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Annual Securities Report [These documents are based on the Company's Annual Securities Report (Japanese only) prepared following the Financial Instruments and Exchange Act for the purpose of providing accurate financial information and other information in a manner that is easy to understand. In the event of any discrepancy between these translated documents and the Japanese originals, the originals shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translations.] Annual Securities Report (The 19th Fiscal Year) From January 1, 2020 to December 31, 2020 NEXON Co., Ltd Table of Contents Page Annual Securities Report for the 19th Fiscal Year 【Cover】 ···················································································································· 1 Part I 【Information on the Company】 ················································································· 2 I. 【Overview of the Company】 ····················································································· 2 1 【Changes in Key Management Indicators】 ································································ 2 2 【History】 ······································································································· 6 3 【Description of Business】 ···················································································· 10 4 【Group Companies】··························································································· 18 5 【Employees】 ··································································································· 20 II. 【Business Overview】 ····························································································· 21 1 【Management Policy, Business Environment, Issues to be Addressed, etc.】 ·························· 21 2 【Risk Factors】 ································································································· 23 3 【Management’s Analysis of Financial Position, Operating Results and Cash Flows】 ··············· 31 4 【Material Agreements, etc. in Business Operation】······················································· 36 5 【Research and Development】 ················································································ 37 III. 【Property, Plant and Equipment】 ··············································································· 38 1 【Summary of Capital Investment, etc.】 ···································································· 38 2 【Major Facilities】 ····························································································· 39 3 【Plans for Additions, Disposals, etc. of Property, Plant and Equipment】 ······························ 41 IV. 【Information on the Company】 ················································································· 42 1 【Information on the Company’s Stock, etc.】 ······························································ 42 2 【Information on Purchase, etc. of Treasury Stock】 ······················································· 84 3 【Dividend Policy】 ····························································································· 85 4 【Information on Corporate Governance, etc.】 ····························································· 86 V. 【Financial Information】 ··························································································· 111 1 【Consolidated Financial Statements, etc.】 ································································· 112 2 【Non-Consolidated Financial Statements, etc.】 ··························································· 201 VI. 【Stock-Related Administrative Information of the Company】 ············································· 213 VII. 【Reference Information on the Company】 ···································································· 214 1 【Information on the Company’s Parent Company, etc.】 ················································· 214 2 【Other Reference Information】 ·············································································· 214 Part II 【Information on Guarantors, etc. for the Company】 ························································ 216 【Cover】 【Document filed】 Annual Securities Report 【Governing law】 Article 24, Paragraph 1 of the Financial Instruments and Exchange Act of Japan 【Filed with】 Director, Kanto Local Finance Bureau 【Filing date】 March 26, 2021 【Fiscal year】 The 19th Fiscal Year (from January 1, 2020 to December 31, 2020) 【Company name】 Kabushiki Kaisha NEXON 【Company name in English】 NEXON Co., Ltd. 【Name and title of representative】 Owen Mahoney, Representative Director, President and Chief Executive Officer 【Address of head office】 1-4-5 Roppongi, Minato-ku, Tokyo 【Telephone number】 03-6629-5318 (main) 【Contact person】 Shiro Uemura, Representative Director and Chief Financial Officer 【Nearest contact address】 1-4-5 Roppongi, Minato-ku, Tokyo 【Telephone number】 03-6629-5318 (main) 【Contact person】 Shiro Uemura, Representative Director and Chief Financial Officer 【Place where a copy of this document is Tokyo Stock Exchange, Inc. made available for public inspection】 (2-1 Nihonbashi Kabutocho, Chuo-ku, Tokyo) ―1― Part I 【Information on the Company】 I. 【Overview of the Company】 1 【Changes in Key Management Indicators】 (1) Consolidated management indicators, etc. (Millions of yen, unless otherwise stated) International Accounting Standard Term 15th FY 16th FY 17th FY 18th FY 19th FY December December December December December Fiscal year-end 2016 2017 2018 2019 2020 Revenue 183,128 234,929 253,721 248,542 293,024 Income before income taxes 47,123 69,995 117,444 121,968 108,171 Net income attributable to owners of 20,133 56,750 107,672 115,664 56,220 the parent company Total comprehensive income 2,905 91,917 72,012 86,865 86,427 Total equity attributable to owners of the 372,924 465,207 555,268 619,985 709,882 parent company Total assets 441,832 543,231 649,998 719,088 862,161 Total equity attributable to owners of the 428.78 528.42 620.91 702.59 800.35 parent company per share (yen) Basic earnings per share (yen) 23.13 64.67 121.03 129.34 63.57 Diluted earnings per share (yen) 22.70 63.46 119.65 128.03 61.90 Ratio of equity attributable to owners of 84.4 85.6 85.4 86.2 82.3 the parent company to total assets (%) Return on equity (%) 5.4 13.5 21.1 19.7 8.5 Price earnings ratio (times) 36.6 25.4 11.7 11.2 50.0 Cash flows from operating activities 73,293 80,718 118,018 105,073 137,603 Cash flows from investing activities (97,084) (81,891) (68,183) (28,625) (140,234) Cash flows from financing activities (9,275) (3,019) 8,260 (27,742) (2,626) Cash and cash equivalents at end of 152,683 153,242 205,292 253,636 252,570 year Number of employees 5,525 5,768 6,441 6,428 6,288 [average number of temporary workers] [157] [130] [143] [143] (77) (persons) (Notes) 1. Revenue does not include consumption taxes, etc. 2. The Company executed a two-for-one stock split of its common stock as of April 1, 2018. As a result, “Total equity attributable to owners of the parent company per share,” “Basic earnings per share” and “Diluted earnings per share” are calculated assuming the stock split was executed on January 1, 2016. 3. During the 15th fiscal year, the total number of outstanding shares became 434,871,414 shares due to changes in common stock because of the following reasons: ・Decrease by 3,168,703 shares due to retirement of treasury stock on November 30, 2016 ・Increase by 3,923,000 shares due to exercise of stock options 4. During the 16th fiscal year, the total number of outstanding shares became 440,184,332 shares due to changes in common stock because of the following reasons: ・Decrease by 3,103,082 shares due to retirement of treasury stock on December 29, 2017 ―2― ・Increase by 8,416,000 shares due to exercise of stock options 5. During the 17th fiscal year, the total number of outstanding shares became 894,278,664 shares due to increases in common stock because of the following reasons: ・Increase by 443,794,332 shares due to a two-for-one stock split of common stock as of April 1, 2018 ・Increase by 10,300,000 shares due to exercise of stock options 6. During the 17th fiscal year, the provisional accounting treatment related to the business combination was finalized and provisionally measured fair values were revised, and therefore the consolidated statement of financial position has been restated retrospectively. As a result, the relevant key management indicators for the 16th fiscal year reflect the restatement. 7. During the 18th fiscal year, the total number of outstanding shares increased to 901,530,560 shares due to increases in common stock for the following reasons: ・Increase by 5,852,000 shares due to exercise of stock options ・1,399,896 shares were issued by third-party allotment as part of the acquisition consideration due to the business combination of Embark Studios AB and in-kind contribution (45,003,500 shares of common stock of Embark Studios AB; ¥2,186 million) was received from the shareholders of Embark Studios AB who are the allottees. Refer to “V. Financial Information, 1 Consolidated Financial Statements, etc., Notes to consolidated financial statements, 38 Business combination” for details of the business combination. 8. During the 19th fiscal year, the total number of outstanding shares became 886,961,539 shares due to changes in common stock because of the following reasons: ・Decrease by 20,971,021 shares due to retirement of treasury stock
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