange rates.

(in thousands of Korean won) 2018 Provision for customer Provision for Provision for loyalty restoration litigation program and others Total

Beginning balance \ 926,439 \ 249,054 \ 39,487,901 \ 40,663,394 Charged (credited) to the statement of profit or loss: - - - - Additional provisions - - 5,479,781 5,479,781 Unused amounts reversed - - (542,978) (542,978) Used during the period - - (3,695,186) (3,695,186) Others1 - - (186,962) (186,962) Ending balance \ 926,439 \ 249,054 \ 40,542,556 \ 41,718,049 Current \ 926,439 \ 249,054 \ 5,272,908 \ 6,448,401 Non-current - - 35,269,648 35,269,648

1 Others include effects of changes in foreign currency exchange rates.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

12. Issuance and Acquisition of Shares

The Company’s total number of authorized shares is 300,000,000 shares. As at September 30, 2019, the Company has issued 164,813,395 ordinary shares (\ 100 per share) and 19,365,600 treasury shares. The Company’s share capital and share premium as at September 30, 2019, amount to \ 16,481,340 thousand and \ 132,920,605 thousand, respectively. There are no changes in the number of shares issued for the nine-month periods ended September 30, 2019 and 2018.

The Company acquired 735,295 shares of treasury shares amounting to \ 93,689 million for the nine- month period ended September 30, 2019, which are accounted for as other components of equity.

13. Income tax expense

Income tax expense is recognized based on management’s best estimate of weighted average annual income tax rate expected for the full financial year. As at September 30, 2019, the estimated average annual income tax rate used for the year ending December 31, 2019, is 57.56% (the estimated tax rate for the nine-month period ended September 30, 2018: 39.5%).

14. Dividends

A dividend in respect of the year ended December 31, 2018, amounting to \ 45,901 million, was paid in April, 2019. Details of the dividends are as follows:

(in thousands of Korean won and in shares) 2019 20181

Shares eligible for dividends 146,183,090 146,852,380 Dividend rate per share (%) 314 289.2 Cash dividends \ 45,901,490 \ 42,469,708

1 Adjusted number of shares considering the share split during the year ended December 31, 2018.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

15. Commitments and Contingencies

As at September 30, 2019, the Group has borrowing agreements with three Korean financial institutions, including Kookmin bank and Sunny solution 3rd, with an aggregated credit limit up to \ 752,000 million. And the Group has borrowing agreements with Sumitomo Mitsui Banking Corporation and Mizuho Corporate Bank with an aggregated credit limit up to JPY 23,680 million.

As at September 30, 2019, the Group has been provided with guarantees of \ 9,975 million from Seoul Guarantee Insurance and \ 4,700 million from Shinhan bank in relation to the performance and payment guarantee, respectively.

As at September 30, 2019, the Group has entered into a construction contract amounting to \ 403,511 million with Samsung C&T Corporation in relation to a construction of a new building for the Group and the outstanding amount of the contract is \ 330,253 million. Also, the Group has entered into a contract to acquire a land amounting to \ 51,000 million in relation to a construction of a new building for the Cloud Data Center and the outstanding amount of the contract is \ 100 million.

As at September 30, 2019, the Group is a defendant in 30 lawsuits cases filed with regard to patent infringement and compensation for damages (aggregate amounts of cases: \ 15,207 million), and the Group is a plaintiff in six lawsuit cases with regard to compensation for damages (aggregate amount of the cases: \ 1,547 million). The outcome of these cases are uncertain as at reporting date and the management recognizes the provision in relation to the potential loss if the lawsuit cases meet the condition for the recognition of the provision.

The Japanese Payment Services Act requires non-banking entities that engage in business activities involving advance payments from end users using virtual credits to secure a certain amount of money equal to the unused balance of virtual credits purchased by the end users, either by depositing or entrusting a cash reserve or government bonds with the Legal Affairs Bureau, or by concluding a guarantee contract with a financial institution. In accordance with the Japanese Payment Services Act, the Group had deposited investments in Japanese government bonds of JPY 280 million as at September 30, 2019, which are recognized as long-term financial instruments. In addition, the Group has credit guarantee contracts for JPY 33,500 million with Sumitomo Mitsui Banking Corporation and Mizuho Corporate Bank as at September 30, 2019 to comply with the Japanese Payment Services Act.

As part of the issuance of convertible bonds by LINE, a subsidiary of the Company, in 2018, the Company has entered into an agreement to lend up to 6,000,000 ordinary shares of Line held by the Company to Morgan Stanley MUFG Securities Co., Ltd., the acquirer of the convertible bonds. When the convertible bonds matures, the lending agreement for convertible bonds with a five-year maturity will be terminated upon the maturity date (50% of ordinary shares lent) and for convertible bonds with a seven- year maturity will be terminated after five business days from the maturity date (50% of ordinary shares lent). Meanwhile, in the event of an early redemption, conversion and others, the lending agreement will be terminated after five business days from the date of such event.

As at September 30, 2019, the Group has entered into an executives and staff members group injury insurance contract with KB insurance.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

16. Related Party Transactions

Details of subsidiaries and associates and joint ventures as at September 30, 2019 and December 31, 2018, are described in Note 1.1 and Note 8, respectively.

Details of other related parties that have sales and other transactions or outstanding balances with the Group as at September 30, 2019 and December 31, 2018, are as follows:

Type September 30, 2019 December 31, 2018

Happybean foundation, Naver Cultural Happybean foundation, Naver Cultural Others1 foundation, Connect foundation foundation, Connect foundation, Everyoung Korea, Iscon

Transactions with related parties including operating revenues and expenses for the nine-month periods ended September 30, 2019 and 2018, are as follows:

(in thousands of Korean won) 2019 Operating revenues and Operating expenses others and others

Associates KG Allat ￦ - ￦ 273,661 Synapsoft - 458,493 ARO In Tech - 560,128 Studio Horang 300,900 2,491 Bigpicture Comics - 848,125 Studio JHS - 693,887 YLAB Japan - 486,473 LINE Music 13,659,530 74,480 Yume no machi Souzou Iinkai 2,773,194 2,489,336 Transcosmos Online Communication 1,054,616 4,171 LINE Mobile 13,978,464 3,082,910 Venture republic 2,470,119 - LINE Games 927,562 476 Orpeo Sound Works 176,800 - AXIS 31,658 274,954 Others 327,377 406,251 Joint ventures JobsN 711,787 1,801,048 RABBIT-LINE PAY COMPANY 2,422,666 247,678 YEOPEUL 118,400 1,829,053 Techplus - 1,248,986 Cineplay - 1,270,877

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

(in thousands of Korean won) 2019 Operating revenues and Operating expenses others and others

Interbiz 179,300 1,317,016 YTN PLUS3 - 716,059 Schooljam - 1,239,979 Sumlab - 972,673 China Lab 81,171 917,980 Designpress 132,029 1,016,494 Agroplus 81,349 917,740 Artitian - 910,483 Animal and Human Story - 1,033,529 Law and Media 10,829 772,046 Others 50,233 168,738 Others1 Happybean foundation 1,323,344 595,192 NAVER Cultural foundation 222,480 12,000,000 Connect foundation 1,904,764 14,000,000 Everyoung Korea2 30,038 - YTN PLUS3 - 100,000

1 Although these entities are not related parties of the Group in accordance with Korean IFRS 1024, they belong to the same large enterprise group according to the Monopoly Regulation and Fair Trade Act in Korea. Transaction amounts from the time of being designated as a same large enterprise group are disclosed.

2 Transaction amount prior to the exclusion from the same large enterprise group and the related parties during the current period are disclosed.

3 Entities were excluded from joint ventures due to the disposal of shares during the nine-month period ended September 30, 2019. Those are classified as other from the time of disposal of its shares to the time of being excluded from the same large enterprise group and the related parties.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

(in thousands of Korean won) 2018 Operating revenues Operating expenses and others and others

Associates ARO In Tech ￦ - ￦ 585,469 KG Allat - 234,278 One Store 96,108 26,080 NSAPCE - 390,616 LINE MUSIC 9,452,947 475,747 LINE Part Time Job 3,567,431 2,998 Synapsoft - 825,616 Transcosmos online communications 788,481 - Yume no Machi Souzou Iinkai 1,478,795 1,066,167 Alchera - 293,959 Bigpicture Comics - 766,309 Line Mobile 2,154,269 477,807 Orpeo Sound Works - 578,950 Others 218,088 427,305 Joint ventures YTN PLUS - 1,337,983 Collab+LINE - 26,673 JobsN 2,224 1,077,650 RABBIT-LINE PAY COMPANY 2,148,407 322,135 Cineplay - 1,348,204 China Lab - 906,989 Designpress 500 881,414 YEOPEUL 1,500 1,658,694 Schooljam - 848,513 Sumlab - 822,879 Techplus - 1,021,957 Animal and Human Story - 742,084 Law and Media - 747,000 Agroplus - 782,400 Interbiz - 1,052,500 Artitian - 789,160 Lantu Games 21,087 - Others 1 Connect foundation 1,227,987 7,000,228 Happybean foundation 732,906 800 NAVER Cultural foundation 133,895 326 EVERYOUNG KOREA 70,867 3,029,784 Iscon - 2,525

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

disclosed.

Outstanding balances of receivables and payables arising from sales and purchases of goods and services as at September 30, 2019 and December 31, 2018, are as follows:

(in thousands of Korean won) September 30, 2019 Receivables Payables Other Accrued Trade receivables Other expenses receivables and others payables and others

Associates KG Allat ￦ 56,492 ￦ - ￦ - ￦ - Synapsoft - - 420,000 - ARO In Tech - - 82,555 - FOLIO Holdings 51,773 - - - Bigpicture Comics - - 185,012 - Studio JHS - - 37,976 - AXIS - 1,320,366 - - LINE Music 3,232,609 480,819 4,009,861 - Yume no machi Souzou Iinkai 316,461 - 3,282,395 265,020 Transcosmos Online Communication 338,039 3,152 - - LINE Mobile 2,117,486 633,205 954,694 295,492 Venture republic 655,563 - - - LINE Games 84,378 17,503 - - iPASS 2,664,271 78,071 2,452,882 - Others 12,838 - 111,908 - Joint ventures China Lab 11,000 - 370,525 - JobsN 237,828 - 140,816 - Designpress 11,440 - 93,764 - Interbiz 57,200 - 68,376 - Agroplus 14,080 200 106,277 - Sumlab - - 122,967 - Techplus - - 290,432 - Lantu Games Limited - 1,279,572 - - RABBIT-LINE PAY COMPANY 333,621 437,030 233,600 53,302 Others 17,644 - 145,792 5,944 Others1 Happybean foundation 136,793 21,938 587,419 - NAVER Cultural foundation 26,603 900 - - Connect foundation 204,939 2,098 537 37,014

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

(in thousands of Korean won) December 31, 2018 Receivables Payables Other Accrued Trade receivables Other expenses receivables and others payables and others

Associates Synapsoft ￦ - ￦ - ￦ 1,220,000 ￦ - AXIS - 806,150 - - LINE Music 2,471,430 447,832 3,024,936 - Yume no machi Souzou Iinkai 354,040 - 3,142,080 342,886 Transcosmos Online Communication 182,825 - - - LINE Mobile 1,254,238 266,057 275,278 110,043 Orpeo Sound Works 22 - 176,800 - iPASS 946,157 48,724 2,319,191 - Others 167,877 13,980 304,924 13,921 Joint ventures YTN PLUS - - 178,767 - China Lab 7,700 - 372,430 - JobsN 267,521 - 63,965 - Sumlab - - 230,547 - Techplus - - 265,475 - Lantu Games Limited - 1,152,342 - - RABBIT-LINE PAY COMPANY 927,659 238,562 195,978 - Others 117,700 - 235,197 - Others1 Happybean foundation 109,871 8,931 934,503 - NAVER Cultural foundation 22,103 - - - Connect foundation 447,933 147 - -

There is no loss allowance recognized in relation to the receivables due from related parties.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

Fund transactions with related parties for the nine-month periods ended September 30, 2019 and 2018, are as follows:

(in thousands of Korean won) 2019 Contributions in Dividends received cash and others

Associates Mirae Asset-NAVER New Growth Fund 1 \ 10,000,000 \ - LINE Music 1,364 - K-FundⅠ 57,945,298 - Laiqu Technology (Shenzhen) 865,999 - LINE Mobile 30,465,117 - MiraeAsset-Naver Asia Growth Fund 26,355,000 - MIRAE ASSET-NAVER ASIA GROWTH INVESTMENT 104,953,634 - China Ventures Fund I, L.P. 1 73,017,655 - JQ COMICS 350,325 - ZK Studio 400,000 - Soo COMICS 400,000 - PT. Bank KEB HANA Indonesia 159,175,419 - ARO In Tech - 6,800 Future Creation NAVER-SB Startup Investment Fund - 3,618,209 MiraeAsset MAPS Private Placement Real Estate 62 - 3,268,250 Joint ventures Lantu Games Limited 2,386,200 - Kasikorn LINE 38,427,011 -

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

(in thousands of Korean won) 2018 Contributions in Dividends received

cash and others Loans

Associates MiraeAsset MAPS Private Placement Real ￦ 196,330,551 ￦ 3,270,894 ￦ - Estate 62 LINE Mobile 98,517,235 - - Mirae Asset-NAVER Asia Growth Fund 85,708,467 - - K-Fund I 76,660,673 - - FOLIO Holdings 56,829,616 - - Venture Republic 16,964,826 - - iPASS 12,433,800 - - LINE Music 11,927,760 - - CHINA VENTURES FUND I, L.P. 3,330,600 - - AXIS 3,000,000 - 800,000 Rock Square 1,500,120 - - Korea Contents Mutual Aid Association 2,000,000 - - NAVER-Suprema Youth Foundation No.5 1,500,000 220,379 - Investment Fund Lensa, Ltd 966,221 - - Bigpicture Comics 700,033 - - Studio JHS 700,033 - - Laiqu Technology (Shenzhen) Co., Ltd 678,157 - - Bravepops 648,294 - - Nano Interactive 174,236 - - NAVER KIP Cheer up! Gamers Fund - 500,000 - Mirae Asset-NAVER New Growth Fund 1 - 999,824 - BonAngels Pacemaker Fund - 750,000 - Future Creation NAVER-SB Startup - 1,707,292 - Investment Fund ARO In Tech - 4,800 - Joint venture Lantu Games 2,238,500 - 1,112,700

The compensation paid or payable to key management (executive directors) for their services for the nine-month periods ended September 30, 2019 and 2018, consists of:

(in thousands of Korean won) 2019 2018

Short-term employee benefits \ 3,247,500 \ 1,800,500 Post-employment benefits 963,398 228,178 Other long-term benefits 422,311 1,319,740 Share-based payment expenses 101,863 -

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

17. Discontinued Operation

LINE Corp., the Company’s subsidiary, decided to terminate the service of its subsidiary, MIXRADIO, at the Board of Directors’ meeting in February 2016, and is proceeding to liquidate MIXRADIO. The profit or loss on the related operations are presented as discontinued operations.

Profit (loss) from discontinued operations for the three-month and nine-month periods ended September 30, 2019 and 2018, are as follows:

(in thousands of Korean won) 2019 2018 Three months Nine months Three months Nine months

Operating revenues \ - \ - \ - \ - Operating expenses - (134) - (54,710) Operating loss - (134) - (54,710) Other income 51,477 54,943 - - Other expenses (216,351) (3,017,523) - - Finance income - - - 184,126 Finance costs - - (8,003) (86,311) Profit (loss) before income tax (164,874) (2,962,714) (8,003) 43,105 Income tax benefit (expense) 5,424 (313,978) (546) 809,609 Profit (loss) for the period from discontinued operations \ (159,450) \ (3,276,692) \ (8,549) \ 852,714

Summarized cash flows from discontinued operations for the nine-month periods ended September 30, 2019 and 2018, are as follows:

(in thousands of Korean won) 2019 2018

Cash flows from operating activities \ (133) \ (116,690) Cash flows from investing activities - - Cash flows from financing activities - - Effects of foreign currency translation on cash and

cash equivalents 41,682 85,156 Net cash inflow (outflow) \ 41,549 \ (31,534)

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

18. Changes in Accounting Policies

18.1 Adoption of Korean IFRS 1116 Leases

As explained in Note 2.1.1, the Group has adopted Korean IFRS 1116, retrospectively, from January 1, 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new lease standards are, therefore, recognized in the consolidated statement of financial position on January 1, 2019.

18.2 Adjustments Recognized on Adoption of Korean IFRS 1116 Leases

On adoption of Korean IFRS 1116, the Group recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of Korean IFRS 1017. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as at January 1, 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 2.34%.

For leases previously classified as ‘finance leases’, the Group recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application. The measurement principles of Korean IFRS 1116 are only applied after that date. The remeasurements to the lease liabilities were recognized as adjustments to the related right-of-use assets immediately after the date of initial application.

(in thousands of Korean won) 2019

Discounted using the lessee’s incremental borrowing rate as at the date of

initial application \ 564,557,248 Less: short-term leases recognized on a straight-line basis as expense (5,116,751) Add: including non-lease components (administrative expenses and

others) 16,012,399 Lease liability recognized as at January 1, 2019 575,452,896 Of which are: Current lease liabilities 125,026,228 Non-current lease liabilities 450,426,668 \ 575,452,896

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

(i) Amounts recognized in the consolidated statement of financial position

The consolidated statement of financial position shows the following amounts relating to leases:

(in thousands of Korean won) September 30, 2019 January 1, 2019

Right-of-use assets Properties \ 418,147,078 \ 374,053,077 Vehicles 986,734 868,195 IDC buildings 294,053,376 181,440,606 Leased line 581,965 1,055,356 \ 733,157,975 \ 575,452,896 Lease receivables 357,119 276,976

(in thousands of Korean won) September 30, 2019 January 1, 2019

Lease liabilities Current \ 160,492,599 \ 125,026,228 Non-current 572,665,376 450,426,668 \ 733,157,975 \ 575,452,896

(ii) Amounts recognized in the consolidated statement of comprehensive income

The consolidated statement of comprehensive income shows the following amounts relating to leases:

(in thousands of Korean won) 2019

Depreciation of right-of-use assets Properties \ 89,453,946 Vehicles 505,732 IDC buildings 18,032,177 Leased line 473,390 \ 108,465,245 Interest expense relating to lease liabilities (included in finance cost)1 \ 11,655,042 Expense relating to short-term leases and leases of low-value assets 6,977,267 Expense relating to variable lease payments not included in lease liabilities 64,789,911

1 There is a difference between interest expenses recognized with regard to the leases and interest expenses in the consolidated statement of comprehensive income due to capitalization of borrowing costs.

The total cash outflow and inflow for leases during the nine-month period ended September 30, 2019, were \ 177,946 million and \ 188 million, respectively.

NAVER Corporation and Subsidiaries Notes to the Consolidated Interim Financial Statements September 30, 2019 and 2018 (Unaudited), and December 31, 2018

The change in accounting policy affected the following items in the consolidated statement of financial position on January 1, 2019:

 right-of-use assets: increase by \ 557,417 million

 lease receivables: increased by \ 277 million

 deferred tax assets: increase by \ 123 million

 lease liabilities: increase by \ 575,453 million

 trade and other payables: decrease by \ 17,363 million

The net impact on retained earnings on January 1, 2019, was a decrease of \ 272 million.

(iii) Practical expedients applied

In applying Korean IFRS 1116 for the first time, the Group has used the following practical expedients permitted by the standard:

 the use of a single discount rate to a portfolio of leases with reasonably similar characteristics

 Impairment review of right-of-use assets by reliance on previous assessments on whether leases are onerous contacts

 the accounting for operating leases with a remaining lease term of less than 12 months as at January 1, 2019, as short-term leases

 the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and

 the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease

The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date, the Group relied on its assessment made applying Korean IFRS 1017 and Interpretation 2104 Determining whether an Arrangement contains a Lease.