February 14, 2012 Consolidated Financial Results for the Year Ended December 31, 2011 (Under Japanese GAAP)

Company name: Co., Ltd. Stock exchange listing: Tokyo Stock Exchange Stock Code: 3659 URL: http://www.nexon.co.jp/ Representative: Seung Woo Choi, President and CEO Contact: Owen Mahoney, Chief Financial Officer and Chief Administrative Officer Tel +81-3-3523-7910 Scheduled date of ordinary shareholders’ meeting: March 27, 2012 Scheduled date for filing of annual securities report: March 28, 2012 Scheduled date of commencement of dividend payment: -

(Amounts of less than one million yen are rounded to the nearest million yen) 1.Consolidated Financial Results for the Fiscal Year Ended December 31, 2011 (From January 1, 2011 to December 31, 2011) (1) Consolidated Results of Operations (Percentage show year-on-year changes) Revenues Operating income Ordinary income Net income Million yen % Million yen % Million yen % Million yen % Year ended December 31, 2011 87,613 25.6 38,249 26.7 36,905 29.6 25,755 19.0 Year ended December 31, 2010 69,781 35.3 30,183 49.9 28,479 27.4 21,638 22.5 (Noted)Comprehensive income: Year ended December 31, 2011 20,271 Million yen Year ended December 31, 2010 16,562 Million yen

Net income per Net income per Ratio of ordinary Ratio of operating Return on equity share (basic) share (diluted) income to total income to revenues Yen Yen % % % Year ended December 31, 2011 71.65 68.32 21.8 20.5 43.7 Year ended December 31, 2010 6,131.79 6,128.50 40.0 26.1 43.3 (Reference) Equity in net income of affiliates: Year ended December 31, 2011 -1,316 Million yen Year ended December 31, 2010 -224 Million yen (Note) The Company effected a 1:100 stock splits on July 21, 2011, therefore, basic net income per share and diluted net income per share for the Year ended December 31, 2011 are prepared to reflect the stock split, while the per share information for the Year ended December 31, 2010 does not reflect the stock split .

(2) Consolidated Financial Position Net assets Total assets Net assets Equity ratio per share Million yen Million yen % Yen December 31, 2011 235,765 177,886 73.8 408.28 December 31, 2010 123,717 66,904 50.5 17,714.50 (Reference) Shareholders' equity As of December 31, 2011 173,979 Million yen As of December 31, 2010 62,512 Million yen (Note) The Company effected a 1:100 stock splits on July 21, 2011, therefore, basic net income per share and diluted net income per share for the Year ended December 31, 2011 are prepared to reflect the stock split, while the per share information for the Year ended December 31, 2010 does not reflect the stock split .

(3) Consolidated Cash Flows Cash flows from operating Cash flows from investing Cash flows from financing Cash and cash equivalents at activities activities activities end of fiscal year Million yen Million yen Million yen Million yen Year ended December 31, 2011 39,762 -29,486 83,499 117,598 Year ended December 31, 2010 34,046 -29,366 2,871 24,473

2. Dividends Dividend per share Ratio of dividends Total dividends Payout ratio End of End of to net assets End of first quarter Year-end Total (annual) (consolidated) second quarter third quarter (consolidated) Yen Yen Yen Yen Yen Million yen % % Year ended December 31, 2010 ― 0.00 ― 300.00 300.00 1,058 4.9 2.0 Year ended December 31, 2011 ― 0.00 ― 0.00 0.00 ― ― ― Year ended December 31, 2012 ― ― ― ― ― ― (forecast)

3. Consolidated Forecast for the Fiscal Year Ending December 31, 2012 (From January 1, 2012 to December 31, 2012) (Percentage figures for the fiscal year represent the changes from the previous year, while percentages figures for the six months period represent the changes from the same period of the previous year) Net income Revenues Operating income Ordinary income Net income per share Million yen % Million yen % Million yen % Million yen % Yen Six months ending June 30, 2012 46,720 13.2 19,705 9.8 19,940 10.1 14,563 14.6 34.18 Year ending December 31, 2012 102,086 16.5 45,259 18.3 45,850 24.2 33,516 30.1 78.65

4. Others (1) Changes of important subsidiaries during the period (changes of specific subsidiaries in accordance with changes in the scope of consolidation): No Addition: ― Exclusion: ―

(2) Changes in accounting policies, procedures, and the method of presentation (i) Changes due to revision of accounting standards, etc.: Yes (ii) Changes other than (i): No

(3) Number of shares outstanding (common stock) (i) Number of shares outstanding at end of period (including treasury stock) As of December 31, 2011 426,132,900 shares As of December 31, 2010 3,528,889 shares (ii) Number of treasury stock at end of period As of December 31, 2011 - shares As of December 31, 2010 - shares (iii) Number of weighted average shares during the period As of December 31, 2011 359,484,592 shares As of December 31, 2010 3,528,889 shares (Note) The Company effected a 1:100 stock splits on July 21, 2011 (Reference) Summary of Non-Consolidated Financial Results 1. Non-Consolidated Financial Results for the Fiscal Year Ended December 31, 2011 (From January 1, 2011 to December 31, 2011) (1)Non-Consolidated Financial Results (Percentage show year-on-year changes.) Revenues Operating income Ordinary income Net income Million yen % Million yen % Million yen % Million yen % Year ended December 31, 2011 13,033 9.6 2,391 -37.6 2,521 -34.4 1,521 -31.2 Year ended December 31, 2010 11,893 -1.7 3,830 0.7 3,841 -7.7 2,210 14.3

Net income Net income per share (basic) per share (diluted) Yen Yen Year ended December 31, 2011 4.23 4.04 Year ended December 31, 2010 626.31 ― (Note) 1. Diluted net income per share for the year ended December 31, 2010 is not disclosed as the Company was then a private company and the average share price during the year is not available. 2. The Company effected a 1:100 stock splits on July 21, 2011, therefore, basic net income per share and diluted net income per share for the Year ended December 31, 2011are prepared to reflect the stock split, while the per share information for the Year ended December 31, 2010 does not reflect the stock split .

(2) Non-Consolidated Financial Position Net assets Total assets Net assets Equity ratio per share Million yen Million yen % Yen Year ended December 31, 2011 128,065 106,459 82.8 248.76 Year ended December 31, 2010 36,228 14,200 38.2 3,919.50 (Reference) Shareholders' equity As of December 31, 2011 106,004 Million yen As of December 31, 2010 13,831 Million yen (Note) The Company effected a 1:100 stock splits on July 21, 2011, therefore, basic net assets per share and diluted net assets per share at the Year ended December 31, 2011 are prepared to reflect the stock split, while the per share information at December 31, 2010 does not reflect the stock split .

* Status of Audit Procedures At the time of disclosure of the consolidated financial results for the year ended December 31, 2011, audit procedures for the consolidated financial statements based on the provisions of the Financial Instruments and Exchange Act are being performed.

* Explanations and other special notes concerning the appropriate use of performance results forecast (Cautionary Statement regarding forward-looking forecast) -Forward-looking statements including the performance results forecast provided in this document is based on currently available information and certain assumptions deemed reasonable. Actual results may differ from these forecasts for a variety of reasons. (Regarding the stock split) The Company effected a stock split with the record date of July 20, 2011 and the effective date of July 21, 2011, following a resolution of the Company’s board of directors meeting held on June 17, 2011. (Supplemental material for financial results) Supplemental material for financial results is included in "Financial results for the year ended December 31, 2011" disclosed on February 14, 2012 and is also available on our web site from February 14, 2012. Consolidated Forecast for the Fiscal Year Ending December 31, 2012 (From January 1, 2012 to December 31, 2012) (Percentage figures for the fiscal year represent the changes from the previous year, while percentages figures for the three months period represent the changes from the same period of the previous year) Net income Revenues Operating income Ordinary income Net income per share Million yen % Million yen % Million yen % Million yen % Yen Three months ending March 31, 2012 24,124 15.9 10,410 11.5 10,516 3.6 7,720 1.8 18.12 Besides the consolidated performance forecasts for the six months ending June 30, 2012 and the forecast for the Year ending December 31, 2012, the Company also announces the performance forecast for the first quarter ended InMarch addition, 31, 2012. when the Company calculates the revised performance forecast that operating income, ordinary income, net income to be deviated more than 30% from the latest released forecast, or revenue to be deviated 10% from the latest released forecast, the Company will release the announcement of updated performance forecast. 1. Qualitative information (1) Qualitative information on consolidated results of operations During the fiscal year ended December 31, 2011, the world economy experienced a downturn due to risks associated with the European debt problem. While the economies in Asian countries, including China and India, continued to grow (mainly as a result of strong domestic demand), the growth rate in the U.S. slowed due to high unemployment rates and the continued decline of housing prices. The European economy also slowed due to concerns about the impact of financial austerity measure and the financial crisis in certain countries. As a result of the Great East Japan Earthquake and the nuclear power plant disaster, Japanese economic activity, primarily in eastern Japan, has been partially paralyzed. Coupled with the rapid appreciation of the yen and concerns about the slowing global economy, the outlook of the domestic economy and individual consumption is uncertain. The Group is primarily engaged in the online games business, as well as the mobile games business and other businesses, and provides a wide range of customers with high quality services. To accommodate the diversifying needs of users, we focus on updating and distributing existing and new game titles. As a result of our efforts, we recorded consolidated revenue of ¥87,613 million (an increase of 25.6% year-over- year), operating income of ¥38,249 million (an increase of 26.7% year-over-year), ordinary income of ¥36,905 million (an increase of 29.6% year-over-year) and net income of ¥25,755 million (an increase of 19.0% year-over- year). Performance results by reporting segments, presented as revenue to third party customers are as follows: (a) Japan In Japan, major updates for our leading existing game titles, such as MapleStory Dungeon&Fighter and TalesWeaver, the expansion of new platforms and devices such as Smartphone and tablets, and our newly launched title Mabinogi Heroes (known as Vindictus in North America and Europe), contributed to Japan’s revenue totaling ¥13,012 million. The segment income recorded ¥2,202 million due to IPO related expenses. (b) Korea In Korea, a continued increase in royalty income from Dungeon&Fighter in China and updates for existing game titles such as MapleStory and Dungeon&Fighter drove the revenue of ¥63,173 million. Despite the customer center construction investment, segment income of ¥33,741 million was recorded. In addition, the strengthening Japanese yen against the Korean Won had a minor impact on its high growth rate. (c) China In China, consulting fees were up due to an increase in online game users combined with broadband Internet penetration growth, resulting in revenue of ¥3,146 million and segment income of ¥2,028 million. (d) North America In North America, revenue was ¥6,210 million, driven by our new game Dragon Nest, the Group’s new Facebook-platform game title MapleStory Adventures and aggressive marketing activities such as attending E3 (Note). Recruitment of human resources resulted in segment loss of ¥274 million. (e) Other In other areas, revenue of existing game titles showed steady growth, mainly in Europe. Revenue amounted to ¥2,071 million and segment income amounted to ¥478 million. (Note) E3: The Electronic Entertainment Expo, commonly known as E3, is an annual trade fair for the computer and video game industry. In addition, please refer to the Shareholder Letter disclosed on February 14, 2012 for detailed consolidated financial information. (2) Qualitative information on consolidated financial position (a) Assets, debt and net assets Assets as of December 31, 2011 amounted to ¥235,765 million. Major components included cash and deposits of ¥132,479 million, notes and accounts receivable-trade of ¥13,845 million, games copyright of ¥31,163 million, goodwill of ¥11,595 million, and investment securities of ¥17,002 million. Debt as of December 31 2011 amounted to ¥57,878 million. Major components included income taxes payable of ¥6,671 million, unearned revenue of ¥8,111 million, long-term loans payable of ¥18,567 million, deferred tax liabilities of ¥4,536 million. Therefore, net assets as of December 31, 2011 amounted to ¥177,886 million, and equity ratio was 73.8%.

- 1 - (b) Cash flow Cash and cash equivalents (“Cash”) as of December 31, 2011 amounted to ¥117,598 million, an increase of ¥93,125 million from the previous fiscal year. Cash flows from each activity for fiscal year ended December 31, 2011 and their significant components are as follows: (Cash flows from operating activities) Net cash provided by operating activities amounted to ¥39,762 million. Major components included income before income taxes and minority interests of ¥35,500 million, depreciation and amortization of ¥9,435 million, an increase in unearned revenue of ¥6,934 million, and an increase in notes and accounts receivable-trade of ¥3,842 million. (Cash flows from investing activities) Net cash used in investing activities amounted to ¥29,486 million. Major components included purchase of property, plant and equipment of ¥12,988 million, and purchase of investment securities of ¥5,623 million. (Cash flows from financing activities) Net cash used in financing activities amounted to ¥83,499 million. Major components included proceeds from the issuance of common stock of ¥87,005 million.

(Reference) The trends of cash flow index are as follows: Year ended Year ended

December 31, 2010 December 31, 2011 Equity ratio (%) 50.5 73.8

Equity ratio at fair value (%) - 200.1

Liabilities to cash flow ratio (years) 72.1 56.7

Interest coverage ratio (times) 44.9 68.5 (Note1) All of the above ratios are calculated from our consolidated financial statements. (Note2) Market capitalization is calculated based on the number of shares outstanding, excluding treasury stock. (Note3) Cash flows from operating activities are derived from our consolidated cash flow statement. (Note4) Interest-bearing debt covers all liabilities with interest in our consolidated balance sheet. (Note5) Equity ratio at fair market price (%) for the year ended December 31, 2010 is not presented since the Company's shares were unlisted for this period. (3) Qualitative information on consolidated performance forecasts The Group, pioneered the concept of “Free-to-Play”(Note) in the online games business, operates the development of online games, publishes games for related online games businesses and provides online games services of various genres for the various regions of Japan, Korea, China, America, Europe. Based on stable operational experience that has been accumulated from our key existing titles such as MapleStory, Mabinogi, Dungeon&Fighter, we will also start the service of new titles leveraging the large user base from our existing titles to expand the scale of our business in the fiscal year ended December 31, 2012. In addition, we plan to accelerate the business growth by expanding our business not only with new game titles, but also on new devices and platforms such as Smartphone and tablets. In Japan, we continue to seek growth opportunities by implementing efficient and effective marketing activities to increase our user base, providing compelling content, and focusing on providing continuous updates for our major titles such as MapleStory, Mabinogi, and Dungeon&Fighter. In addition, we will continue to expand our business by effectively operating our game service in our game pipeline, as well as through our new title Mabinogi Heroes (known as Vindictus in North America and Europe) that launched in the second half of 2011. In Korea, in addition to our major titles such as MapleStory, Mabinogi, and Dungeon&Fighter, we also expect growth from our publishing title, Sudden Attack, that we started service for in the second half of 2012, and Cyphers that launched in June 2011. In addition, we also plan to expand the business through the launch of new online games and the development of mobile platforms. In China where Dungeon&Fighter is gathering a high user base, we are continuously expanding our business through excellent collaboration and smooth communication with our local partners, and by providing new content. We also expect continued growth from our popular titles such as Counter-Strike Online and MapleStory. - 2 - In North America, we believe that over time, our existing titles such as Combat Arms and MapleStory, and several other new published games will drive further growth. On the other hand, the company’s forward-looking statement with the foreign exchange rates assumption of 14.70 Korean Won against Japanese Yen, and U.S. dollar against 77 Japanese Yen, are subject to fluctuations in real currencies, therefore the actual results could differ materially from expectations. The expected foreign exchange rate is calculated based on historical trends and management's views. Based on the above forward-looking statement, for the fiscal year 2012 the Group expect consolidated revenue to be ¥102,086 million (an increase of 16.5% year-over-year), operating income to be ¥45,259 million (an increase of 18.3% year-over-year), ordinary income to be ¥45,850 million (an increase of 24.2% year-over-year), net income to be ¥33,516 million (an increase of 30.1% year-over-year). In addition, the business outlook for the first quarter ended March 31, 2012 are as follows: consolidated revenue to be ¥24,124 million (an increase of 15.9%year-over-year), operating income to be ¥10,410 million (an increase of 11.5% year-over-year), ordinary income to be ¥10,516 million (an increase of 3.6% year-over-year), quarterly net income to be ¥7,720 million (an increase of 1.8% year-over-year). (Note) A model of monetization that user could participate in game for free. (4) Basic Policy on the Distribution of Profits Guided by the fundamental principles of protecting investor interests, our dividend policy is to return profits to our shareholders through the distribution of dividends only after careful consideration of shareholders’ equity, our performance and anticipated earnings, and in line with our anticipated performance development. We aim to effectively use retained earnings to develop new businesses and expand our existing business, including through M&A and the acquisition of game copyrights, for the purpose of strengthening our foundation and making improvements in various areas of business. The company recorded net income of ¥25,755 million in the year ended December 31, 2011, however, after careful consideration of future investment opportunities, we decided not to pay dividends in this fiscal year. We will fully consider the dividend payment in the next fiscal year and in line with our basic dividend policy. Basically, the dividends payment is made once a year at year-end with the resolution of our Board of Directors. Our Articles of Incorporation further stipulates that “the decisions of the Company with regards to dividends from surplus and other matters as stipulated under each provision of Article 459 (1) of the Companies Act shall not require a resolution of the General Meeting of Shareholders but shall be decided by a resolution of the Board of Directors, except when otherwise provided for by laws and regulations;” that “the record date for the Company’s year-end dividends shall be December 31 of each year;” and that “the record date for the Company’s interim dividends shall be June 30 of each year.”

- 3 - 2. Current status of Corporate Group As of December 31, 2011, the Group, which consists of the Company, 22 consolidated subsidiaries and 11 affiliated companies, is engaged in production/development and distribution of on-line games. The Company (in Japan) and its local consolidated subsidiaries (overseas) develop overall strategies and operate business activities for their respective merchandises and services in each region as independent units. Accordingly, the Group consists of geographical segments based on production and development as well as distribution of online games. The reportable segments include “Japan,” “Korea,” “China,” and “North America,” and “Other” includes the United Kingdom and other European countries. Japan: The Company Korea: NEXON Korea Corporation; Quad Dimensions Co., Ltd.; NEOPLE INC.; Nexon mobile Corporation, Nexon Networks Corporation; Nexon Nova Corporation; Copersons Corporation; ExC Games Corporation; Qbious Co., Ltd.; NexToric Corporations; Ndoors Corporation; GameHi Co., Ltd.; NEXON COMMUNICATIONS Co., Ltd. China: Lexian Software Development (Shanghai) Co., Ltd. North America: Nexon America Inc.; Fantage.com Inc.; Wawagames Inc.; GameHi Inc.; Ndoors Interactive, Inc. Other: Nexon Europe Limited; NEXON Europe S.à.r.l.; Ndoors Interactive Philippine, Inc.

The business activities that the Group is engaged in are limited to production/development and distribution of on- line games. Accordingly, the per-type segment information of business activities is omitted from the disclosure. The Group’s business sectors are divided into the following three departments: (a) Online game business; (b) Mobile game business; and (c) Other business. (1) Business department (a) Online game business department The primary business activities of the online game business department are production/development and distribution of online games. Online games are those in which many game players who are interlinked through the internet game server and play games on a real time basis. The online games are categorized into two groups, PC-type and console-type (Note 1), pursuant to the platform each game is structured. The online games that the Group distributes are PC platform types that users play through the Internet. The Group has produced, developed and distributed various game titles since the former Nexon Corporation (presently called NXC Corporation) commenced distribution of a graphic online game entitled “The Kingdom of the Winds” in 1996. The Group currently distributes a wide variety of online games including but not limited to MORPG (Note 2), MMORPG (Note 3), FPS (Note 4) and casual games (Note 5) in various countries around the world. During the period that ended December 2011, the sales of PC-type online games accounted for more than 90% of the overall consolidated gross sales. The Company and NEXON Korea Corporation have been spear heading market development activities in this business sector. The major game titles that the Group distributes include MapleStory, Mabinogi, KartRider, Dungeon&Fighter, and Counter-Strike Online. At the time of deciding to introduce a new game title, the Company first evaluates users’ characteristics and preferences in each area as well as the appropriateness of the genre of the game under consideration. Then based on the evaluation results distribution commences on a trial basis. Accordingly, the Company selects a game title to flexibly address the changing market. The Company has been distributing online games developed by the group in various countries through respective group member companies. By establishing a closely coordinated structure for production and development as well as distribution of online games, the Company has been maximizing the synergy effects. In addition, the company has set up a mechanism to distribute online games that were originally developed by other companies through the group owned site to secure and distribute the wide variety of game titles and to appropriately address the ever diversifying needs of users. As of December 31, 2011, the Group was distributing in Japan a total of 28 titles of online games that the group proprietarily developed along with those developed by other companies, 41 titles in Korea, 10 titles in China and 17 titles in North America. Furthermore, within those regions where the Group has not directly engaged in businesses, the Group has been distributing the online games that the Group proprietarily produced through local distribution companies so that the Group can provide services that are backed up by the Group’s name recognition and online game distribution know-how so that users around the world would have more opportunities to enjoy online games. (Note 1) Console: a term indicates home-use game machine; (Note 2) MORPG: Multi-player Online Role-Playing Game. The game is different from MMORPG in the

- 4 - number of players who play in the game world; (Note 3) MMORPG: Massively Multiplayer Online Role-Playing Game; (Note 4) FPS: First-person shooters are a type of three-dimensional graphics shooter game featuring a “first- person point of view” with which the gamer sees the action through the eyes of the player character. The primary design element is a combat character with firearms who fights against enemies. In contrast to conventional action games in which gamers control from the back of the player character, First person shooters allow the gamer to experience realistic sensations or sense of urgency as if the gamer is actually present at the combat scene. (Note 5) Casual game: Casual games are simple to operate and do not require a long-term time commitment to play.

(b) Mobile game business department The primary business activities of the mobile game business department are production and development as well as distribution of mobile device games. Mobile device game is a type of game in which gamers play games on mobile devices such as cellular phones, personal digital assistants (PDAs), Smartphone (Note), etc.

Mobile games have advanced drastically both qualitatively and quantitatively primarily due to the performance of mobile phones which have drastically improved due to the introduction of high-end devices with touch-pad platforms along with an advancement and augmentation of the G3 data communication infrastructure-related technologies. The Group with the intent of effectively utilizing self-owned intellectual properties (IPs) has been developing mobile game contents taking advantage of the existing IPs of the main-line online game contents primarily at Nexon mobile Corporation. In Asia, the Group has been focusing on Japan where there is substantial mobile phone usage and China where dissemination of mobile terminals are progressing. In addition, the Group will promote mobile game business operations in the Korean market where a formation of mobile game market primarily among the users of Smartphone is expected. (Note) Smartphone: A multi-functionality mobile terminal that mainly combines the functions of a cellular phone and PHS as well as a personal digital assistant (PDA). (c) Other business department The primary business activities of the other business department are online game distribution related to consulting services, in-game advertisement business and merchandising business operations.

As for the consulting services, Lexian Software Development Co., Ltd. provides Chinese domestic distribution companies with consulting services for setting up and maintaining billing systems (Note) and membership systems, business strategy formations, game business management, and marketing.

In addition, NEXON Networks Corporation provides Korean companies with services for clients to provide assistance in running online game operations and managing net-cafés.

The in-game advertisement business department has been developing its activities by taking advantage of its two unique characteristics. The first characteristic is the ability to continuously update game contents or advertisement content, a primary strength for online game advertisements, so that direct exposures by using functional items that are equipped with an advertisement function in the game can be secured, and the other is the simultaneous use of different advertisements that are exposed to targeted users through dedicated servers that aggregately manage all the advertisements.

The merchandising business is engaged in operations to produce and market merchandises from popular characters of the Group owned games. The Group has been continuously introducing merchandises taking advantage of popular characters of our online games including but not limited to MapleStory and Dungeon&Fighter .The group has adopted a merchandising business strategy in which the Group does not directly manufacture merchandises but grant a right to use the characters to licensees and recognize a certain portion of the gross sales as income from royalty.

(Note) Billing system: An electronic confirmation service that account for, in a detailed manner, the usage of services that enterprises provide through the Internet or emails.

(2) Online game business model

The Group’s online game business models can be categorized into the following three types. - 5 - (a) Self distribution model

The self distribution model is a model in which the group sets up a group of servers through which the Group directly distributes self developed games without relying on outside game management companies, markets the service on its own, provide clients with supporting services and directly provide users with game services.

After commencing to distribute services, the company will collect user charges pursuant to a pre-determined charging policy. However, in most cases, the Group has retained the closing agent business services for fees to collect user charges.

(b) License granting model

The Group as the owner of the copyright of self-developed games enters into licensing agreements with outside distribution companies and grants distribution rights.

The grantee of the distribution right itself will assume the responsibility of managing servers that are necessary to provide services, client marketing, and client support services. At the same time, member companies of the Group that hold the copyright of the games will support the actions of the grantee for the purpose of increasing its profit.

In our group, this model has been adopted by NEXON Korea Corporation or NEOPLE Inc. that are directly engaged in game development operations.

The Group in principle executes only one license agreement for a game in each country. Accordingly, the Group grants a local distribution company with an exclusive right to distribute. In this context, member companies of the Group that owns the copyright of the subject game will provide updates of the content of the game in a continuous manner or necessary technical supports, and collect a contract payment at the time of executing the contract with a distribution company, and after distribution service has commenced, receive a certain portion the service charges that the distribution company collects from users as a royalty payment.

The terms and condition of the royalty payments are stipulated in an individual agreement pursuant to conditions of the area where the local distribution company is located.

(c) License distribution model

This is a model that works in a reversed manner to the above mentioned license granting model. The Group executes a license agreement with an outside online game developer (hereunder called “Development Company”), obtains a local exclusive distribution right, and sets up a group of servers through which the company provides services, markets the service on its own, provides clients with supporting services and directly provides users with game services.

The Group collects service charges from users, and a certain amount of royalty payment will be made to Development Company. In the Group, the deal with Valve Corporation falls into this category. (Game title: Counter-Strike Online)

(3) Online game monetization model

With respect to the current online game monetization model, the provider charges a fee for playing a game and raises revenue. The billing method can be categorized into the following three types. In this context, the Group in principle has adopted type (a). (a) Item-based revenue model, a fee is charged at the time of purchasing items

Basic usage of games is free. However, certain payments are charged at the time of purchasing necessary items (costumes or weapons) or using certain services.

To ease the mental hurdle at the initial stage of playing online games, new users will be able to easily start playing games. However, the amount of sales will be impacted by the attractiveness of the items on sale. In recent years, more online games have come to adopt this method to entertain new users as the recognition of the market improves.

The Group, with the intent of attracting more users to this service, has been the first to provide the item-by- item charge method for online games. (b) Pay-as-you-go according to the term of usage (Fixed amount charge method) Pay-as-you-go (fixed amount charge) method is a method to charge users for playing games in a manner in

- 6 - which a fixed amount per month, day or hour is charged to users. Under this method, it is possible to generate a constant level of sales by securing a certain number of users. However, it is probable that new users may feel intimidated with the idea of committing to a fixed amount every month. (c) Advertisement revenue model Basic usage of games is free. The service provider raise revenues from advertisements that are inserted either at the beginning, ending or during the games. Under this method, advertisements are primarily sponsored by businesses, thus, it is commonly combined with the above methods of (a) or (b). The popularity of the game itself (user attractions) will have a direct impact.

- 7 - [Business system chart] Chart No.1 presents a business system chart describing the above described matters per reporting segment. (Note) In principle, the company grants one local company exclusive rights to distribute a game in each country.

Normal User Normal User Normal User

Game usage collecting

Payment gateway company Payment Game Service Game Service Payment

Commission Payment

The Group License Granting (Note) < China >

Publishing Company Consulting (licensees)

Online Mobile Royalty Other China game game (License fee) business Publishing business business Company

Developing Company (licenser) Outsourcing Payroll

License Granting

The flow of royalty income within the Group is presented in Chart No.2. The chart only covers the flow for the company and primary subsidiaries. Heavy lines represent major flows.

Other publishing company GameHi Co., Ltd. (Licensees) (Korea)

Ndoors Corporation (Korea) The Company Nexon America Inc. (United States)

Other developing company Nexon Europe Limited (Licenser) (United Kingdom) Nexon Korea Corporation (Korea)

NEXON Europe S.à.r.l. NEOPLE INC.(Korea) (Luxemburg)

- 8 - 3. Management Policy (1) Company’s Basic Management Policy Under management philosophy, “Globalization & Creativity - Connecting the world by developing new value and innovative entertainment -”, the Group define the management policy and values as “aspiring to be “the world’s leading entertainment company” through “Innovation”, “Challenge”, and “Globalization”. The Group operates in different countries, with NEXON Co., Ltd as our core company. The Company is an operating holding company. While we have game-related enterprises with focus on online game distribution business in Japan, we also administer overseas affiliate companies. The Group has subsidiaries (NEXON Korea Corporation, Nexon America Inc., Nexon Europe Limited and NEXON Europe S.à.r.l.) that distribute games in main overseas markets. The Group hold 100% of the companies’ shares, thus managing them as consolidated subsidiaries. NEXON Korea Corporation, with other developers under its umbrella, takes charge of game production and development as well as owns intellectual property rights such as game copyrights. It has an exclusive games’ distribution agreement (grants the license) with group publishing companies or third parties in each region and receives royalty fees. In China, due to the regulatory restrictions, foreign invested companies cannot directly distribute online games. The consolidated subsidiary, Lexian Software Development (Shanghai) Co., Ltd. provides necessary infrastructures for commercial online game operators as well as due consultation (such as business strategy, game administration, marketing) for game content provision operation in the country. Korean subsidiaries such as NEXON Korea Corporation, which owns game intellectual property rights, directly license our games to those that have the necessary business infrastructure and know-how. NEXON Korea Corporation releases Dungeon&Fighters through Tencent Technology (Shenzhen) Co., Ltd.. Headed by our development team, we are constantly developing in-house online game software that appeals to international markets. We are also conducting joint development with other developers and acquiring game intellectual property rights from other developers by investing in them or buying them.

(2) Targeted Management Indicators As targeted management indicators, the Group set “20% period over period revenue increase” and “40 to 45% of operating margin”. In case the operating margin reaches more than 45%, the Group will actively invest in recruiting and retaining competent people and acquiring promising intellectual property rights. (3) Company’s mid- to long-term Management Strategy The Group is implementing the long term growth strategy relying on the following fundamental principle: Through our “free-to-play” online games, we deliver deeply immersive entertainment and special experiences to a global audience. As the Group is developing this principle according to regional characteristics, and believe - based on our achievement in the past- that the Group can continue to grow steadily through the following key elements: 1. Enhance and extend our existing game franchises 2. Broaden our portfolio through new game introductions 3. Expand our international business 4. Bring our games to new devises and platforms such as Smartphone 5. Build the NEXON brand globally

- 9 - 4. Consolidated financial statements (1) Consolidated balance sheets (Millions of yen) Fiscal Year ended Fiscal Year ended December 31, 2010 December 31, 2011 Assets Current assets Cash and deposits 32,331 132,479 Notes and accounts receivable-trade 10,760 13,845 Short-term investment securities 729 12 Merchandise 20 40 Deferred tax assets 458 233 Other 3,022 4,133 Allowance for doubtful accounts △ 89 △ 22 Total current assets 47,233 150,722 Noncurrent assets Property, plant and equipment Buildings and structures 1,313 1,146 Accumulated depreciation △ 501 △ 587 Buildings and structures, net 812 558 Vehicles 49 36 Accumulated depreciation △ 38 △ 19 Vehicles, net 10 16 Tools, furniture and fixtures 4,796 5,657 Accumulated depreciation △ 3,442 △ 4,186 Tools, furniture and fixtures, net 1,354 1,471 Land 4,675 12,374 Construction in progress 550 1,596 Total property, plant and equipment 7,403 16,016 Intangible assets Games Copyright 40,829 31,163 Goodwill 14,476 11,595 Other 779 1,315 Total intangible assets 56,086 44,074 Investments and other assets Investment securities 7,148 17,002 Long-term loans receivable 171 71 Deferred tax assets 2,742 4,680 Long-term prepaid expenses 405 653 Lease and guarantee deposits 2,192 2,166 Other 2,000 3,194 Allowance for doubtful accounts △ 1,667 △ 2,815 Total investments and other assets 12,994 24,952 Total noncurrent assets 76,483 85,043 Total assets 123,717 235,765

- 10 -

(Millions of yen) Fiscal Year ended Fiscal Year ended December 31, 2010 December 31, 2011 Liabilities Current liabilities Notes and accounts payable-trade 892 981 Short-term loans payable 1,424 - Current portion of long-term loans payable 2,155 2,994 Current portion of convertible bond-type bonds with subscription rights to - 9 shares Accounts payable-other 1,560 2,017 Accrued expenses 704 831 Income taxes payable 6,313 6,671 Deferred tax liabilities 1 110 Unearned revenue 6,843 8,111 Provision for bonuses 610 1,082 Asset retirement obligations - 47 Other 1,664 1,702 Total current liabilities 22,171 24,562 Noncurrent liabilities Convertible bond-type bonds with subscription rights to shares 24 - Long-term loans payable 20,007 18,567 Deferred tax liabilities 7,554 4,536 Long-term unearned revenue 1,144 5,707 Provision for retirement benefits 394 203 Negative goodwill 4,711 3,553 Asset retirement obligations - 117 Other 804 630 Total noncurrent liabilities 34,641 33,316 Total liabilities 56,812 57,878 Net assets Shareholders' equity Capital stock 4,245 50,300 Capital surplus 4,107 50,162 Retained earnings 66,120 90,757 Total shareholders' equity 74,473 191,219 Accumulated other comprehensive income Valuation difference on available-for-sale securities 463 471 Foreign currency translation adjustment △ 12,424 △ 17,711 Total accumulated other comprehensive income △ 11,960 △ 17,239 Subscription rights to shares 368 455 Minority interests 4,022 3,451 Total net assets 66,904 177,886 Total liabilities and net assets 123,717 235,765

- 11 - (2)Consolidated statements of (comprehensive) income (Consolidated Statements of income) (Millions of yen) Fiscal Year ended Fiscal Year ended December 31, 2010 December 31, 2011 Net sales 69,781 87,613 Cost of sales 11,922 14,948 Gross profit 57,858 72,665 Selling, general and administrative expenses 27,675 34,415 Operating income 30,183 38,249 Non-operating income Interest income 504 981 Dividends income 98 18 Gain on sales of investment securities 12 135 Amortization of negative goodwill 1,011 951 Reversal of deferred revenue - 303 Miscellaneous income 416 261 Total non-operating income 2,042 2,652 Non-operating expenses Interest expenses 763 552 Foreign exchange losses 2,453 317 Equity in losses of affiliates 224 1,316 Commission fee 112 128 Provision of allowance for doubtful accounts - 1,314 Miscellaneous expenses 192 367 Total non-operating expenses 3,746 3,997 Ordinary income 28,479 36,905 Extraordinary income Gain on sales of noncurrent assets 6 399 Income from reversal of foreign currency translation adjustments due to 29 - liquidation of overseas subsidiaries Gain on sales of investment securities 928 - Gain on sales of subsidiaries and affiliates' stocks - 80 Gain on prior period adjustment 319 5 Gain on change in equity 335 20 Gain on negative goodwill 259 - Other 82 33 Total extraordinary income 1,960 540 Extraordinary loss Loss on sales and retirement of noncurrent assets 6 18 Loss on valuation of investment securities 136 - Impairment loss 638 1,384 Loss on change in equity 71 36 Settlement package 167 - Loss on adjustment for changes of accounting standard for asset retirement - 3 obligations Loss on step acquisitions 111 - Compensation for damage - 398 Other 26 103 Total extraordinary losses 1,157 1,944 Income before income taxes and minority interests 29,282 35,500 Income taxes-current 11,565 14,641 Income taxes-deferred △ 3,625 △ 4,688 Total income taxes 7,939 9,953 Income before minority interests - 25,547 Minority interests in loss △ 295 △ 208 Net income 21,638 25,755

- 12 -

(Consolidated Statements of comprehensive income) (Millions of yen) Fiscal Year ended Fiscal Year ended December 31, 2010 December 31, 2011 Consolidated statements of comprehensive income Income before minority interests - 25,547 Other comprehensive income Valuation difference on available-for-sale securities - 6 Foreign currency translation adjustment - △ 4,371 Share of other comprehensive income of associates accounted for using - △ 910 equity method Total other comprehensive income - ※2 △ 5,275 Comprehensive income - ※1 20,271 Comprehensive income attributable to Comprehensive income attributable to owners of the parent - 20,476 Comprehensive income attributable to minority interests - △ 205

- 13 - (3)Consolidated statements of changes in net assets (Millions of yen) Fiscal Year ended Fiscal Year ended December 31, 2010 December 31, 2011 Shareholders' equity Capital stock Balance at the end of previous period 4,245 4,245 Changes of items during the period Issuance of new shares - 46,054 Total changes of items during the period - 46,054 Balance at the end of current period 4,245 50,300 Capital surplus Balance at the end of previous period 4,105 4,107 Changes of items during the period Issuance of new shares - 46,054 Other 1 - Total changes of items during the period 1 46,054 Balance at the end of current period 4,107 50,162 Retained earnings Balance at the end of previous period 44,481 66,120 Changes of items during the period Dividends from surplus - △ 1,058 Net income 21,638 25,755 Other - △ 60 Total changes of items during the period 21,638 24,636 Balance at the end of current period 66,120 90,757 Total shareholders' equity Balance at the end of previous period 52,833 74,473 Changes of items during the period Issuance of new shares - 92,109 Dividends from surplus - △ 1,058 Net income 21,638 25,755 Other 1 △ 60 Total changes of items during the period 21,640 116,746 Balance at the end of current period 74,473 191,219

- 14 -

(Millions of yen)

Fiscal Year ended Fiscal Year ended December 31, 2010 December 31, 2011 Accumulated other comprehensive income Valuation difference on available-for-sale securities Balance at the end of previous period 758 463 Changes of items during the period Net changes of items other than shareholders' equity △ 294 8 Total changes of items during the period △ 294 8 Balance at the end of current period 463 471 Foreign currency translation adjustment Balance at the end of previous period △ 7,936 △ 12,424 Changes of items during the period Net changes of items other than shareholders' equity △ 4,487 △ 5,287 Total changes of items during the period △ 4,487 △ 5,287 Balance at the end of current period △ 12,424 △ 17,711 Total accumulated other comprehensive income Balance at the end of previous period △ 7,178 △ 11,960 Changes of items during the period Net changes of items other than shareholders' equity △ 4,782 △ 5,278 Total changes of items during the period △ 4,782 △ 5,278 Balance at the end of current period △ 11,960 △ 17,239 Subscription rights to shares Balance at the end of previous period 231 368 Changes of items during the period Net changes of items other than shareholders' equity 137 86 Total changes of items during the period 137 86 Balance at the end of current period 368 455 Minority interests Balance at the end of previous period 9 4,022 Changes of items during the period Net changes of items other than shareholders' equity 4,013 △ 571 Total changes of items during the period 4,013 △ 571 Balance at the end of current period 4,022 3,451 Total net assets Balance at the end of previous period 45,895 66,904 Changes of items during the period Issuance of new shares - 92,109 Dividends from surplus - △ 1,058 Net income 21,638 25,755 Other 1 △ 60 Net changes of items other than shareholders' equity △ 631 △ 5,763 Total changes of items during the period 21,008 110,982 Balance at the end of current period 66,904 177,886

- 15 - (4) Consolidated statements of cash flows (Millions of yen) Fiscal Year ended Fiscal Year ended December 31, 2010 December 31, 2011 Operating activities Income before income taxes and minority interests 29,282 35,500 Depreciation and amortization 8,785 9,435 Amortization of goodwill 1,855 2,407 Amortization of negative goodwill △ 1,011 △ 951 Gain on negative goodwill △ 259 - Share-based compensation expenses 137 102 Increase in allowance for doubtful accounts 109 1,266 Increase in provision for bonuses 196 525 Decrease in provision for retirement benefits △ 50 △ 181 Interest and dividends income △ 602 △ 1,000 Interest expenses 763 552 Foreign exchange losses 3,815 71 Reversal of deferred revenue - △ 303 Income from reversal of foreign currency translation adjustments △ 29 - Loss (gain) from prior period adjustment △ 319 51 Impairment loss 638 1,384 Loss on valuation of investment securities 136 - Gain on sales of investment securities △ 940 △ 135 Gain on sales of stocks of subsidiaries and affiliates - △ 46 Equity in losses of affiliates 224 1,316 Loss (gain) on change in equity △ 263 15 Loss on step acquisitions 111 - Settlement package 167 - Gain on sales of noncurrent assets - △ 396 Increase in notes and accounts receivable-trade △ 1,163 △ 3,842 Decrease (increase) in other current assets 154 △ 521 Increase in notes and accounts payable-trade 107 146 Increase in unearned revenue 1,470 6,934 Increase in other current liabilities 608 737 Other, net △ 176 846 Subtotal 43,748 53,914 Interest and dividends income received 600 1,047 Interest expenses paid △ 758 △ 580 Settlement package paid - △ 159 Compensation for damage paid - △ 398 Income taxes paid △ 9,544 △ 14,061 Net cash provided by operating activities 34,046 39,762

- 16 -

(Millions of yen)

Fiscal Year ended Fiscal Year ended December 31, 2010 December 31, 2011 Investing activities Decrease (increase) in time deposits 2,266 △ 6,167 Decrease (increase) in short-term investment securities △ 430 709 Purchase of property, plant and equipment △ 1,864 △ 12,988 Proceeds from sales of property, plant and equipment - 2,384 Purchase of intangible assets △ 505 △ 1,099 Payments for long-term prepaid expenses with increase △ 395 △ 523 Payments of short-term loans receivable △ 1,172 △ 1,894 Collection of short-term loans receivable 1,241 311 Payments of long-term loans receivable △ 21 △ 1 Collection of long-term loans receivable 73 39 Purchase of investment securities △ 2,657 △ 5,623 Proceeds from sales of investment securities 1,287 837 Increase in lease and guarantee deposits △ 916 △ 89 Purchase of investments in subsidiaries △ 3,047 △ 960 Purchase of stocks of subsidiaries and affiliates - △ 2,951 Purchase of investments in subsidiaries resulting in change in scope of △ 23,020 - consolidation Proceeds from purchase of investments in subsidiaries resulting in change in scope of consolidation 6 - Payments for deposit pledged as collateral △ 10,434 △ 13,896 Proceeds from deposit released from collateral 10,554 12,391 Payments for deposit to account with limited use △ 174 △ 5 Other, net △ 157 41 Net cash used in investing activities △ 29,366 △ 29,486 Financing activities Increase in short-term loans payable 1,685 - Decrease in short-term loans payable △ 1,713 △ 1,438 Proceeds from long-term loans payable 12,717 11,174 Repayment of long-term loans payable △ 9,496 △ 11,574 Proceeds from issuance of common stock - 87,005 Cash dividends paid - △ 1,058 Repayments of finance lease obligations △ 303 △ 480 Other, net △ 18 △ 128 Net cash provided by financing activities 2,871 83,499 Effect of exchange rate change on cash and cash equivalents △ 3,972 △ 650 Net increase in cash and cash equivalents 3,578 93,125 Cash and cash equivalents at beginning of period 20,894 24,473 Cash and cash equivalents at end of period 24,473 117,598

- 17 - (5) Notes concerning going concern assumption None

(6) Significant basis for preparation of the consolidated financial statements

Item Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

1. Scope of consolidation (1) Number of consolidated subsidiaries: 24 (1) Number of consolidated subsidiaries: 22 Name of the consolidated subsidiaries are omitted as they are listed in “2. Corporate Group.” The following companies are included in the The following companies are included in the consolidated financial statements: consolidated financial statements:

NEXON Korea Corporation, Lexian Software Nexon Communications Co., Ltd was newly Development Co., Ltd., NEXON America Inc. , established and included in the scope of NEOPLE INC, Ndoors Corporation, GameHi consolidation. Co., Ltd. NexToric Corporation absorbed Symmetric NEXON Europe s.a.r.l, Wawagames Inc., and Corporation and NCLIPSE Corporation in a Centum Interactive Company Ltd. were newly merger by absorption, with NexToric established and included in the scope of Corporation as a surviving company. consolidation. Ndoors Entertainment Inc. was excluded from Fantage.com Inc. and NCLIPSE Corporation the scope of consolidation as its liquidation were included in the scope of consolidation as a process was completed. result of additional acquisition of shares.

Quad Dimensions Co., Ltd., Ndoors Corporation and its three consolidated subsidiaries, and GameHi Co., Ltd. and its consolidated subsidiary were included in the scope of consolidation as a result of new acquisition of shares.

Also, Silverportion Co., Ltd was excluded from the scope of consolidation as its liquidation process was completed.

(2) Name of unconsolidated subsidiaries (2)Name of unconsolidated subsidiaries Unconsolidated subsidiaries Unconsolidated subsidiaries Moria Japan Company Ltd. (Japan) Moria Japan Company Ltd. (Japan) GameHi SB Company Ltd. (Republic of GameHi SB Company Ltd. (Republic of Korea) Korea) Ace Company Ltd. (Republic of Korea) GameHi SB Company Ltd. (Republic of GameHi SB Company Ltd. (Republic of Korea) Korea)

(Reason for excluding from the scope of (Reason for excluding from the scope of consolidation) consolidation) These companies are excluded from the scope of These companies are excluded from the scope of consolidation as their business size is small and consolidation as their business size is small and their Total assets, Revenues, Net income (for the their Total assets, Revenues, Net income (for the Company’s proportional share) and Retained Company’s proportional share) and Retained earnings (for the Company’s proportional share) earnings (for the Company’s proportional share) do not have material impact on the consolidated do not have material impact on the consolidated financial statements. financial statements. - 18 - Item Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

2. Application of equity method (1) Number of companies accounted for using (1) Number of companies accounted for using the equity method: 9 the equity method: 11 Name of the equity method companies Name of the equity method companies Innotive Inc. (USA) Nitmus Co., Ltd. (Republic of Korea) Nitmus Co., Ltd. (Republic of Korea) Xeogen Inc. (Republic of Korea) Qplay Motion Graphics Corporation INTIVSOFT Co., Ltd. (Republic of Korea) (Republic of Korea) Human Works Co., Ltd. (Republic of Xeogen Inc. (Republic of Korea) Korea) INTIVSOFT Co., Ltd. (Republic of Korea) Boombang Games SL. (Kingdom of Human Works Co., Ltd.(Republic of Spain) Korea) CJ Game Lab Corporation (Republic of Boombang Games SL. (Kingdom of Korea) Spain) Gamania Digital Entertainment Co., Ltd. Gamonster Inc (Republic of Korea) (Taiwan) GH Hope Island Co., Ltd. (Republic of A Bit Lucky, Inc. (USA) Korea) Eyasoft Co., Ltd. (Republic of Korea) Six Waves Inc. (Hong Kong) Of those, INTIVSOFT Co., Ltd., NGL Co., Ltd. (Republic of Korea) Boombang Games SL., Gamonster Inc, and GH Hope Island Co., Ltd. became Of those, Gamania Digital Entertainment equity method companies as a result of the Co., Ltd. (Taiwan) became an equity purchase of new shares, and Human method company as a result of the Works Co., Ltd. became an equity method purchase of additional shares, A Bit company as a result of the purchase of Lucky, Inc. (USA), Eyasoft Co., Ltd. additional shares during the year. (Republic of Korea) and Six Waves Inc. (Hong Kong) became equity method Fantage.com Inc is no longer accounted companies as a result of purchase of new for using the equity method due to the shares, NGL Co., Ltd. (Republic of Korea) purchase of additional shares. became an equity method company as a result of establishment of a joint venture.

Innotive Inc. (USA), Qplay Motion Graphics Corporation (Republic of Korea), Gamonster Inc (Republic of Korea) are no longer accounted for using the equity method as a result of sale of their shares.

GH Hope Island Co., Ltd. (Republic of Korea) changed its company name to CJ Game Lab Corporation (Republic of Korea).

- 19 - Item Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

(2) Name of non-consolidated subsidiaries (2) Name of non-consolidated subsidiaries and affiliate are not accounted for using and affiliate are not accounted for using the equity method the equity method (Non-consolidated subsidiaries) (Non-consolidated subsidiaries) Moria Japan Company Ltd. (Japan) Moria Japan Company Ltd. (Japan) GameHi SB Company Ltd. (Republic of GameHi SB Company Ltd. (Republic of Korea) Korea) Ace Company Ltd. (Republic of Korea) 7on information tech Company Ltd. 7on information tech Company Ltd. (People’s Republic of China) (People’s Republic of China) (Affiliate) (Affiliate) Menian.com Company Ltd. (Republic of Menian.com Company Ltd. (Republic of Korea) Korea)

(Reason for excluding from the scope of (Reason for excluding from the scope of using the equity method) using the equity method) The above four non-consolidated The investments in the following subsidiaries and one affiliate have not been affiliated entities have not been accounted for under the equity method of accounted for under the equity method accounting because net income and of accounting because net income and retained earnings of these affiliated entities retained earnings of these affiliated are not significant in the aggregate, in entities are not significant in the relation to the consolidated financial aggregate, in relation to the consolidated statements. financial statements. 3. Fiscal year of consolidated All consolidated subsidiaries have the same Same as the previous year subsidiaries fiscal year-end as the consolidated fiscal year- end.

- 20 - Item Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

4. Accounting policies

(1) Valuation basis and method (i) Securities (i) Securities for major assets (a) Trading securities (a) Trading securities Valued at fair value, with cost of Same as the previous year securities sold calculated using the moving-average method. (b) Available-for-sale securities (b) Available-for-sale securities With fair value With fair value Securities with fair values are stated Same as the previous year at fair value with fair market value at year end. Unrealized gains and losses, net of applicable taxes, are directly recorded in Net assets and Cost of securities sold is calculated using the moving-average method. Without fair value Without fair value Securities without fair values are Same as the previous year stated at cost based on the moving- average method. (ii) Derivatives (ii) Derivatives Derivatives are stated at fair value. Same as the previous year (iii) Inventory (iii) Inventory Inventory is stated principally at the Same as the previous year periodic-average cost. (Book value is written down due to decline in profitability)

- 21 - Item Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

(2) Depreciation method for (i) Tangible fixed assets, excluding lease assets (i) Tangible fixed assets, excluding lease assets major depreciable assets The Company and its consolidated Same as the previous year subsidiaries apply the declining balance method. Useful lives of major assets are as follows: Buildings and structures: 3 to 40 years Vehicles: 3 years Furniture and fixture: 3 to 5 years (ii) Intangible fixed assets, excluding lease (ii) Intangible fixed assets, excluding lease assets Same as the previous year Software for internal use is amortized using the straight-line method over the useful life (three to five years). Game copyrights are amortized using the straight-line method over the period between four and eight years. (iii) Leased assets (iii) Lease assets Finance lease transactions that do not Same as the previous year transfer ownership Finance lease assets without ownership transfer are depreciated using the straight- line method over the lease period, assuming no residual value. Finance lease assets without ownership transfer with the lease start date prior to December 31, 2008 are accounted for using the similar method as the operating lease.

- 22 - Item Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

(3)Accounting for major (i) Allowance for doubtful accounts (i) Allowance for doubtful accounts allowances Allowance for performing receivable is Same as the previous year provided based on the actual credit loss ratio. Allowance for specific receivable such as those with doubtful collectability is provided for the expected uncollectible amount based on the individual assessment for collectability. (ii) Bonus allowance (ii) Bonus allowance Bonus allowance is provided for the Same as the previous year estimated bonus amount to be paid to the employees attributable to this consolidated fiscal year. (iii) Allowance for retirement benefits (iii) Allowance for retirement benefits In Korean subsidiaries, allowance for In some Korean subsidiaries, allowance for employees’ retirement benefits is provided employees’ retirement benefits is provided for the amount of obligation expected to for the amount of obligation expected to have incurred at year-end based on the have incurred at year-end based on the estimated retirement benefit obligation and estimated retirement benefit obligation and pension assets as of year-end. pension assets as of year-end. Actuarial difference is fully expensed in the Actuarial difference is fully expensed in the year it incurred. year it incurred. (4) Revenue recognition In the online game business, “Service period Same as the previous year method” is applied whereby revenue is recognized ratably over the estimated period during which a game user can use an in-game item purchased in exchange for game points. (5) Basis of translation of Foreign currency denominated monetary Same as the previous year major foreign currency receivables and payables are translated into denominated assets and Japanese yen using the year-end spot foreign liabilities to Japanese yen exchange rates, with resulting gains and losses included in income. Assets and liabilities of overseas subsidiaries are translated into Japanese yen using the year-end spot foreign exchange rates and revenues and expenses are translated using the average foreign exchange rates during the year, with resulting gains and losses recorded in Foreign currency translation adjustments in Net assets. (6) Interest expense As for interest expense related to business Same as the previous year assets under construction for a long period of time, Korean subsidiaries capitalize those incurred during the construction and include as part of the cost of the assets in accordance with the local accounting standards.

- 23 - Item Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

(7) Amortization of goodwill ────── Goodwill and negative goodwill incurred and negative goodwill before March 31th,2010 are amortized over the period of four to ten years during which they are expected to have effects. (8) Scope of cash in the ────── Included are cash at hand, demand deposit, Consolidated statements of and short-term investments with maturity less cash flows than three months that can be easily converted into cash and are subject to a limited price volatility risk. (9) Other important matters for Accounting for consumptions taxes Same as the previous year preparation of the Transactions subject to consumption taxes are consolidated financial stated at the amount, net of the consumption statements taxes (“Zei Nuki method”). 5. Valuation of assets and All assets and liabilities of consolidated ────── liabilities of consolidated subsidiaries are marked to market. subsidiaries 6. Amortization of goodwill Goodwill and negative goodwill are amortized ────── and negative goodwill over the period of four to eight years during which they are expected to have effects. 7. Scope of cash in the Included are cash at hand, demand deposit, ────── Consolidated statements of and short-term investments with maturity less cash flows than three months that can be easily converted into cash and are subject to a limited price volatility risk.

- 24 - (7) Changes in significant basis for preparation of the consolidated financial statements

Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

(Adoption of Accounting standards for business combination) (Adoption of Accounting Standard for Asset Retirement Effective January 1, 2010, the Company adopted ASBJ Obligations) Statement No. 21, “Accounting Standard for Business Effective January 1, 2011, the Company has adopted Combinations,” issued on December 26, 2008, ASBJ Statement Accounting Standards Board of Japan (“ASBJ”) Statement No. 22, “Accounting Standard for Consolidated Financial No.18, “Accounting Standard for Asset Retirement Statements,” issued on December 26, 2008, ASBJ Statement Obligations” issued on March 31, 2008 and ASBJ Guidance No. 23, “Partial amendments to Accounting Standard for No.21, “Guidance on Accounting Standard for Asset Retirement Research and Development Costs,” issued on December 26, Obligations” issued on March 31, 2008. The impact of the 2008, ASBJ Statement No. 7, “Revised Accounting Standard adoption on earnings was insignificant. for Business Divestitures,” issued on December 26, 2008, ASBJ Statement No. 16, “Revised Accounting Standard for Equity (Adoption of Accounting Standard for Equity Method of Method of Accounting for Investments,” issued on December Accounting for Investments and “Practical Solution on 26, 2008, and ASBJ Guidance No.10, “Revised Guidance on Unification of Accounting Policies Applied to Associates Accounting Standard for Business Combinations and Accounted for Using the Equity Method”) Accounting Standard for Business Divestitures.” issued on Effective January 1, 2011, the Company adopted ASBJ December 26, 2008, for business combinations and business Statement No.16, “Accounting Standard for Equity Method of divestitures that occur after April 1, 2008 as they became Accounting for Investments” issued on March 10, 2008 and applicable to business combinations and business divestitures Practical Issues Task Force No.24, “Practical Solution on that occur after April 1, 2008. Unification of Accounting Policies Applied to Associates Accounted for Using the Equity Method” issued on March 10, 2008. The adoption had no impact on earnings.

- 25 - (8) Notes to the consolidated financial statements (Notes to the consolidated statements of comprehensive income)

Fiscal Year ended December 31, 2011 *1 Comprehensive income for the consolidated fiscal year ended December 31, 2010. (Millions of yen) Comprehensive income attributable to parent company ¥16,856 Comprehensive income attributable to minority interest (293) Total 16,562

*2 Other comprehensive income for the consolidated fiscal year ended December 31, 2010. (Millions of yen) Unrealized gains (losses) on available-for-sale securities ¥(293) Translation adjustments (4,485) Share of other comprehensive income of associates accounted for using the equity method (1) Total (4,780)

- 26 - (Stock options) Fiscal Year ended December 31, 2010 1. The amount charged during the year ended December 31, 2010 related to stock options is as follows: Cost of sales ¥1 million Selling, general and administrative expenses ¥136 million

2. Description, number and changes of stock options (1) Description of stock options

2007 Stock option (1)

1 director of the Company Category and 24 employees of the Company number of eligible 224 directors and employees of persons subsidiaries Number of stock options by share Common stock 249,050 shares class (Note 1) Date of grant October 1, 2007 The person must be a director or an employee of the Company at the time of the Vesting conditions exercise to be eligible, except when employment is terminated for due reasons such as retirement. (Note 2) Vesting period Not prescribed From December 14, 2011 to Exercise period September 30, 2015

- 27 - 2009 Stock option (2-1) 2010 Stock option (2-2) 2010 Stock option (2-3)

5 employees of the Company Category and 37 directors and employees of 1 employee of a subsidiary 8 directors and employees of number of eligible subsidiaries subsidiaries persons

Number of stock options by share Common stock 52,800 shares Common stock 2,000 shares Common stock 2,000 shares class (Note 1) Date of grant October 1, 2009 January 1, 2010 April 2, 2010 The person must be a director Same as left Same as left or an employee of the Company at the time of the Vesting conditions exercise to be eligible, except when employment is terminated for due reasons such as retirement. (Note 3) Vesting period Not prescribed Same as left Same as left From December 14, 2011 to Exercise period Same as left Same as left September 30, 2015

- 28 - 2010 Stock option (3)

2 director of the Company Category and 11 employees of the Company number of eligible 23 directors and employees of persons subsidiaries Number of stock options by share Common stock 19,700 shares class (Note 1) Date of grant November 1, 2010 The person must be a director or an employee of the Company at the time of the Vesting conditions exercise to be eligible, except when employment is terminated for due reasons such as retirement. (Note 3) Vesting period Not prescribed From December 14, 2011 to Exercise period September 30, 2015 (Notes) 1.The number of options granted represents the number of shares to be received upon exercise. 2.When employment is terminated for due reasons such as retirement, the options vested at the time of termination are exercisable within 90 days of employment termination. If the following day of employment termination is prior to the IPO date, the vested options can be exercised after the IPO date. 3. When employment is terminated for due reasons such as retirement, the options vested at the time of termination are exercisable within 90 days of employment termination. If the following day of employment termination is prior to the IPO date, the vested options can be exercised at the earlier of the IPO date or after three years from the grant date.

- 29 - (2) The number and changes of stock options The number of stock option outstanding during the year ended December 31, 2010 represents the number of shares to be received upon exercise. 1) Number of stock options

2007 Stock option (1)

Unvested stock options (Shares)

As of December 31, 2009 37,530

Granted -

Forfeited 1,020

Vested 36,510

Unvested options as of December 31, 2010 -

Vested stock options (Shares)

As of December 31, 2009 113,400

Vested 36,510

Exercised -

Forfeited - Unexercised options as of December 31, 149,910 2010

- 30 - 2009 Stock option (2-1) 2010 Stock option (2-2) 2010 Stock option (2-3)

Unvested stock options

(Shares) As of December 31, 52,800 - - 2009 Granted - 2,000 2,000

Forfeited 7,370 - 30

Vested 15,880 - - Unvested options as of 29,550 2,000 1,970 December 31, 2010 Vested stock options

(Shares) As of December 31, - - - 2009 Vested 15,880 - -

Exercised - - -

Forfeited - - - Unexercised options as 15,880 - - of December 31, 2010

2010 Stock option (3)

Unvested stock options

(Shares) As of December 31, - 2009 Granted 19,700

Forfeited -

Vested - Unvested options as of 19,700 December 31, 2010 Vested stock options

(Shares) As of December 31, - 2009 Vested -

Exercised -

Forfeited - Unexercised options as - of December 31, 2010

- 31 - 2) Price information

2007 Stock option (1)

Exercise price (Yen) 15,286 Average share price at (Yen) - the time of exercise Fair value per share at (Yen) 1,722 grant date

2009 Stock option 2010 Stock option 2010 Stock option

(2-1) (2-2) (2-3)

Exercise price (Yen) 30,000 30,000 30,000 Average share price at (Yen) - - - the time of exercise Fair value per share at (Yen) 4,430 19,624 19,624 grant date

2010 Stock option (3)

Exercise price (Yen) 64,000 Average share price at (Yen) - the time of exercise Fair value per share at (Yen) 656 grant date

3. Estimate of fair value of stock options As a privately held company, the Group estimated fair value of stock options granted in the year ended December 31, 2007, 2009 and 2010 using the intrinsic value instead of the fair value. The value of the Company’s stock which was used as a basis to calculate the intrinsic value was derived using the discounted cash flow method.

4. Estimate of number of vested stock options Because it is difficult to estimate future forfeitures, the Group only considered actual forfeitures.

5. The aggregate intrinsic value of stock options outstanding at December 31, 2011 and the aggregated intrinsic value of stock options exercised on the exercise date, based on intrinsic value per unit (1) The aggregate intrinsic value of stock options outstanding ¥12,423 million (2) The aggregate intrinsic value of stock options exercised - million

- 32 - (Stock options) Fiscal Year ended December 31, 2011 1. The amount charged during the year ended December 31, 2011 related to stock options is as follows: Cost of sales ¥1 million Selling, general and administrative expenses ¥101 million

2. Description, number and changes of stock options (1) Description of stock options

2007 Stock option (1)

1 director of the Company Category and 24 employees of the Company number of eligible 224 directors and employees of persons subsidiaries Number of stock Common stock: 24,905,000 options by share shares class (Note 1) Date of grant October 1, 2007 The person must be a director or an employee of the Company at the time of the Vesting conditions exercise to be eligible, except when employment is terminated for due reasons such as retirement. (Note 2) Vesting period Not prescribed From December 14, 2011 to Exercise period September 30, 2015

- 33 - 2009 Stock option (2-1) 2010 Stock option (2-2) 2010 Stock option (2-3)

5 employees of the Company Category and 37 directors and employees of 1 employee of a subsidiary 8 directors and employees of number of eligible subsidiaries subsidiaries persons

Number of stock Common stock: 5,280,000 Common stock: 200,000 Common stock 200,000 options by share shares shares shares class (Note 1) Date of grant October 1, 2009 January 1, 2010 April 2, 2010 The person must be a director Same as left Same as left or an employee of the Company at the time of the Vesting conditions exercise to be eligible, except when employment is terminated for due reasons such as retirement. (Note 3) Vesting period Not prescribed Same as left Same as left From December 14, 2011 to Exercise period Same as left Same as left September 30, 2015

- 34 - 2010 Stock option (3-1) 2011 Stock option (3-2) 2011 Stock option (3-3)

2 director of the Company Category and 11 employees of the Company 1 employee of a subsidiary 1 director of the Company number of eligible 23 directors and employees of 4 employees of the Company persons subsidiaries Number of stock Common stock: 1,970,000 Common stock: 100,000 Common stock: 190,000 options by share shares shares shares class (Note 1) Date of grant November 1, 2010 January 3, 2011 July 1, 2011 The person must be a director The person must be a director The person must be a director or an employee of the or an employee of the or an employee of the Company at the time of the Company at the time of the Company at the time of the Vesting conditions exercise to be eligible, except exercise to be eligible, except exercise to be eligible, except when employment is when employment is when employment is terminated for due reasons such terminated for due reasons terminated for due reasons as retirement. (Note 3) such as retirement. (Note 3) such as retirement. (Note 3) Vesting period Not prescribed Same as left Same as left From December 14, 2011 to Exercise period Same as left Same as left September 30, 2015

- 35 - 2011 Stock option (3-4)

Category and number of eligible 1 employee of a subsidiary persons Number of stock options by share Common stock: 800,000 shares class (Note 1) Date of grant August 1, 2011 The person must be a director or an employee of the Company at the time of the Vesting conditions exercise to be eligible, except when employment is terminated for due reasons such as retirement. (Note 3) Vesting period Not prescribed From December 14, 2011 to Exercise period September 30, 2015

- 36 - 2011 Stock option (4)

Category and number of eligible 1 employee of a subsidiary persons Number of stock options by share Common stock: 35,000 shares class (Note 1) Date of grant November 3, 2011 The person must be a director or an employee of the Company at the time of the Vesting conditions exercise to be eligible, except when employment is terminated for due reasons such as retirement. (Note 3) Vesting period Not prescribed From December 14, 2011 to Exercise period September 30, 2015

(Notes) 1.The number of options granted represents the number of shares to be received upon exercise. The number of shares reflects the effect of a 100-for-1 stock split of common stock executed on July 21, 2011. 2.When employment is terminated for due reasons such as retirement, the options vested at the time of termination are exercisable within 90 days of employment termination. If the following day of employment termination is prior to the IPO date, the vested options can be exercised after the IPO date. 3. When employment is terminated for due reasons such as retirement, the options vested at the time of termination are exercisable within 90 days of employment termination. If the following day of employment termination is prior to the IPO date, the vested options can be exercised at the earlier of the IPO date or after three years from the grant date.

- 37 - (2) The number and changes of stock options The number of stock option outstanding during the year ended December 31, 2010 represents the number of shares to be received upon exercise. As the Company executed a 100-for-1 stock split of common stock on July 21, 2011, the number of stock options and price information reflects the effect of such stock split. 1) Number of stock options

2007 Stock option (1)

Unvested stock options

(Shares) As of December 31, - 2010 Granted -

Forfeited -

Vested - Unvested options as of - December 31, 2011 Vested stock options

(Shares) As of December 31, 14,991,000 2010 Vested -

Exercised 615,000

Forfeited - Unexercised options as of December 31, 14,376,000 2011

- 38 - 2009 Stock option 2010 Stock option 2010 Stock option

(2-1) (2-2) (2-3) Unvested stock options

(Shares) As of December 31, 2,955,000 200,000 197,000 2010 Granted - - -

Forfeited 108,000 - 3,000

Vested 1,440,000 66,000 63,000 Unvested options as of 1,407,000 134,000 131,000 December 31, 2011 Vested stock options

(Shares) As of December 31, 1,588,000 - - 2010 Vested 1,440,000 66,000 63,000

Exercised 129,000 - -

Forfeited - - - Unexercised options as of December 31, 2,899,000 66,000 63,000 2011

- 39 - 2010 Stock option 2011 Stock option 2011 Stock option

(3-1) (3-2) (3-3) Unvested stock options

(Shares) As of December 31, 1,970,000 - - 2010 Granted - 100,000 190,000

Forfeited 50,000 100,000 -

Vested 621,000 - - Unvested options as of 1,299,000 - 190,000 December 31, 2011 Vested stock options

(Shares) As of December 31, - - - 2010 Vested 621,000 - -

Exercised - - -

Forfeited - - - Unexercised options as of December 31, 621,000 - - 2011

2011 Stock option

(3-4) Unvested stock options

(Shares) As of December 31, - 2010 Granted 80,000

Forfeited -

Vested - Unvested options as of 80,000 December 31, 2011 Vested stock options

(Shares) As of December 31, - 2010 Vested -

Exercised -

Forfeited - Unexercised options as of December 31, - 2011

- 40 - 2011 Stock option

(4) Unvested stock options

(Shares) As of December 31, - 2010 Granted 35,000

Forfeited -

Vested - Unvested options as of 35,000 December 31, 2011 Vested stock options

(Shares) As of December 31, - 2010 Vested -

Exercised -

Forfeited - Unexercised options as of December 31, - 2011

- 41 - 2) Price information 2007 Stock option

(1)

Exercise price (Yen) 153 Average share price at (Yen) 1,131 the time of exercise Fair value per share at (Yen) 17 grant date

2009 Stock option 2010 Stock option 2010 Stock option

(2-1) (2-2) (2-3)

Exercise price (Yen) 300 300 300 Average share price at (Yen) 1,131 - - the time of exercise Fair value per share at (Yen) 44 196 196 grant date

2010 Stock option 2011 Stock option 2011 Stock option

(3-1) (3-2) (3-3)

Exercise price (Yen) 640 640 640 Average share price at (Yen) - - - the time of exercise Fair value per share at (Yen) 6 157 240 grant date

2011 Stock option

(3-4)

Exercise price (Yen) 640 Average share price at (Yen) - the time of exercise Fair value per share at (Yen) 240 grant date

2011 Stock option

(4)

Exercise price (Yen) 880 Average share price at (Yen) - the time of exercise Fair value per share at (Yen) - grant date

- 42 - 3. Estimate of fair value of stock options As a privately held company, the Group estimated fair value of stock options granted in the year ended December 31, 2007, 2009, 2010 and 2010 using the intrinsic value instead of the fair value. The value of the Company’s stock which was used as a basis to calculate the intrinsic value was derived using the discounted cash flow method.

4. Estimate of number of vested stock options Because it is difficult to estimate future forfeitures, the Group only considered actual forfeitures.

5. The aggregate intrinsic value of stock options outstanding at December 31, 2011 and the aggregated intrinsic value of stock options exercised on the exercise date, based on intrinsic value per unit (1) The aggregate intrinsic value of stock options outstanding ¥18,538 million (2) The aggregate intrinsic value of stock options exercised ¥708 million

- 43 - (Segment information) a.Segment information by business type Fiscal Year ended December 31, 2010 Segment information by business type is omitted as the Group operates predominantly in one business segment “Online game business” where the Group develops and distributes online games.

b. Segment information by location Fiscal Year ended December 31, 2010 North Elimination/ Japan Korea China Other Total Consolidated America Head office (Millions of (Millions of (Millions of (Millions of (Millions of (Millions of (Millions of (Millions of yen) yen) yen) yen) yen) yen) yen) yen) I. Revenues and operating income

Revenues

(1) Revenues from third 12,156 47,925 2,783 5,889 1,026 69,781 - 69,781 parties

(2) Intersegment revenues 13 4,548 - 0 - 4,562 (4,562) - or transfer

Total 12,170 52,474 2,783 5,889 1,026 74,344 (4,562) 69,781

Operating expenses 8,336 28,301 865 5,774 826 44,104 (4,506) 39,598

Operating income 3,833 24,173 1,917 115 200 30,239 (56) 30,183

II.Assets 38,329 105,564 3,793 3,971 795 152,454 (28,737) 123,717 (Notes)1. The segmentation by country or area is based on geological proximity. 2. Details of areas other than Japan, Korea and China are as follows: North America: the United States of America Other: the United Kingdom, Republic of the Philippines, and other countries of Europe. 3. None of Operating expenses were included in Elimination/Head Office as unallocable expenses. 4. No assets were included in Elimination/Head Office as corporate assets. 5. Changes in accounting treatment (Adoption of accounting standards for business combination) Effective January 1, 2010, the Company adopted ASBJ Statement No. 21, “Accounting Standard for Business Combinations,” issued on December 26, 2008, ASBJ Statement No. 22, “Accounting Standard for Consolidated Financial Statements,” issued on December 26, 2008, ASBJ Statement No. 23, “Partial amendments to Accounting Standard for Research and Development Costs,” issued on December 26, 2008, ASBJ Statement No. 7, “Revised Accounting Standard for Business Divestitures,” issued on December 26, 2008, ASBJ Statement No. 16, “Revised Accounting Standard for Equity Method of Accounting for Investments,” issued on December 26, 2008, and ASBJ Guidance No.10, “Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures.” issued on December 26, 2008, for business combinations and business divestitures that occur after April 1, 2008 as they became applicable to business combinations and business divestitures that occur after April 1, 2008.

- 44 - c.Overseas revenues Fiscal Year ended December 31, 2010 Korea China North America Other areas Total

I Overseas revenues (Millions of yen) 24,692 21,580 5,598 5,711 57,583 II Consolidated revenues (Millions of 69,781 yen) III Ratio of overseas revenues to 35.4 30.9 8.0 8.2 82.5 consolidated revenues (Note) 1. The segmentation by country or area is based on geological proximity. 2. Details of segmentation by country or area are as follows: North America: the United States of America, Canada Other: the United Kingdom and other European countries, Asian countries and Central and South America 3. Overseas revenues represent revenues of the Company and its consolidated subsidiaries in countries and areas other than Japan

d.Segment information Fiscal Year ended December 31, 2011 (Additional information) Effective January 1, 2011, the Company adopted ASBJ Statement No.17, “Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” issued on March 27, 2009 and ASBJ Guidance No.20, “Guidance on the Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” issued on March 21, 2008.

1. Description of reportable segments Reportable segments of the Group are components of the Group for which separate financial information is available that is evaluated regularly by the Board of Directors in deciding how to allocate resources and in assessing performance. The Group is engaged in production/development and distribution of online games, and the Company (in Japan) and its local consolidated subsidiaries (overseas) develop overall strategies and operate business activities for their respective products and services in each region as independent units. Accordingly, the Group consists of geographical segments based on production/development and distribution of online games. The reportable segments include “Japan”, “Korea”, “China”, and “North America”, and “Other” includes European countries and Asian countries. 2. Calculation methods for revenues, profits or losses, assets, liabilities and other items by reportable segments Accounting treatments used for business segments reporting are consistent with those described in “Significant Basis for Preparation of Consolidated Financial Statements.” Reportable segment income is based on operating income.

- 45 - 3. Revenues, profits or losses, assets, liabilities and other items by reportable segments Fiscal Year ended December 31, 2011 (Millions of yen) Consolidated Other Adjustments financial Reportable segments (Note 1) (Note 2) statements (Note 3) North Japan Korea China Total America Revenues (1) Revenues from 13,012 63,173 3,146 6,210 85,542 2,071 - 87,613 third parties (2) Intersegment revenues or 21 5,261 - 38 5,321 24 (5,345) - transfer Total 13,033 68,434 3,146 6,249 90,863 2,095 (5,345) 87,613

Segment income 2,202 33,741 2,028 (274) 37,699 478 71 38,249

Segment assets 127,023 126,302 5,812 3,389 262,527 1,096 (27,858) 235,765

Other items Depreciation and amortization 302 8,337 152 669 9,462 42 (69) 9,435 (Note 4) Goodwill 206 2,200 - - 2,407 - - 2,407 amortization Negative goodwill - 951 - - 951 - - 951 amortization Investments in equity method 8,880 377 - - 9,258 - - 9,258 companies Increase in tangible fixed assets and 1,189 12,018 274 500 14,032 86 0 14,119 intangible fixed assets(Note 4) (Notes) 1. “Other” includes geographical segments not included in any of the reportable segments such as European countries and Asian countries. 2. “Adjustments” includes as follows: (1) The adjustment to Segment income of ¥71 million represents elimination of intersegment transactions. (2) The adjustment to Segment assets of ¥(27,858) million includes offsetting of investments and capital of ¥(7,936) million and offsetting of receivable and payable of ¥(19,921) million. (3) The adjustment to Depreciation and amortization of ¥(69) million represents elimination of intersegment transactions. 3. Segment income is adjusted to operating income presented in the consolidated statements of operations. 4. “Depreciation and amortization” and “Increase in tangible fixed assets and intangible fixed assets” include “Long-term prepaid expenses” and their amortization.

- 46 - e. Related information Fiscal Year ended December 31, 2011 1. Information by products and services Disclosure is omitted as revenues of single product/service segment from third parties account for over 90% of Revenues reported in the consolidated statements of operations.

2. Information by region (1) Revenues Current fiscal year (From January 1, 2011 to December 31, 2011) (Millions of yen) Japan Korea China North America Other Total

13,016 28,613 32,785 6,337 6,861 87,613 (Notes) 1. Revenues are grouped into countries or areas based on the customers’ location. 2. The segmentation by country or area is based on geological proximity. 3. Major countries or areas included in each segment (i) North America: the United States of America, Canada (ii) Other: European countries, Asian countries and Central and South America

(2) Tangible fixed assets Current fiscal year (From January 1, 2011 to December 31, 2011) (Millions of yen) Japan Korea China North America Other Total

289 14,992 203 487 43 16,016

3. Information by major customer (Millions of yen) Name of customer Revenues Related segment

Tencent Technology Company Limited 24,110 Korea

- 47 - f. Information on impairment loss on noncurrent assets by reportable segments Fiscal Year ended December 31, 2011 (Millions of yen) Reportable segments Other Adjustments Total North Japan Korea China Total America Impairment loss 833 516 - 35 1,384 - - 1,384 g. Information on amortization of goodwill and amortized balance by reportable segments Fiscal Year ended December 31, 2011 (Goodwill) (Millions of yen) Reportable segments Other Adjustments Total North Japan Korea China Total America Amortized during the 206 2,200 - - 2,407 - - 2,407 year At December 31, 2011 855 10,740 - - 11,595 - - 11,595

(Negative goodwill) (Millions of yen) Reportable segments Other Adjustments Total North Japan Korea China Total America Amortized during the - 951 - - 951 - - 951 year At December 31, 2011 - 3,553 - - 3,553 - - 3,553

h. Information on gain on negative goodwill by reportable segments Fiscal Year ended December 31, 2011 Not applicable.

- 48 - (Per share information)

Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

(yen) (yen)

Net assets per share 17,714.50 Net assets per share 408.28

Net income per share 6,131.79 Net income per share 71.65 Diluted net income Diluted net income 6,128.50 68.52 per share per share

The Company has executed a share split at the ratio of 100-for-1 for common stock as of July 21, 2011. Had the share split taken place at the beginning of the previous consolidated fiscal year, the pro-forma per share information would have been as follows:

(yen) Net assets per share 177.14 Net income per share 61.32 Diluted net income 61.29 per share

(Note)The basis for calculating net income per share and diluted net income per share are as follows:

Fiscal Year ended December 31, Fiscal Year ended December 31,

2010 2011

Net income per share Net income (Millions of yen) 21,638 25,755 Net income not attributable to common shareholders - - Net income attributable to common shareholders 21,638 25,755 (Millions of yen) Average number of shares during the year (share) 3,528,889 359,484,592 Diluted net income per share Adjustments to net income (Millions of yen) 11 8 (of which adjustment for consolidated subsidiaries’ (11) (8) dilutive shares) Changes in common stock (shares) - 17,357,678 Description of dilutive shares not included in the Three types of subscription rights (21,901 units) calculation of diluted net income per share because Shares granted under unsecured Shares granted under unsecured they do not have a dilutive effect convertible bonds with warrants convertible bonds with warrants

issued by GameHi Co., Ltd. issued by GameHi Co., Ltd.

- 49 - (Significant subsequent events)

Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

(Renewal of significant contracts) ────── The Company’s Korean subsidiaries NEXON Korea Corporation and NEOPLE renewed their existing agreement with Tencent Holdings Ltd, a company incorporated in People’s Republic of China, on June 17, 2011 under which the publishing rights of the online game Dungeon&Fighter within China are granted to Tencent Holdings Ltd. The renewal was part of the Company’s important operational strategies in China and was intended to allow Tencent Holdings Ltd. to continue publishing Dungeon&Fighter in China, the copyright for which is owned by NEOPLE.

(Stock split) Pursuant to a resolution of the board of directors meeting held on June 17, 2011, the Company effected a stock split on July 21, 2011. (1) Purpose of the stock split The purpose of the stock split was to guarantee the same rights as previously granted to current shareholders, to improve the liquidity of the Company’s stock and to broaden the shareholder class by introducing the unit share system pursuant to Securities Listing Regulations 205-1-9 of Tokyo Stock Exchange, Inc. (2) Description of the stock split (i) Method of the stock split Each share of common stock owned by the current shareholders, as registered on the Company’s shareholder registry as of the close of business on July 20, 2011 was split into 100 shares. (ii) Number of shares increased by the stock split Number of shares issued before the stock split: 3,528,889 shares Number of shares increased by the stock split: 349,360,011 shares Number of shares issued after the stock split: 352,888,900 shares (iii) Time schedule Record date for the stock split: July 20, 2011 Effective date: July 21, 2011

- 50 - Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

(iv) Other In connection with the stock split, the Company’s articles of incorporation were amended on July 20, 2011 and the number of authorized shares was increased by 1,380,000,000 shares to 1,400,000,000 shares. If this stock split had been completed at the beginning of the previous period, the unaudited pro forma per-share information would have been as follows: Net assets per share Fiscal Year ended December Fiscal Year ended December 31, 2009 31, 2010 Net assets per share ¥129.37 Net assets per share ¥177.14

Net income per share (yen) Fiscal Year ended December Fiscal Year ended December 31, 2009 31, 2010 Net income per Net income per share 50.04 share 61.32 Diluted net income Diluted net income - per share per share 61.29

- 51 - Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

────── (Issuance of new shares) On July 20, 2011, the board of directors approved a resolution to issue common stock in the form of a third-party allotment as consideration for in-kind contributions from Insight Venture Partners VI, L.P., Insight Venture Partners (Co-Investors) VI, L.P., and Insight Venture Partners VI (Cayman), L.P., and subsequently the Company completed the issuance of new shares on July 29, 2011.

The description of the issuance is as follows: As a 100-for-1 stock split of common stock effected on July 21, 2011 with a record date of July 20, 2011, the number of shares stated below reflects the effect of such stock split.

(1) Method of placement: Third-party allotment (2) Number of newly issued shares: 2,500,000 common stock (3) Issue price: ¥1,912.92 per share (4) Total issue amount: ¥4,782 million (5) Amount incorporated into common stock: ¥2,391 million (6) Date of payment: July 29, 2011 (7) First date of dividend accrual period: July 29, 2011 (8) Purpose of the issuance: In order to enhance the Facebook game distribution business in the social game market, new shares were issued in the form of a third-party allotment in exchange for in-kind contributions of shares of Six Waves Inc. (Hong Kong) held by Insight Venture Partners VI, L.P., Insight Venture Partners (Co-Investors) VI, L.P., and Insight Venture Partners VI (Cayman), L.P.

(Material purchase of property, plant and equipment, and large amount of borrowings) Based on the resolution of the Board of Directors’ meeting held on February 18, 2011, the Company’s Korean subsidiary NEXON Korea Corporation entered into a real estate sale and purchase agreement and purchased a property in Seoul, Korea on October 13, 2011. Also, the Company entered into a loan agreement in accordance with the resolution of the Board of Directors’ meeting held on August 17, 2011 in order to raise the fund to purchase the above mentioned property.

- 52 - Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

1. Objective of the purchase The objective of the purchase is to build a company office in order to provide pleasant working environment that can accommodate an increasing number of employees and to improve productivity.

2. Description of the assets Down payment: ¥864 million Location of the property: Yeoksamdo, Gangnam-gu, Seoul, Korea Sales price (including down payment) Land: ¥8,558 million (Area: 3,371.8 m2) Building: ¥86 million (Area: 2,901.2 m2) All amounts included in the agreement are denominated in Korean won only. The amount in Japanese yen above is converted into yen using the foreign exchange rate prevailing on September 30, 2011.

- 53 - Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

3. Funding method for the purchase price ────── The Company entered into a loan agreement with Sumitomo Mitsui Banking Corporation. The outline of the agreement is as follows: (1) Loan amount ¥10,000 million (2) Repayment condition Lump-sum repayment on maturity (3) Interest rate Short-term prime rate prevailing on the interest payment date of respective interest calculation period (4) Date of agreement September 9, 2011 (5) Date of drawdown October 13, 2011 (6) Repayment date October 13, 2018 (7) Loan period Seven years (8) Types and book value of the assets pledged as collateral (a) Land: ¥8,558 million yen (b) Building: ¥86 million yen In addition, four savings accounts set up for the loan repayment are also pledged as collateral. There is no balance in any of these accounts as of September 30, 2011. Terms of the partially collateralized bank deposit The Company entered into an agreement with the lender Sumitomo Mitsui Banking Corporation (“Bank”), under which the Company is required to deposit ¥370 million to the collateral account set up in the Bank on the last day of March, June, September, December of each year commencing in December 2011, unless an early repayment of ¥370 million or more is made, in which case such deposit is not required for the quarter. These accounts cannot be used for purposes other than repayment of principal and interest of the loan. (Notes) 1. The collateralized land and building are those acquired in the aforementioned sale and purchase agreement, and their value is based on the fair value as of the acquisition date. If a building is newly built, the new building will be considered as the pledged asset, including the right to claim for the fire insurance for the new building if such right is attached to the new building. 2. Book values of the land and building are translated into the Japanese yen using the exchange rate as of

September 30, 2011.

- 54 - Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

(9) Other material covenants ────── Financial covenants The long-term loan agreements of the Company entered into with Sumitomo Mitsui Banking Corporation totaling ¥10 billion include the following financial covenants calculated based on the Group’s consolidated year-end results. In the event that the Group fails to comply with such financial covenants and the notice from the lender is received, all obligations under the agreements would lose the benefit of time and immediate repayment would be required. 1) Leverage ratio must be maintained equal to or less than 3.0. 2) Interest coverage ratio must be maintained equal to or more than 2.5 3) Debt service coverage ratio must be maintained equal to or more than the ratio specified for each fiscal year in the table below.

Fiscal year Ratio FY 2010 1.5 FY 2011 1.5 FY 2012 1.5 FY 2013 1.5 FY 2014 1.5 FY 2015 1.5 FY 2016 1.5 FY 2017 1.5 FY 2018 1.5 4) Total off-balance sheet liabilities must be maintained equal to or less than ¥12 billion. 5) Net assets of Nexon Corporation must be maintained equal to or more than those at December 31, 2010. 6) Consolidated revenue and operating income of the Group must be maintained equal to or more than the higher of (i) 70% of the respective amounts for the year ended December 31, 2007, or (ii) 70% of the respective amounts for the previous year. sheet, such as loan guarantee, lease, derivative transactions including swaps and forward exchange contracts, etc. 5) EBITDA = Operating income + Depreciation and amortization + Goodwill amortization

- 55 - Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

[Definition and formula] 1) Leverage ratio = Interest-bearing debts / EBITDA 2) Interest coverage ratio = Free cash flow / (Interest expense + Discounting charges) 3) Debt service coverage ratio = Free cash flow / (Principal payment + Interest expense + Discounting charges) 4) Off-balance sheet liabilities = Liabilities associated with transactions that are not recorded on the balance

- 56 - Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

(Share transfer agreement) ────── Pursuant to the resolution of the Company’s board of directors meeting held on October 19, 2011, NEXON Korea Corporation, the Company’s subsidiary incorporated in the Republic of Korea, entered into a share transfer agreement on October 24, 2011 with the largest shareholder and major shareholders of JC Entertainment Corporation (incorporated in Korea). 1. Purpose of share acquisition The purpose of the share acquisition is to enhance development capability of online games in the sport genre and the content lineup of the online game business in China.

2.Acquired entity (1) Name JC Entertainment Corporation (2) Representative Song In Soo, Representative Director (3) Date of incorporation May 30,1984 (4) Year-end December (5) Share capital 5,704 million Korean won (6) Number of share issued 11,431,598 shares

- 57 - Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

3. Number of shares acquired, acquisition price, and percentage ────── of voting rights after acquisition Acquisition date October, 24, 2011 Number of shares acquired 1,868,113 shares Price per share 34,000 Korean won Total acquisition price (*) ¥4,141 million Percentage of voting rights 16.34% after acquisition (*) Total acquisition price is translated into Japanese yen at the exchange rate as of September 30, 2011.

4. Special term The largest shareholder and major shareholders have the option to sell their JC Entertainment Corporation shares to NEXON Korea Corporation within six months and two weeks after October 24, 2011, under the following conditions: Number of shares 1,868,112 shares Price per share 38,000 Korean won Total value of shares (*) ¥4,628 million Percentage of voting rights after acquisition in case the 32.68% above option is exercised (*) Total value of shares is translated into Japanese yen at the exchange rate as of September 30, 2011.

5. Means of payment and source of financing (1) Means of payment Cash (2) Source of financing Own funds

(Issuance of stock options) Pursuant to the resolutions of the Company’s special shareholders’ meeting and board of directors meeting held on November 2, 2011, the Company granted stock options to certain eligible individuals, in accordance with Article 236, Articles 238 and 239 of the Companies’ Act as follows: 1. Title and number of eligible individuals Employee of a subsidiary: 1 2. Number of stock options 35 (Number of underlying shares to be subscribed per stock option is 1,000 shares) 3. Class and number of underlying share 35,000 common stock 4. Option price No cash payment is required in exchange for the stock options granted 5. Grant date November 3, 2011

- 58 - Fiscal Year ended December 31, 2010 Fiscal Year ended December 31, 2011

6. Exercise terms ────── Stock options cannot be exercised if the individual has not continuously been a director or an employee of the Company or its subsidiary from the grant date through the exercise date. When employment is terminated for due reasons such as retirement, the options vested at the time of termination are exercisable within 90 days of employment termination. If the following day of employment termination is prior to the IPO date, the vested options can be exercised at the earlier of the IPO date or after three years from the grant date. 7. Exercise period From IPO listing date or November 3, 2014, whichever comes earlier, to September30, 2015 8. Accounting matters concerning common stock and capital surplus to be increased upon exercise of stock options i) Common stock balance will be increased upon exercise of stock options by half of the maximum amount allowed in accordance with Article 17.1 of Ordinance on Accounting of Companies, with fractions rounded up. ii) Capital surplus will be increased upon exercise of stock options by the remaining amount after deducting the amount as determined in i). 9. Method used to estimate the fair value of stock options Stock options granted on November 3, 2011 are measured using the intrinsic value instead of the fair value as the Company’s shares are not publicly traded as of September 30, 2011. The intrinsic value per unit as of the grant date is as follows: i) the Company’s share value using the discounted cash flow approach at grant date: ¥880 /share ii) Exercise price: Per stock option: ¥880,000 Per share: ¥880 Total value of stock options at exercise price: ¥30,800,000 iii) Total intrinsic value of the stock options: Total intrinsic value as of the grant date is nil.

- 59 - With respect to the accounts items stated in this consolidated financial statement, please refer to the following chart with comparison to offering circular.

(1) Consolidated balance sheets

Consolidated Financial Results Offering Circular Assets Assets Current assets Current assets: Cash and deposits Cash and time deposits Notes and accounts receivable-trade Accounts receivable - trade Short-term investment securities Trading securities Merchandise Merchandise Deferred tax assets Deferred tax assets Other Other current assets Allowance for doubtful accounts Allowance for doubtful accounts Total current assets Total current assets Noncurrent assets - Property, plant and equipment Property, plant and equipment: Buildings and structures Buildings and structures Accumulated depreciation - Buildings and structures, net - Vehicles Vehicles Accumulated depreciation - Vehicles, net - Tools, furniture and fixtures Furniture and fixture Accumulated depreciation - Tools, furniture and fixtures, net - Land Land Construction in progress Construction in progress Total property, plant and equipment Total property, plant and equipment Intangible assets - Games Copyright Game copyrights Goodwill Goodwill Other - Total intangible assets - Investments and other assets Investments and other assets: Investment securities Investment securities Long-term loans receivable Long-term loans receivable Deferred tax assets Deferred tax assets Long-term prepaid expenses Long-term prepaid expenses Lease and guarantee deposits Security deposits Other Other Allowance for doubtful accounts Allowance for doubtful accounts Total investments and other assets Total investments and other assets Total noncurrent assets - Total assets Total assets

- 60 - Consolidated Financial Results Offering Circular Liabilities Liabilities and net assets Current liabilities Current liabilities: Notes and accounts payable-trade Accounts payable - trade Short-term loans payable Short-term borrowings Current portion of long-term loans payable Current portion of long-term borrowings Current portion of bonds convertible bond-type bonds with - subscription rights to shares Accounts payable-other Accounts payable - other Accrued expenses Accrued expenses Income taxes payable Provision for income taxes Deferred tax liabilities Deferred tax liabilities Unearned revenue - Provision for bonuses Employees’ bonuses Asset retirement obligations - Other Other current liabilities Total current liabilities Total current liabilities Noncurrent liabilities Long-term liabilities: Convertible bond-type bonds with subscription rights to shares Convertible bonds Long-term loans payable Long-term borrowings Deferred tax liabilities Deferred tax liabilities Long-term unearned revenue Deferred income Provision for retirement benefits Employees’ retirement benefits Negative goodwill Negative goodwill Asset retirement obligations - Other Other non-current liabilities Total noncurrent liabilities Total long-term liabilities Total liabilities Total liabilities Net assets Net assets: Shareholders' equity Shareholders’ equity Capital stock Common stock: Capital surplus Capital surplus Retained earnings Retained earnings Total shareholders' equity Total shareholders’ equity Accumulated other comprehensive income Valuation and translation adjustments: Valuation difference on available-for-sale securities Net unrealized gains (losses) on investment securities, net of tax Foreign currency translation adjustment Foreign currency translation adjustments Total accumulated other comprehensive income Total valuation and translation adjustments Subscription rights to shares Stock options Minority interests Non-controlling interest Total net assets Total net assets Total liabilities and net assets Total liabilities and net assets

- 61 - (2)Consolidated statements of (comprehensive) income (Consolidated Statements of income) Consolidated Financial Results Offering Circular Net sales Revenues Cost of sales Cost of sales Gross profit Gross profit Selling, general and administrative expenses Selling, general and administrative expenses Operating income Operating income Non-operating income Other income (expense): Interest income Interest income Dividends income Dividend income Gain on sales of investment securities - Amortization of negative goodwill Negative goodwill amortization Reversal of deferred revenue - Miscellaneous income - Total non-operating income - Non-operating expenses - Interest expenses Interest expense Foreign exchange losses Foreign exchange gains (losses) Equity in losses of affiliates Equity in earnings (losses) of affiliates Commission fee Fees and commissions Provision of allowance for doubtful accounts Provision for doubtful accounts Miscellaneous expenses - Total non-operating expenses - Ordinary income - Extraordinary income - Gain on sales of noncurrent assets Gain (loss) on sales/disposal of fixed assets Income from reversal of foreign currency translation adjustments Gain on reversal of foreign currency translation adjustments due due to liquidation of overseas subsidiaries to liquidation of foreign subsidiaries Gain on sales of investment securities Gain on sales of investment securities Gain on sales of subsidiaries and affiliates' stocks Gain on sale of securities of consolidated subsidiaries & affiliates Gain on prior period adjustment Gain on prior period adjustments Gain on change in equity Gain on sale of equity method investments Gain on negative goodwill Gain on bargain purchase Other - Total extraordinary income - Extraordinary loss - Loss on sales and retirement of noncurrent assets - Loss on valuation of investment securities Write-off of investment securities Impairment loss Impairment losses Loss on prior period adjustment - Loss on change in equity - Settlement package Settlement Loss on adjustment for changes of accounting standard for asset Effect of the change in accounting policy for revenue recognition retirement obligations Loss on step acquisitions Losses on step acquisition Compensation for damage Imdemnification damage Other Other–net The extraordinary loss - Income before income taxes and minority interests Income before income taxes Income taxes-current Current Income taxes-deferred Deferred Income taxes - Income before minority interests - Minority interests in loss Non-controlling interest in net income (loss) Net income Net income

- 62 - (3)Consolidated statements of changes in net assets

Consolidated Financial Results Offering Circular Consolidated statements of changes in net assets Consolidated Statements of Changes in Net Assets Shareholders' equity Shareholders’ equity Capital stock Common stock: Blance at the end of previous period Balance at beginning of year Changes of items during the period Changes during the year Issuance of new shares - Total changes of items during the period Total changes during the year Blance at the end of current period Balance at end of year Capital surplus Capital surplus: Blance at the end of previous period Balance at beginning of year Changes of items during the period Changes during the year Issuance of new shares - Other Other Total changes of items during the period Total changes during the year Blance at the end of current period Balance at end of year Retained earnings Retained earnings: Blance at the end of previous period Balance at beginning of year Changes of items during the period Changes during the year Dividends from surplus - Net income Net income Other - Total changes of items during the period Total changes during the year Blance at the end of current period Balance at end of year Total shareholders' equity Total shareholders’ equity: Blance at the end of previous period Balance at beginning of year Changes of items during the period Changes during the year Issuance of new shares - Dividends from surplus - Net income Net income Other Other Total changes of items during the period Total changes during the year Blance at the end of current period Balance at end of year

- 63 - Consolidated Financial Results Offering Circular Accumulated other comprehensive income Valuation and translation adjustments Valuation difference on available-for-sale securities Net unrealized gains (losses) on investment securities, net of tax: Blance at the end of previous period Balance at beginning of year Changes of items during the period Changes during the year Net changes of items other than shareholders' equity Net changes other than shareholders’ equity Total changes of items during the period Total items during the year Blance at the end of previous period Balance at end of year Foreign currency translation adjustment Translation adjustments: Blance at the end of previous period Balance at beginning of year Changes of items during the period Changes during the year Net changes of items other than shareholders' equity Net changes other than shareholders’ equity Total changes of items during the period Total items during the year Blance at the end of current period Balance at end of year Total accumulated other comprehensive income Total valuation and translation adjustments: Blance at the end of previous period Balance at beginning of year Changes of items during the period Changes during the year Net changes of items other than shareholders' equity Net changes other than shareholders’ equity Total changes of items during the period Total items during the year Blance at the end of current period Balance at end of year Subscription rights to shares Stock options Blance at the end of previous period Balance at beginning of year Changes of items during the period Changes during the year Net changes of items other than shareholders' equity Net changes other than shareholders’ equity Total changes of items during the period Total items during the year Blance at the end of current period Balance at end of year Minority interests Non-controlling interest Blance at the end of previous period Balance at beginning of year Changes of items during the period Changes during the year Net changes of items other than shareholders' equity Net changes other than shareholders’ equity Total changes of items during the period Total items during the year Blance at the end of current period Balance at end of year Total net assets Total net assets Blance at the end of previous period Balance at beginning of year Changes of items during the period Changes during the year Issuance of new shares - Dividends from surplus - Net income Net income Other Other Net changes of items other than shareholders' equity Net changes other than shareholders’ equity Total changes of items during the period Total changes during the year Blance at the end of current period Balance at end of year

- 64 - (4) Consolidated statements of cash flows

Consolidated Financial Results Offering Circular Operating activities Operating activities Income before income taxes and minority interests Income before income taxes Depreciation and amortization Depreciation and amortization Amortization of goodwill Goodwill amortization Amortization of negative goodwill Negative goodwill amortization Gain on negative goodwill Gain on bargain purchase Share-based compensation expenses Stock-based compensation expense Increase in allowance for doubtful accounts Increase (decrease) in allowance for doubtful accounts Increase in provision for bonuses Increase (decrease) in provision for employees’ bonuses Decrease in provision for retirement benefits Decrease in provision for retirement benefit expenses Interest and dividends income Interest and dividend income Interest expenses Interest expense Foreign exchange losses Foreign exchange (gains) losses Reversal of deferred revenue - Gain on reversal of foreign currency translation adjustments due Income from reversal of foreign currency translation adjustments to liquidation of foreign subsidiaries Loss (gain) from prior period adjustment Gain on prior period adjustments Impairment loss Impairment losses Loss on valuation of investment securities Gain on sales of investment securities Gain on sales of investment securities Gain on sales of investment securities Gain on sales of stocks of subsidiaries and affiliates Gain on sales of investment securities of affiliates Equity in losses of affiliates Equity in losses of affiliates Loss (gain) on change in equity Dilution gain on sale of affiliate shares Loss on step acquisitions Losses on step acquisitions Settlement package Settlement Gain on sales of noncurrent assets - Increase in notes and accounts receivable-trade Increase in accounts receivable trade Decrease (increase) in other current assets Decrease (increase) in other current assets Increase in notes and accounts payable-trade Increase in accounts payable trade Increase in unearned revenue Increase (decrease) in deferred income Increase in other current liabilities Increase in other current liabilities Other, net Other - net Subtotal Subtotal Interest and dividends income received Interest and dividends received Interest expenses paid Interest paid Settlement package paid - Compensation for damage paid Income taxes paid Income taxes paid Net cash provided by operating activities Net cash provided by operating activities

- 65 -

Consolidated Financial Results Offering Circular Investing activities Investing activities Decrease (increase) in time deposits Decrease (increase) in time deposits Decrease (increase) in short-term investment securities Decrease (increase) in short-term investment securities Purchase of property, plant and equipment Purchases of property, plant and equipment Proceeds from sales of property, plant and equipment - Purchase of intangible assets Purchases of intangible assets Payments for long-term prepaid expenses with increase Increase in long-term prepaid expenses Payments of short-term loans receivable Payments of short-term loans receivable Collection of short-term loans receivable Collection of short-term loans receivable Payments of long-term loans receivable Payments of long-term loans receivable Collection of long-term loans receivable Collection of long-term loans receivable Purchase of investment securities Purchases of investment securities Proceeds from sales of investment securities Proceeds from sales of investment securities Increase in lease and guarantee deposits Increase in guarantee deposits Purchase of investments in subsidiaries Purchases of shares of subsidiaries Purchase of stocks of subsidiaries and affiliates - Purchase of investments in subsidiaries resulting in change in Purchase of investments in subsidiaries resulting in change in scope of consolidation scope of consolidation Proceeds from purchase of investments in subsidiaries resulting Proceeds from purchase of investments in subsidiaries resulting in change in scope of consolidation in change in scope of consolidation Payments for deposit pledged as collateral Payments of deposits pledged as collateral Proceeds from deposit released from collateral - Payments for deposit to account with limited use - Other, net Other - net Net cash used in investing activities Net cash used in investing activities Financing activities Financing activities Increase in short-term loans payable Proceeds from short-term borrowings Decrease in short-term loans payable Repayments of short-term borrowings Proceeds from long-term loans payable Proceeds from long-term borrowings Repayment of long-term loans payable Repayments of long-term borrowings Proceeds from issuance of common stock - Cash dividends paid Dividends paid Repayments of finance lease obligations Repayments of lease obligations Other, net Other - net Net cash provided by financing activities Net cash provided by (used in) financing activities Effect of exchange rate change on cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at beginning of year Cash and cash equivalents at end of period Cash and cash equivalents at end of year

- 66 -