Securities code: 3659 March 11, To Shareholders

Transcription

1 To Shareholders Securities code: 3659 March 11, Shinkawa, Chuo-ku, Tokyo NEXON Co., Ltd. President and Chief Executive Officer Owen Mahoney Notice of the 14 th Annual General Meeting of Shareholders Dear Shareholders: You are cordially invited to attend the 14 th Annual General Meeting of Shareholders. The meeting details and agenda are as outlined below. If you are unable to attend the meeting, you may exercise your voting rights in writing or via the Internet. Please review the Annual General Meeting of Shareholders agenda described below and exercise your voting rights by 7 p.m. on Monday, March 28, 2016, in accordance with the instructions set forth in the next page. Notice 1. Date &Time: 10:00 a.m., Tuesday, March 29, 2016 (Doors open at 9:00 a.m.) 2. Location: Tokyo Sankei Building At Otemachi Sankei Plaza on 4 th Floor 1-7-2, Otemachi, Chiyoda-ku, Tokyo 3. Agenda: Matters to be reported: 1) Business Report and Consolidated Financial Statements for the 14 th fiscal year (from January 1, 2015 to December 31, 2015), and audit results on the Consolidated Financial Statements by the Independent Auditors and the Board of Statutory Auditors. 2) Non-consolidated Financial Statements for the 14 th fiscal year (from January 1, 2015 to December 31, 2015). Proposals to be voted on: Proposal No. 1: Reduction in the amounts of capital, capital reserve and retained earnings reserve Proposal No. 2: Election of seven (7) directors Proposal No. 3: Issuance of subscription rights to shares as stock options to the Company s directors and employees, etc

2 [Exercise of voting rights by mail] Please indicate your vote on the enclosed Voting Rights Exercise Form and return it so that it arrives no later than 7 p.m. on Monday, March 28, [Exercise of voting rights via the Internet] To exercise voting rights via the Internet, please read the Guide to Exercising Voting Rights via the Internet on the next page and exercise voting rights by 7 p.m. on Monday, March 28, If attending the meeting in person, please submit the enclosed Voting Rights Exercise Form to the receptionist. Shareholders may exercise voting rights by proxy by assigning his or her voting rights to another shareholder with voting rights designated to act as his or her proxy, provided that the document certifying his or her power of attorney is submitted to the Company. Systems and organization to ensure proper operations and summary of the operating status of such systems, and Notes to consolidated financial statements and non-consolidated financial statements that should be included in the Business Report are not included in the Notice of the 14th Annual General Meeting of Shareholders as the Company discloses them on our website ( in accordance with relevant laws and regulations and provisions of Article 16 of the Company s Articles of Incorporation. Business Report, consolidated financial statements and non-consolidated financial statements included in the Reference Materials of the Notice of the Annual General Meeting of Shareholders are part of the documents audited by independent auditors in preparing their audit report and by statutory auditors in preparing their audit report. Should there be any amendments to the Reference Materials for the General Meeting of Shareholders, Business Report, Financial Statements and Consolidated Financial Statements, the Company will notify its shareholders via the Company s website (

3 Guide to Exercising Voting Rights via the Internet If you wish to exercise your voting rights via the Internet, please note the following matters. 1. Voting rights exercise website Exercising voting rights via the Internet is only available through the use of the voting rights exercise website designated by the Company: 2. Handling of exercise of voting rights (1) When exercising voting rights via the Internet, use the Voting Rights Exercise Code and Password indicated on the enclosed Voting Rights Exercise Form, and follow the on-screen guidance to enter your vote. (2) As the voting rights exercise period ends at 7 p.m. on Monday, March 28, 2016, please exercise your voting rights ahead of time. (3) If voting rights are exercised both in writing and via the Internet, the vote via the Internet will supersede. In addition, if voting rights are exercised via the Internet in multiple occasions, the last vote will supersede. (4) Any fees for internet provider or carrier incurred in accessing the voting rights exercise website (e.g. connection fees) will be borne by shareholders. 3. Handling of password and voting rights exercise code (1) Password is important information required to identify shareholders who cast their votes. Please handle it with care as is the case with your personal seal and passcode. (2) Password will be locked and disabled when input incorrectly a certain number of times. If you wish to request reissuance of your password, please follow the on-screen guidance. (3) The voting rights exercise code indicated on the Voting Rights Exercise Form can be used only for this general meeting of shareholders. 4. System requirements for the exercise of voting rights via the Internet The following system environment is required for exercising voting rights via the Internet. (1) A display monitor with SVGA resolution (800 (W) 600 (H) pixels) or higher. (2) The following applications must be installed. i. Microsoft Internet Explorer Version 5.01 SP2 (or later version) as web browser ii. Adobe Acrobat Reader Version 4.0 (or later version) or Adobe Reader Version 6.0 (or later version) as PDF file browser * Internet Explorer is a registered trademark, trademark, or product name of Microsoft Corporation (U.S.A) in the U.S.A. and other countries, and Adobe Acrobat Reader and Adobe Reader are registered trademarks, trademarks, or product names of Adobe Systems Incorporated (U.S.A.) in the U.S.A. and other countries. * You may download any of the above software free of charge from the respective company websites. (3) If Pop-up blocker feature is enabled in your web browser or browser add-ons, it must be disabled (or temporarily disabled) and the use of cookies in this website must be allowed in your privacy settings. (4) If you cannot access the above website, please check the settings of firewall proxy server or security software if communication via the Internet is not restricted

4 5. Contact for inquiries about computer operations, etc. (1) If you have inquiries about computer operations regarding the exercise of voting rights through this website, please contact the following: Dedicated dial-in number for Stock Transfer Agency Web Support of Sumitomo Mitsui Trust Bank, Limited Tel: (Operating hours: 9:00 to 21:00) (2) For other inquiries, please contact the following i. Shareholders who have accounts with securities companies Shareholders who have accounts with securities companies are requested to contact your securities company. ii. Shareholder who do not have accounts with securities companies (Shareholders who have special accounts) Stock Transfer Agency Department of Sumitomo Mitsui Trust Bank, Limited Tel: (Operating hours: 9:00 to 17:00, excluding Saturdays, Sundays and holidays) - 4 -

5 (Reference Materials) Business Report (From January 1, 2015 to December 31, 2015) 1. Current Status of the Corporate Group (1) Business summary for the current consolidated fiscal year (i) Outline and results of business operations During the fiscal year ended December 31, 2015, the world economy as a whole generally witnessed a gradual recovery, supported by the recovery in the U.S. and Europe, although Asian emerging economies including China showed a slowdown. In the U.S., consumer spending showed a steady growth as employment and income environment improved. In Europe, the economy recovered gradually as an increase in real income amid gradual decline in the unemployment rate brought in strong consumption spending. Meanwhile, the Chinese economy gradually decelerated due to weak investment, export and production. Affected by the slowdown in the Chinese economy, the Asian emerging economies also somewhat slowed down. The Japanese economy made a big leap toward quick exit from prolonged deflation and revitalization of the economy under the Abenomics policies. The exit from deflation created a virtuous cycle of the economy, and the Japanese economy continued to be on a gradual recovery trend. However, there were delays in ripple effect of steady corporate and household income on capital expenditures and consumption spending. Under these circumstances, Nexon Group is primarily engaged in PC online and mobile game businesses. In order to provide users with an enjoyable game experience, Nexon Group has endeavored to provide high-quality games, obtain more contents, deliver new titles, and update existing titles. Specifically, Nexon Group has worked on various initiatives such as the enhancement of game development capabilities within Nexon Group, business alliance with other companies including joint development, provision of high-quality new game titles through purchase of leading game developers, enhancement of Nexon Group s development capabilities in mobile business and further reinforcement of the business platform to enable attractive content updates for the existing game titles. As a result, for the fiscal year ended December 31, 2015, Nexon Group recorded revenue of 190,263 million (up 10.0% year-over-year), operating income of 62,290 million (up 36.9% year-over-year), income before income taxes of 68,006 million (up 29.1% year-over-year) and net income attributable to owners of the parent company of 55,132 million (up 88.1% year-over-year)

6 Performance results by reportable segments are as follows: (a) Japan Revenue for the fiscal year ended December 31, 2015 amounted to 20,772 million (down 30.6% yearover-year), and segment loss amounted to 1,929 million (segment loss of 1,275 million for the fiscal year ended December 31, 2014). Both PC and mobile game revenues decreased. (b) Korea Revenue for the fiscal year ended December 31, 2015 amounted to 152,571 million (up 16.6% yearover-year), and segment profit amounted to 70,709 million (up 14.3% year-over-year). In Korea, sales of EA SPORTS TM FIFA Online 3 decreased year-over-year as it posted strong sales in 2014 due to a massive boost from the FIFA World Cup held in the same year. However, revenue showed a steady growth as sales of our existing PC online games including Dungeon&Fighter and Sudden Attack increased year-over-year and sales from new games released in 2015 including HIT and DomiNations - Creation of Civilization ( DomiNations ) contributed to revenue. Revenue in Korea includes royalty income of NEOPLE INC. attributable to license agreements in China. For the fiscal year ended December 31, 2015, content updates and item sales for our core PC online game title in China, Dungeon&Fighter introduced for the Lunar New Year holidays and the National Day holiday were well received by its users, and an increase in the related royalty income also contributed to the business results. (c) China Revenue for the fiscal year ended December 31, 2015 amounted to 4,087 million (down 5.3% yearover-year), and segment profit amounted to 2,189 million (down 14.5% year-over-year). In China, consulting fees related to the existing PC online game titles decreased. (d) North America Revenue for the fiscal year ended December 31, 2015 amounted to 11,111 million (up 101.2% yearover-year), and segment loss amounted to 4,024 million (segment loss of 2,746 million for the fiscal year ended December 31, 2014). In North America, revenue increased due to a contribution from the new mobile game title DomiNations launched in the U.S. and Europe in Q2, but an increase in related marketing expense resulted in an increase in loss

7 (e) Other Revenue for the fiscal year ended December 31, 2015 amounted to 1,722 million (down 23.6% yearover-year), and segment loss amounted to 560 million (segment loss of 435 million for the fiscal year ended December 31, 2014). Revenue by region (revenue classified into country or region category based on the customers location) was 76,964 million (up 17.7% year-over-year) in Korea, 75,388 million (up 12.6% yearover-year) in China, 21,026 million (down 29.8% year-over-year) in Japan, 8,971 million (up 62.5% year-over-year) in North America, and 7,914 million (up 55.0% year-over-year) in Other. Region Current consolidated fiscal year Amount ( million) Ratio (%) Korea 76, China 75, Japan 21, North America 8, Other 7, Total 190,

8 (ii) Capital expenditure Total capital expenditure of Nexon Group during the current consolidated fiscal year amounted to 6,029 million. The major components include long-term prepaid expenses related to game license fee of 1,791 million, game content development cost of 513 million, building construction cost (in Jeju Special Administrative Region) by NEOPLE INC., a subsidiary, of 510 million and PC online game and mobile game operation equipment (e.g. server equipment) of 1,644 million, and software for internal use (game related) of 1,458 million. (iii) Financing During the current consolidated fiscal year, Nexon Group borrowed 6,000 million under short- and longterm borrowings from financial institutions for procurement of its working capital. (iv) Business transfers, absorption-type splits, or incorporation-type splits Not applicable. (v) Businesses transferred from other companies Not applicable. (vi) Rights and obligations related to other companies assumed as a result of absorption-type mergers or splits Omitted as it is immaterial. (vii) Acquisition or disposition of shares, other equity interests or subscription rights to shares of other companies Effective October 16, 2015, Nexon Group sold all NCSOFT Corporation shares. Other transactions than the above are omitted as they are immaterial

9 (2) Assets and Profit/Loss Accounts 11 th Fiscal Year (Ended December 31, 2012) 12 th Fiscal Year (Ended December 31, 2013) 13 th Fiscal Year (Ended December 31, 2014) 14 th Fiscal Year (Ended December 31, 2015) Japan GAAP IFRS IFRS IFRS IFRS Net sales or revenue (Millions of yen) 108, , , , ,263 Operating income (Millions of yen) - 47,267 50,705 45,509 62,290 Ordinary income (Millions of yen) 44, Income before income taxes (Millions of yen) Net income or net income attributable to owners of the parent (Millions of yen) Net income per share or basic earnings per share (Yen) - 43,324 48,648 52,671 68,006 25,401 28,283 30,132 29,316 55, Total assets (Millions of yen) 313, , , , ,586 Net assets or equity (Millions of yen) 214, , , , ,681 Net assets per share or equity attributable to owners of the parent per share (Yen) (Notes)1. The Company prepares the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) from the 12 th fiscal year ended December 31, For the 11 th fiscal year, figures under both Japanese GAAP and IFRS are presented. Operating income under Japanese GAAP for the 11 th fiscal year is not presented as it is calculated using a different method from that under IFRS. 2. Net income per share or basic earnings per share is calculated as net income or net income attributable to owners of the parent, respectively, divided by the weighted average number of common stock issued and outstanding during the current fiscal year. The weighted average number of common stock does not include common stock held by Nexon Group as treasury stock. 3. Net assets per share or equity attributable to owners of the parent per share are calculated as net assets less subscription rights to shares and non-controlling interests or equity attributable to owners of the parent, respectively, divided by the total number of common stock issued and outstanding at year-end. The total number of common stock issued and outstanding does not include common stock held by Nexon Group as treasury stock

10 (3) Current status of the major parent company and subsidiaries (a) Parent company The Company s parent company is NXC Corporation, which owns 167,631 thousand shares, or voting rights ratio of 38.61%, of the Company. NXC Corporation and its subsidiaries, except for Nexon Group, engage in investment businesses and other businesses that are not related to online game business which is the Company s primary business. The NXC Group has executed a non-compete agreement stipulating that they shall not engage in any businesses that may compete with the online game business of Nexon Group. With regard to a company name trademark NEXON in Japan owned by NXC Corporation, the Company has entered into a trademark licensing agreement with NXC Corporation and agreed to pay license fee to NXC, which is set as the amount calculated as a certain percentage of the Company s revenue. NXC Corporation has agreed that the Company has a right to extend the trademark licensing agreement regarding the company name trademark NEXON. Certain subsidiaries of the Company, including NEXON Korea Corporation and NEXON America, Inc., have also entered into the similar agreement with NXC Corporation. Except for the above transaction, there are no other recurring transactions between Nexon Group and NXC Corporation, and the Company also has no plan in the future to engage in transactions, investments and business developments in which NXC Corporation may have influence on Nexon Group and/or which is advantageous to NXC Corporation

11 (b) Major subsidiaries Name NEXON Korea Corporation Lexian Software Development (Shanghai) Co., Ltd. Capital KRW 32,000 million US$4,100 thousand Voting rights owned by the Company 100% 100 NEXON America, Inc. US$ NEOPLE INC. KRW 181 million 100 Main business PC online and mobile game development, and PC online and mobile game distribution and publication licensing service mainly in Korea Provision of necessary infrastructure to distributors and consulting services for game distribution in China PC online game distribution mainly in the North America region PC online game and mobile game development gloops, Inc. 26 million 100 Social application service NEXON M Inc. NEXON Europe GmbH US$1,500 thousand EUR25 thousand Mobile game distribution mainly in the North America region and Europe PC online game distribution mainly in Europe (c) Status of specified wholly-owned subsidiaries during the current consolidated fiscal year Not applicable

12 (4) Issues to Be Addressed Nexon Group recognizes the following matters as issues to be addressed in order to achieve our future growth: (a) (b) Provide new game titles with enticement and high quality and execute content update of existing game titles Regardless of whether the hardware used to play the game is PC or mobile or whether the game is distributed in Japan, Korea, China, the U.S., or anywhere in the world, excellence of the game is measured by the quality of its content in the game industry. We have no intention of settling for our popular game titles Nexon Group is currently offering, including Dungeon&Fighter and MapleStory. Instead, in order to become the world s top game company, we are aiming to distribute exciting, creative and unique game titles with high quality to offer users with the greatest pleasure and special experience and, for existing games, to execute attractive content updates and manage game operation that can attract and satisfy users for a long period of time. To this end, we intend to further enhance the business base in order to distribute new high-quality game titles and execute attractive content updates to existing game titles, through efforts such as strengthening game operation capability, enhancing development and publishing capability within Nexon Group, forming partnerships including co-development with other game developers, and investing in leading game developers. Strengthening information security Nexon Group provides PC online game and mobile game service which handles game data and users personal information through the information system, and accordingly, it is required to maintain the highest level of information systems infrastructure to prevent illegal access or illegal use by external parties, and to enhance information security structure including appropriate internal information management organization. Nexon Group has been focusing on enhancement of the information security structure through Nexon Group-wide enhancement of the organization in terms of information security and implementation of cutting-edge information systems, and is determined to make continued efforts to strengthen the overall information security structure in order to provide our users with reliable and secure services

13 (5) Principal Business (as of December 31, 2015) PC online game business and mobile game business (6) Major Office and Factories (as of December 31, 2015) Office and Name factories The Company Head office Chuo-ku, Tokyo Location NEXON Korea Corporation Head office Seongnam, Gyeonggi, Korea Lexian Software Development (Shanghai) Co., Ltd. Head office Shanghai, People s Republic of China NEXON America, Inc. Head office California, U.S.A. NEOPLE INC. Head office Jeju Special Administrative Region, Korea gloops, Inc. Head office Minato-ku, Tokyo NEXON M Inc. Head office California, U.S.A. NEXON Europe GmbH Head office Berlin, Germany

14 (7) Employees (as of December 31, 2015) (a) Employees of Nexon Group employees Changes from the previous consolidated fiscal year-end 5,033(169) Increase by 377(decrease by 17) (Note) employees above represent full-time employees, and figures in parenthesis represent average number of temporary workers (part-time and fixed-term employees) during the year. (b) Employees of the Company employees Changes from the previous year-end Average age Average service years 251 (2) Increase by 8 (increase by 1) 34.4 years old 4.4 years (Note) 1. Excluded from the number of employees above is one employee seconded from the Company to other company. 2. employees above represent full-time employees, and figures in parenthesis represent average number of temporary workers (part-time and fixed-term employees) during the year. 3. Average service years for secondees from Nexon Group are calculated based on the total service years including those in the seconder company. (8) Major Lenders(as of December 31, 2015) Lenders Sumitomo Mitsui Banking Corporation Amount of loan payable 4,417 million (9) Other material facts concerning the current status of Nexon Group Not applicable

15 2. Current Status of the Company (1) Shares (as of December 31, 2015) (a) Total number of authorized shares: 1,400,000,000 shares (b) shares issued: 434,117,117 shares (Notes) The number of shares issued increased by 10,175 thousand shares due to exercise of stock options, and decreased by 7,313 thousand shares due to cancellation of treasury stock. (c) shareholders 6,512 (d) Major shareholders (Top 10) Name of shareholders shares owned (Thousand shares) Ratio (%) NXC Corporation 167, NXMH B.V.B.A. 83, CBHK-KOREA SECURITIES DEPOSITORY- SAMSUNG 20, Japan Trustee Services Bank, Ltd. (trust account) 8, CBNY-ORBIS SICAV 8, Min Seo 7, The Master Trust Bank of Japan, Ltd. (trust account) 5, CHASE MANHATTAN BANK GTS CLIENTS ACCOUNT ESCROW 5, STATE STREET BANK AND TRUST COMPANY 5, CBNY-ORBIS FUNDS 4,

16 (2) Subscription Rights to Shares (a) Subscription rights to shares granted to officers of the Company as considerations for services provided (as of December 31, 2015) Subscription Rights (5-1) Subscription Rights (6) Date of resolution to issue August 17, 2012 April 22, 2013 subscription rights to shares 703 units 150 units Class and number of underlying shares Common stock 703,000 shares (1,000 shares per unit) Common stock 150,000 shares (1,000 shares per unit) Cash paid for subscription rights No payment is required in exchange for subscription rights 944,000 per unit Exercise price 1,367,000 per unit ( 1,367 per share) 1,000 per unit ( 1 per share) Exercise period (Qualified stock option) From: August 18, 2014 To: September 5, 2018 (Non-qualified stock option) From: September 6, 2012 To: September 5, 2018 From: May 7, 2013 To: May 6, 2043 Conditions on exercise Notes 1 and 2 Notes 2, 3 and 4 Status of holding by officers Directors (excluding external directors) External directors Statutory auditors subscription rights 683 units subscription rights 150 units underlying shares 683,000 shares underlying shares 150,000 shares holders (Note 5) 3 persons holders 2 persons subscription rights 20 units subscription rights -unit underlying shares 20,000 shares underlying shares -share holders 2 persons holders -person subscription rights underlying shares -unit -share subscription rights underlying shares -unit -share holders -person holders -person (Notes)1. In principle, holders of subscription rights to shares must continue to be officer or employee of the Company or its subsidiary from the date of allocation up to the date of exercise to be eligible to exercise the right. 2. Partial exercise of subscription rights to shares is not allowed. 3. Subscription rights may be exercised within ten days from the following day of retirement from directorship during the exercise period (or during the calendar year in which the eligible person retires in case the holder resides in the U.S.) 4. All units granted will be forfeited in case the holder is dismissed from directorship. 5. Of which, subscription rights granted to one director were granted before his appointment as a director

17 Subscription Rights (7) Subscription Rights (8) Date of resolution to issue February 20, 2014 March 25, 2014 subscription rights to shares 731 units 2,725 units Class and number of underlying shares Common stock 731,000 shares (1,000 shares per unit) Common stock 2,725,000 shares (1,000 shares per unit) Cash paid for subscription rights No payment is required in exchange for subscription rights No payment is required in exchange for subscription rights Exercise price 853,000 per unit ( 853 per share) 1 per unit ( per share) Exercise period (Qualified stock option) From: February 20, 2016 To: March 2, 2020 (Non-qualified stock option) From: March 3, 2014 To: March 2, 2020 From: March 25, 2015 To (1) March 15, 2019 (2) March 24, 2021 Note 3 Conditions on exercise Notes 1 and 2 Notes 1 and 2 Status of holding by officers Directors (excluding external directors) External directors Statutory auditors subscription rights underlying shares holders (Note 4) subscription rights underlying shares 646 units 646,000 shares subscription rights underlying shares 2,725 units 2,725,000 shares 3 persons holders 2 persons 80 unit 80,000 share subscription rights underlying shares -unit -share holders 2 persons holders -person subscription rights underlying shares -unit -share subscription rights underlying shares -unit -share holders -person holders -person (Notes)1. In principle, holders of subscription rights to shares must continue to be officer or employee of the Company or its subsidiary from the date of allocation up to the date of exercise to be eligible to exercise the right. 2. Partial exercise of subscription rights to shares is not allowed. 3. Different subscription rights agreements have different exercise period. 4. Of which, subscription rights granted to one director were granted before his appointment as a director

18 Subscription Rights (9-1) Subscription Rights (10) Date of resolution to issue May 9, 2014 July 17, 2015 subscription rights to shares 1,683 units 50 units Class and number of underlying shares Common stock 1,683,000 shares (1,000 shares per unit) Common stock 50,000 shares (1,000 shares per unit) Cash paid for subscription rights No payment is required in exchange for subscription rights 1,558,000 per unit Exercise price 809,000 per unit ( 809 per share) 1,000 per unit ( 1 per share) Exercise period From: May 9, 2014 To: May 8, 2021 From: August 3, 2015 To: August 2, 2045 Conditions on exercise Notes 1 and 2 Notes 2, 3, and 4 Status of holding by officers Directors (excluding external directors) External directors Statutory auditors subscription rights underlying shares 1,683 units 1,683,000 shares 50 units subscription rights 50,000 shares underlying shares holders 2 persons holders 1 person subscription rights underlying shares -unit -share subscription rights underlying shares -unit -share holders -person holders -person subscription rights underlying shares -unit -share subscription rights underlying shares -unit -share holders -person holders -person (Notes)1. In principle, holders of subscription rights to shares must continue to be officer or employee of the Company or its subsidiary from the date of allocation up to the date of exercise to be eligible to exercise the right. 2. Partial exercise of subscription rights to shares is not allowed. 3. Subscription rights may be exercised within ten days from the following day of retirement from directorship during the exercise period (or during the calendar year in which the eligible person retires in case the holder resides in the U.S.) 4. All units granted will be forfeited in case the holder is dismissed from directorship

19 (b) Subscription rights to shares granted to employees as considerations for services provided during the current fiscal year Not applicable. (c) Other material facts concerning subscription rights to shares Not applicable

20 (3) Corporate officers (a) Directors and statutory auditors (as of December 31, 2015) Post and Responsibility Name Material Posts Concurrently Held President and CEO Owen Mahoney Director of transcosmos inc. Representative Director Shiro Uemura Director of gloops, Inc. Director Jiwon Park President and CEO of NEXON Korea Corporation Director Jungju Kim President and CEO of NXC Corporation Director Satoshi Honda Director of Spline Network Inc. Director Shiro Kuniya Full-time statutory auditor Toshishige Tanaka Not applicable Managing partner of Oh-Ebashi LPC & Partners Auditor of Kitano Hospital, The Tazuke Kofukai Medical Research Institute Board member of the Japan Commercial Arbitration Association Board member of Japan Century Symphony Orchestra Director of Ebara Corporation Statutory auditor of Takeda Pharmaceutical Company Ltd. Director of Sony Financial Holdings Inc. Statutory auditor Iwao Ohtomo Representative of Ohtomo Accounting Firm Statutory auditor Ryoji Mori Partner of Eichi Law Offices, LLC. (Notes)1. Mr. Satoshi Honda and Mr. Shiro Kuniya are external directors. 2. Mr. Toshishige Tanaka, Mr. Iwao Ohtomo and Mr. Ryoji Mori are external statutory auditors. 3. Statutory auditor Mr. Iwao Ohtomo is a certified public accountant and has substantial knowledge about finance and accounting. 4. The Company has appointed Statutory Auditor Mr. Ryoji Mori as the independent officer pursuant to the regulations of Tokyo Stock Exchange and reported such appointment to the Exchange

21 (b) Director who resigned during the year Not applicable (c) Summary of the limited liability agreement Pursuant to provisions of Article 427, Paragraph 1 of the Companies Act and Article 28 of the Company s articles of incorporation, the Company and each of the external directors entered into an agreement to limit the liability for damages provided for in Article 423, Paragraph 1 of the Companies Act. Pursuant to provisions of Article 427, Paragraph 1 of the Companies Act and Article 36 of the Company s articles of incorporation, the Company and each of the external statutory auditors entered into an agreement to limit the liability for damages provided for in Article 423, Paragraph 1 of the Companies Act. The limit of liability for damages under the agreement described above is 2.4 million or the amount provided for in Article 425, Paragraph 1 of the Companies Act, whichever is higher. (d) Remuneration for directors and statutory auditors (i) Total amount of remuneration for the current fiscal year Post Number Total amount of remuneration Directors (in which external directors) Statutory auditors (in which external statutory auditors) Total (in which external officers) 6 (2) 3 (3) 9 (5) 1,113 million ( 25 million) 13 million ( 13 million) 1,126 million ( 38 million) (Notes)1. Amount of remuneration to directors does not include employee remuneration paid to those directors who serve the company as directors and employees simultaneously. 2. Maximum amount of annual remuneration to directors was resolved at the 12 th annual general meeting of shareholders held on March 25, 2014 to be fixed compensation at or below 400 million and performance-based bonus at or below 1,000 million, excluding the amount paid as employee compensation. In addition, annual remuneration in the form of equity-based compensation stock options was resolved to be at or below 250 million at the 11 th annual general meeting of shareholders held on March 26, 2013, and also, annual remuneration in the form of stock options was resolved to be at or below 1,500 million at the 13 th annual general meeting of shareholders held on March 27, Maximum amount of annual remuneration to statutory auditors was resolved at the 9 th annual general meeting of shareholders held on March 30, 2011 to be at or below 50 million. 4. Amount of remuneration to directors includes the following: 852 million worth of remuneration in the form of stock options ( 10 million to two external directors) (ii) Retirement allowance for officers paid during the current fiscal year Not applicable. (iii) Total amount of officers remuneration paid to external officers by the parent company or subsidiaries Not applicable

22 (e) Matters concerning external officers i) Material concurrent positions of other corporations and the relationship between such companies and the Company Mr. Satoshi Honda, Director, is Director of Spline Network Inc. There exists no special relationship between the Company and the subject company. Mr. Shiro Kuniya, Director, is Managing partner of Oh-Ebashi LPC & Partners, Auditor of Kitano Hospital, The Tazuke Kofukai Medical Research Institute, Board member of the Japan Commercial Arbitration Association, Board member of Japan Century Symphony Orchestra, Director of Ebara Corporation, Statutory auditor of Takeda Pharmaceutical Company Ltd. and Director of Sony Financial Holdings Inc. There exists no special relationship between the Company and the subject companies. Mr. Iwao Ohtomo, Statutory auditor, is Representative of Ohtomo Accounting Firm. There exists no special relationship between the Company and the subject accounting firm. Mr. Ryoji Mori, Statutory auditor, is a partner of Eichi Law Offices, LLC. There exists no special relationship between the Company and the subject law firm. ii) Major activities during the current fiscal year Attendance and Participation Director Director Statutory Auditor Statutory Auditor Statutory Auditor Satoshi Honda Shiro Kuniya Toshishige Tanaka Iwao Ohtomo Ryoji Mori Mr. Honda attended all 17 meetings of the board of directors that were held during the current fiscal year. Mr. Honda participated in discussions, as necessary, concerning items on agenda as well as general deliberations with extensive experience in the game industry. Mr. Kuniya attended all 17 meetings of the board of directors that were held during the current fiscal year. Mr. Kuniya participated in discussions, as necessary, concerning establishment and maintenance of the Company s compliance system and legal aspect of items on agenda mainly from the viewpoint of legal counsel. Mr. Tanaka attended all meeting of the board of directors and statutory auditors that were held 17 times and 14 times, respectively, during the current fiscal year. Mr. Tanaka participated in discussions, as necessary, concerning items on agenda as well as general deliberations from the viewpoint of fulltime statutory auditor. Mr. Ohtomo attended all meetings of the board of directors and statutory auditors that were held 17 times and 14 times, respectively, during the current fiscal year. Mr. Ohtomo participated in discussions, as necessary, concerning monthly performance and corporate acquisitions mainly from the professional viewpoint of certified public accountant. Mr. Mori attended 16 of the total 17 meetings of the board of directors and 13 of the total 14 meetings of statutory auditors during the current fiscal year. Mr. Mori participated in discussions, as necessary, concerning establishment and maintenance of the Company s compliance system and legal aspect of items on agenda mainly from the viewpoint of legal counsel. iii) Opinion of the external officers concerning the contents Not applicable

23 (4) Independent Auditors (a) Name: PricewaterhouseCoopers Aarata (Note) On July 1, 2015, PricewaterhouseCoopers Aarata changed its name in Japanese from Aarata Audit Corporation to PwC Aarata Audit Corporation. (b) Amount of remuneration Amount of remuneration Amount of remuneration paid to the independent auditors for the current fiscal year Total amount of cash and other financial benefits to be paid by the Company and its subsidiaries to the independent auditors 64 million 192 million (Notes) 1. The amount of remuneration paid to the independent auditors for the current fiscal year represents the sum of the professional audit fees for the services under the Companies Act and those under the Financial Instruments and Exchange Act as the audit service agreement between the Company and the independent auditors does not clearly divide them and it is impracticable to do so. 2. The board of statutory auditors agreed on the amount of remuneration paid to the independent auditors based on the necessary examination of the contents of the independent auditors audit plan, the performance status of their duties concerning financial audit, and the appropriateness of the calculation basis for estimated remuneration. 3. NEXON Korea Corporation and other five companies, all of which are consolidated subsidiaries of the Company, are audited by PricewaterhouseCoopers LLP, member firms of the same global network of the Company s auditor, and the total amount of cash and other financial benefits to be paid by the Company and its subsidiaries to the independent auditors include those audit fees. (c) Non-audit services Each of the Company and its consolidated subsidiaries, NEXON Europe GmbH, Ndoors Corporation and Nexon GT Co., Ltd., pays professional fees for financial due diligence and tax-related services. (d) Policies to determine dismissal or non-reappointment of the auditor When the independent auditors receive disciplinary actions or administrative sanctions from the regulatory agencies for violation of laws including the Companies Act and the Certified Public Accountants Act, or when the independent auditors are determined to be unsuitable for performing the audit from the viewpoint of audit quality, quality management, independence and comprehensive capability, the board of statutory auditors will decide to place the matter to dismiss or not to reappoint the current independent auditor on the agenda of a general meeting of shareholders

24 When it is acknowledged that the independent auditors fall under any of the items in Article 340, Paragraph 1 of the Companies Act, and when it is deemed appropriate, the board of statutory auditors shall dismiss the independent auditors with unanimous consent of all statutory auditors. In this case, the statutory auditor appointed by the board of statutory auditors will report the dismissal of the independent auditor and the reason of dismissal at the first general meeting of shareholders called after the dismissal. (5) Basic Policy on Control of the Company Not applicable. (6) Policy to Determine Distributions of Surplus The Company provides in its articles of incorporation that distributions of surplus shall be decided by resolutions of the board of directors pursuant to Article 459, Paragraph 1 of the Companies Act. The Company recognizes that one of its important management tasks is to return profits to the shareholders and intends to return profits in a stable manner in line with the performance after prudently considering the actual results and forecast of the Company s performances. Under the current conditions, the Company intends to maintain balance between returning profits and making effective investments to aggressively expand the business for future growth by expanding existing businesses or starting new businesses to strengthen the management basis and enhance future business areas, pursuing opportunities in M&A, or acquiring game copyrights. Distribution of five yen per share as the year-end dividend for the current fiscal year was approved at the meeting of the board of directors of the Company held on February 22,

25 Consolidated Statement of Financial Position (As of December 31, 2015) (Millions of Yen) Account Amount Account Amount (Assets) (Liabilities) Current assets 331,670 Current liabilities 36,884 Cash and cash equivalents 194,225 Trade and other payables 10,874 Trade and other receivables 33,362 Deferred income 9,558 Other deposits 97,105 Borrowings 1,916 Other financial assets 1,973 Income taxes payable 7,135 Other currents assets 5,005 Other financial liabilities 568 Non-current assets 93,916 Provisions 2,246 Property, plant and equipment 22,027 Other current liabilities 4,587 Goodwill 35,387 Non-current liabilities 9,021 Intangible assets 7,520 Deferred income 1,985 Investments accounted for using equity method 2,071 Borrowings 2,501 Other financial assets 19,576 Other financial liabilities 790 Other non-currents assets 3,040 Provisions 327 Deferred tax assets 4,295 Other non-current liabilities 1,280 Deferred tax liabilities 2,138 Total liabilities 45,905 (Equity) Total equity attributable to owners of the parent 374,447 Capital stock 56,441 Capital surplus 34,597 Other equity interest 73,308 Retained earnings 210,101 Non-controlling interests 5,234 Total equity 379,681 Total assets 425,586 Total liabilities and equity 425,

26 Consolidated Income Statement (From January 1, 2015 to December 31, 2015) (Millions of Yen) Account Amount Revenue 190,263 Cost of sales 49,701) Gross profit 140,562 Selling, general and administrative expenses 74,212) Other income 1,621 Other expenses 5,681) Operating income 62,290 Finance income 7,587 Finance costs 1,962) Equity in profit of affiliates 91 Income before income taxes 68,006 Income taxes expense 12,405) Net income 55,601 (Attributable to) Owners of the parent 55,132 Non-controlling interests 469 Net income 55,

27 Consolidated Statement of Changes in Equity (From January 1, 2015 to December 31, 2015) (Millions of Yen) Capital stock Capital surplus Equity attributable to owners of the parent Treasury stock Other equity interest Retained earnings Total Noncontrolling interests Total equity Balance as of January 1, ,481 40,830-92, , ,380 5, ,477 Net income ,132 55, ,601 Other comprehensive income ,627) - 14,627) 332) 14,959) Total comprehensive income ,627) 55,132 40, ,642 Issue of new stock 3,960 3, ,920-7,920 Stock issue cost - (27) ) - 27) Dividend ,305) 4,305) - 4,305) Share-based payments Acquisition of treasury stock - (169) (10,000) - - (10,169)- - (10,169)- Cancellation of treasury stock - (10,000) 10, Transfer from other equity interest to retained earnings ,249) 4, Other changes Total transaction with owners 3,960 6,233) - 4,109) 56) 6,438) - 6,438) Balance as of December 31, ,441 34,597-73, , ,447 5, ,

28 Non-consolidated Balance Sheet (As of December 31, 2015) (Millions of Yen) Account Amount Account Amount (Assets) (Liabilities) Current assets 70,444 Current liabilities 3,506 Cash and deposits 68,997 Accounts payable-trade 268 Accounts receivable-trade 570 Accounts payable-other 261 Prepaid expenses 182 Accrued expenses 106 Short-term loans receivable from 3,923 Income taxes payable 1,835 subsidiaries and affiliates Other 820 Provision for bonuses 121 Allowance for doubtful accounts (4,048) Unearned revenue 657 Non-current assets 38,190 Other 258 Tangible fixed assets 200 Non-current liabilities 498 Leasehold improvements 120 Lease obligations 25 Tools, furniture and fixtures 403 Long-term unearned income 269 Accumulated depreciation (323) Provision for retirement benefits 74 Intangible fixed assets 66 Asset retirement obligations 13 Software 66 Deferred tax liabilities 117 Other 0 Total liabilities 4,004 Investments and other assets 37,924 (Net assets) Investment securities 3,039 Shareholders equity 99,779 Stocks of subsidiaries and affiliates 28,211 Capital stock 56,227 Long-term loans receivable from subsidiaries and affiliates 8,455 Capital surplus 36,087 Long-term prepaid expenses 485 Capital reserve 6,087 Other 327 Other capital surplus 30,000 Allowance for doubtful accounts (2,593) Retained earnings 7,465 Retained earnings reserve 1,305 Other retained earnings 6,160 Retained earnings brought forward 6,160 Valuation and translation adjustments 246 Valuation difference on availablefor-sale securities 246 Subscription rights to shares 4,605 Total net assets 104,630 Total assets 108,634 Total liabilities and net assets 108,

29 Non-consolidated Statement of Income (From January 1, 2015 to December 31, 2015) (Millions of Yen) Account Amount Net sales Sales of games 5,691 Other sales 124 5,815 Cost of sales 3,117 Gross profit 2,698 Selling, general and administrative expenses 6,470 Operating loss 3,772 Non-operating income Interest income 213 Dividends income 18,869 Other 81 19,163 Non-operating expenses Interest expenses 285 Foreign exchange loss 759 Stock issue cost 27 Treasury stock acquisition cost 169 Other 6 1,246 Ordinary income 14,145 Extraordinary gain Gain on sale of investment securities 6,298 Gain from reversal of subscription rights to shares 145 6,443 Extraordinary loss Provision of allowance for doubtful accounts for subsidiaries and affiliates 6,483 Loss on valuation of stocks of subsidiaries and affiliates 192 Loss on valuation of investment securities 109 Loss on sales and retirement of non-current assets 33 Impairment loss 80 6,897 Income before income taxes 13,691 Income taxes-current 4,160 Income taxes-deferred 1,359 5,519 Net income 8,

30 Non-consolidated Statement of Changes in Net Assets (From January 1, 2015 to December 31, 2015) Capital surplus Shareholders equity (Millions of Yen) Retained earnings Other retained Capital stock Capital Other capital Total capital Retained earnings reserve surplus surplus earnings Retained reserve earnings Total retained earnings brought forward Balance as of January 1, ,332 2,192 40,000 42, ,724 3,598 Changes of items during the period Issue of new stock 3,895 3,895-3, Dividend from surplus ,736) 4,305) Net income ,172 8,172 Net changes of items other than shareholders equity Acquisition of treasury stock Cancellation of treasury stock ,000) 10,000) Total changes of items during the period 3,895 3,895 10,000) 6,105) 431 3,436 3,867 Balance as of December 31, ,227 6,087 30,000 36,087 1,305 6,160 7,465 Shareholders equity Treasury stock Total shareholders equity Valuation and translation adjustments Valuation difference on available-for-sale securities Total valuation and translation adjustments Subscription rights to shares Total net assets Balance as of January 1, ,122 6,536 6,536 3, ,598 Changes of items during the period Issue of new stock - 7, ,790 Dividend from surplus - 4,305) ,305) Net income - 8, ,172 Net changes of items other than shareholders equity - - 6,290) 6,290) 665 5,625) Acquisition of treasury stock 10,000) 10,000) ,000) Cancellation of treasury stock 10, Total changes of items during the period - 1,657 6,290) 6,290) 665 3,968) Balance as of December 31, , , ,

31 (Translation) Audit Report on Consolidated Financial Statements To the Board of Directors of NEXON Co., Ltd. Independent Auditors Report PricewaterhouseCoopers Aarata Designated Partner, Engagement Partner Certified Public Accountant February 18, 2016 Hideaki Zenba Designated Partner, Engagement Partner Certified Public Accountant Hiroyuki Sawayama Pursuant to the fourth paragraph of Article 444 of the Companies Act, we have audited the consolidated financial statements, namely, the consolidated statement of financial position as of December 31, 2015 of NEXON Co., Ltd. (the Company ), and the related consolidated statements of income and changes in equity, and the related notes for the fiscal year from January 1, 2015 to December 31, Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with provisions of Article 120, the second sentence of Paragraph 1 of the Ordinance on Accounting of Companies which permits preparation of the consolidated financial statements with omission of certain disclosure items required under international accounting standards. It includes design and operation of internal control that management determines as necessary to enable the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures are selected and applied based on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. An audit also includes assessing the accounting policies adopted and its application and accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that we obtained sufficient and appropriate audit evidence to provide a reasonable basis for our opinion. Opinion In our opinion, the consolidated financial statements referred to above, which omitted certain disclosure items required under the international accounting standards pursuant to provisions of Article 120, the second sentence of Paragraph 1 of the Ordinance on Accounting of Companies, present fairly, in all material respects, the financial position of the Company and its consolidated subsidiaries as of December 31, 2015, and the results of their operations for the year then ended