Prospectus
(Merger)
Section
I. Basic Merger Items
A.
Overview
of the Parties to the Merger
(1)
Parties
to the Merger
|
Surviving
Corporation After Merger
|
|
Name of
Corporation
|
Webzen Inc.
(“Webzen”)
|
|
Address
|
14Fl. Daerung
Post Tower 2
nd
,
182-13 Guro-dong, Guro-gu, Seoul
|
|
Representative
Director
|
Chang Keun
Kim
|
|
Corporate
Category
|
KOSDAQ Listed
Corporation
|
|
After
Merger
|
Surviving
Corporation
|
|
Dissolving
Corporation After Merger
|
|
Name of
Corporation
|
NHN Games
Co., Ltd. (“NHN Games”)
|
|
Address
|
13Fl. Daerung
Post Tower 2
nd
,
182-13 Guro-dong, Guro-gu, Seoul
|
|
Representative
Director
|
Byoung Gwan
Kim
|
|
Corporate
Category
|
Unlisted
Corporation
|
|
After
Merger
|
Dissolving
Corporation
|
(2)
Background of Merger
By merging with NHN
Games, a company in possession of verified game development capabilities and
profitability, Webzen hopes to enhance its game service portfolio, expand its
publishing business and promote efficient development of online games by sharing
R&D resources and integrating the operational networks of the parties to the
merger. Ultimately, this is expected to enhance the management efficiency and
the competitiveness of the two companies, as well as increase the synergistic
effect between the two companies, thereby increasing Webzen’s share
value.
B.
Impact on Corporate Management, Finances, and Operations
(1)
Impact on Corporate Management
As of the date of
submission of the Report on Important Items in Korea, the largest shareholder of
Webzen is NHN Games. The largest shareholder of NHN Games is NHN Corporation.
The dissolving corporation is a subsidiary of NHN Corporation. Upon completion
of this merger, Webzen will remain as the surviving corporation and its largest
shareholder will change from NHN Games to NHN Corporation.
(2)
Effects on Finance and Operations
As of the date of
submission of the Report on Important Items in Korea, Webzen has developed
online games such as ‘MU’ and ‘SUN’ and is providing commercial service and
preparing for the open beta testing and commercialization of the new game
‘Huxley’ and the FPS game ‘BATTERY’ via publishing contract. NHN Games is a
company specializing in the development of online games such as ‘R2’,
‘Archlord’, ‘C9’, and ‘BATTERY’.
Webzen seeks to
enhance its capabilities in new games development by procuring the game
development capacities of NHN Games, and is regarding this as an opportunity to
expand its weak portfolio in the publishing business.
Also, Webzen
expects to achieve significant financial synergies through the reduction of
overhead cost such as salaries and network costs, and diversification of profit
sources, which will in turn help maximize its profitability.
C.
Listing Plan
As of the date of
submission of the Report on Important Items in Korea, Webzen, the surviving
corporation, is listed on KRX KOSDAQ Market (“KOSDAQ”) and does not have plans
to delist after the merger. In a merger between a listed corporation and a
unlisted corporation, pursuant to KOSDAQ Market Listing Rules and other relevant
Korean law, a merger will be deemed an “indirect listing” if either (i) two or
more of the total assets, capital, and sales as per the financial statements of
the unlisted corporation for the fiscal year immediately preceding the fiscal
year of the date of submission of the Report on Important Items in Korea, are
greater than that of the listed corporation or (ii) the largest shareholder of
the surviving corporation changes upon completion of merger. This merger was
deemed a case of “indirect listing” since the largest shareholder will change
from NHN Games to NHN Corporation.
At market closing
on April 15, 2010, Korea Exchange (“KRX”), which operates KOSDAQ on which Webzen
is listed, suspended the trading of Webzen’s common shares for one day while
reviewing the merger in relation to the indirect listing rules. At market
closing on April 16, 2010, KRX cleared the issues and lifted Webzen’s common
share trading suspension.
D.
Other Relevant Matters Regarding the Method of Merger
In order for Webzen
to conduct a merger, a merger agreement must be drafted and approved by the
general shareholders meetings of both the surviving corporation and the
dissolving corporation. With regards to notification and announcement of
convening the general shareholders meeting, notification to shareholders in
possession of 1 percent or less of the issued shares with voting rights can be
substituted by announcing through the electronic announcement system (“DART”)
operated by the Financial Supervisory Service or KRX at least 2 weeks before the
date of the shareholders meeting as per Article 542-4 of the Commercial
Code.
2.
Form of Merger
A.
Method of Merger
NHN Games will
merge with and into Webzen. Although two or more of the total assets, capital,
and sales as per the financial statements of the unlisted corporation for the
fiscal year immediately preceding the fiscal year of the date of submission of
the Report on Important Items in Korea, was not greater than that of the listed
corporation, this merger is still deemed a “indirect listing” under article 19
paragraph 1 of the KOSDAQ Listing Regulations Enforcement Details since the
largest shareholder of the surviving corporation will change upon completion of
the merger.
|
Relevant
Regulations
|
|
KOSDAQ
Listing Regulations Enforcement Details Article 19 Paragraph 1 Item
2
When the
largest shareholder etc., of said unlisted corporation becomes the largest
shareholder of the KOSDAQ listed corporation through the merger (refers to
cases of becoming the largest shareholder according to the merger ratio of
the report on important items)
KOSDAQ
Listing Regulations Enforcement Details Article 19 Paragraph 1 Item
3
When the sum
of the number of shares of the KOSDAQ listed corporation held by the
largest shareholder etc., and shareholders with 5% or more of the shares
of the unlisted corporation as of the date of submission of the report on
important items and the number of new shares of the listed corporation
that are to be issued through the merger is greater than the shares of the
KOSDAQ listed corporation held by its largest shareholders etc.(including
new shares to be issued to said shareholder upon merger), as of the date
of submission of the report on important items. However, this does not
apply when the largest shareholder etc., and shareholders with 5% or more
of the shares of the unlisted corporation become the largest shareholder
of the KOSDAQ listed corporation at least one year prior to the date of
submission of the report on important
items.
|
B.
Whether this is a case of small scale merger or simplified merger
This merger is not
governed by Article 527-2(simplified merger) or Article 527-3(small scale
merger) of the Commercial Code.
C.
Listing Status of Surviving Corporation after Merger
Webzen, the
surviving corporation, is a KOSDAQ listed corporation as of the date of
submission of the Report on Important Items in Korea, and there are no plans to
delist after the merger.
3.
Progress and Schedule
A.
Important progress before signing of contract or resolution by board of
directors.
(1)
External evaluation contract for the evaluation of merger value
An external
evaluation contract was signed on March 29
th
, 2010
with Deloitte Anjin Accounting Firm (“Deloitte”), which is a member of Deloitte
Touche Tohmatsu. Under the contract, Deloitte was engaged to verify the
appropriateness of the merger value and stock exchange ratio pursuant to Article
176-5 of the Enforcement Decree. Such evaluation was conducted from March
29
th
, 2010
to April 14
th
, 2010
and Deloitte issued a report confirming the appropriateness of the merger value
and stock exchange ratio on April 14
th
,
2010.
(
2) Date of resolution of board of
directors for decision on merger
: April 15
th
,
2010.
(3) Date of Merger Agreement:
April 15
th
,
2010.
B.
Merger Timeline
|
Item
|
Webzen
Inc.
|
NHN Games
Co., Ltd.
|
|
Resolution of
Board of Directors Approving the Merger
|
15 April
2010
|
15 April
2010
|
|
Date of the
Merger Agreement
|
15 April
2010
|
15 April
2010
|
|
Determination
of Shareholders for General Shareholders Meeting on Merger
|
6 May
2010
|
6 May
2010
|
|
General
Shareholders Meeting for Approval of Merger
|
4 June
2010
|
28 May
2010
|
|
Term for
Exercising Appraisal Rights of Objecting Shareholders
|
Commencement
|
5 June
2010
|
29 May
2010
|
|
Termination
|
25 June
2010
|
17 June
2010
|
|
Date of
Merger
|
7 July
2010
|
7 July
2010
|
|
General
Assembly for Merger Completion Report
|
8 July
2010
|
8 July
2010
|
|
Announcement
of Merger Completion Report
|
9 July
2010
|
9 July
2010
|
|
Other
Schedule
|
|
Announcement
of Closure of Shareholder List
|
20 April
2010
|
20 April
2010
|
|
Period of
Closure of Shareholder List
|
Commencement
|
7 May
2010
|
7 May
2010
|
|
Termination
|
11 May
2010
|
11 May
2010
|
|
Period of
Prior Notice of Shareholders Objecting to the Merger
|
Commencement
|
19 May
2010
|
13 May
2010
|
|
Termination
|
3 June
2010
|
3 June
2010
|
|
Announcement
of Submission of Objections by Creditors
|
5 June
2010
|
5 June
2010
|
|
Period of
Submission of Objections by Creditors
|
Commencement
|
6 June
2010
|
6 June
2010
|
|
Termination
|
6 July
2010
|
6 July
2010
|
|
Period of
Submission of Old Shares
|
Commencement
|
-
|
6 June
2010
|
|
Termination
|
-
|
6 July
2010
|
|
Expected Date
of Merger Registration
|
12 July
2010
|
|
|
Expected Date
of Issuance
|
5 August
2010
|
|
|
Expected Date
of Listing New Shares
|
6 August
2010
|
|
Note 1) The
aforementioned schedule contains expected dates as of the submission date of the
Report on Important Items and is subject to change due to the amendment of
related laws, consultation and authorization processes of the relevant agencies,
satisfaction of conditions preceding the merger or other relevant
circumstances.
Note 2) The general
assembly for merger completion report shall be replaced by the newspaper notice
per resolution of the board of directors.
4.
Conditions for Consummation of Merger
A.
Termination Conditions of the Merger Agreement
The termination
conditions of Article 13 of the merger agreement are as follows;
|
Article 13.
TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time of the Merger by any party (except by the party in
violation of this Agreement):
(a) by mutual
written consent of WEBZEN and NHN Games; or
(b) if there
are any insolvency, dissolution, liquidation, bankruptcy or work-out
procedures of, or application for such procedures by, either WEBZEN or NHN
Games; or
(c) if the
approval of the shareholders of WEBZEN and/or NHN Games regarding the
Merger has not been obtained in the three months period after the
shareholder list closing date; or
(d) if the
consummation of the Merger becomes illegal or impossible, due to any
changes in the relevant laws or government regulations, and no agreement
between WEBZEN and NHN Games is forthcoming in 30 days since such changes
became effective; or
(e) if a
party breaches the Agreement and does not remedy in 30 days after its
receipt of the other party’s written request for remedy; or
(f) if the
total amount of appraisal rights exercised exceeds KRW 30,000,000,000;
or
(g) if any
change that will have a material adverse impact on the finance, operation,
sales and prospects of either WEBZEN or NHN Games occurs.
In the event
of termination of this Agreement, this Agreement and all related
transactions shall retroactively become void and null except for the
liabilities already incurred.
|
B.
Possibility of Merger being voided at the General Shareholders Meeting for
Approval
Merger may be
voided if the approval of two-thirds or more of the attending shareholders and
one-third or more of the total issued shares is not received at the special
general shareholders meeting convened for the approval of this merger. This
requirement applies to both the surviving corporation and the dissolving
corporation.
C.
Regulations or Special Provisions of Related Laws
Any required
authorization, licenses, or acceptance of reports of governmental agencies must
be received by the day before the date of the merger. Otherwise this merger may
be nullified.
Section
2 Merger Value and Calculation Formula
1.
Merger Value
A.
Merger Ratio
The merger of the
KOSDAQ-listed Webzen,(hereinafter referred to as “surviving corporation”) and
NHN Games, the unlisted corporation, (hereinafter referred to as “dissolving
corporation”) will be conducted according to the following ratios.
(unit: KRW,
Share)
|
Item
|
Surviving
Corporation
(Webzen
Inc.)
|
Dissolving
Corporation
(NHN Games
Co., Ltd.)
|
|
Value per
share
|
11,800
KRW
|
18,557
KRW
|
|
Merger
Ratio
|
1:
1.57262712
(1.57262712
shares of surviving corporation issued per 1 share of dissolving
corporation.)
|
B.
Calculation Formula
Article 176-5 of
the Enforcement Decree of the Financial Investment Services and Capital Markets
Act of Korea (the “Enforcement Decree”) provides that, in cases of a merger
between a “listed corporation” and a “unlisted corporation” (i.e., a private
company), (i) the stock exchange ratio shall be determined based upon the market
price of the stock-listed corporation (as long as market price exceeds the net
asset value per share) and the weighted average of “asset value,” “earnings
value” and “relative value” of the stock-unlisted corporation, provided that
when relative value is unavailable, it may be replaced with the weighted average
of the asset value and earnings value (the methods of calculating asset value,
earnings value and relative value are to be prescribed by the Finance Service
Commission (“FSC”)) and (ii) if the surviving corporation after the merger is a
stock-listed corporation, the appropriateness of the merger value shall be
appraised by an outside appraisal organization such as an accounting firm,
credit rating agency or other organizations designated in the rules. FSC has
published interpretive guidelines setting forth that (i) asset value shall be
calculated by subtracting loans and receivables the payments of which are
doubtful from net tangible assets and then dividing by issued and outstanding
shares, (ii) earnings value shall be calculated by dividing estimated net profit
per share (using the weighted average of the projections of net income for the
current year and the immediately subsequent year after subtracting the expected
dividends) by the benchmark ROE (150% of the average interest rate of 1-year
term savings of four Korean commercial banks designated by FSC) and (iii)
relative value is calculated by averaging the market price of two or more
companies that are conducting similar businesses, listed on an exchange and meet
other requirements and then discounting the price at a reasonable rate, which
shall not be lower than 30%.
2.
External Evaluation of Merger
A.
Evaluating Institution: Deloitte
B.
Overview of Evaluation
-
Date of Evaluation Contract: March 29
th
,
2010
-
Evaluation Period: March 29
th
, 2010 –
April 14
th
,
2010
-
Name of Evaluating Company: Deloitte
In
reviewing the merger ratio of 1 : 1.57262712 reported by the surviving
corporation, we used the financial statements as of December 31
st
, 2009
provided by the surviving corporation, the financial statements as of December
31
st
, 2009
provided by the dissolving corporation, stock data of the surviving corporation,
estimated financial statements for fiscal year ending on December 31
st
, 2010
and 2011 of the dissolving corporation, respectively, and applied the merger
value calculation methods stipulated by Article 165-4 of the Financial
Investment Services and Capital Markets Act, Article 5-13 of the Regulations on
Issuance and Announcement of Shares, and Articles 4 through 8 of its Enforcement
Details.
C.
Independence of External Evaluating Institution
(1)
Evaluation of the Independence of External Evaluating Institution
The external
evaluating institution of this merger is Deloitte Anjin LLC, to which Articles
21 and 33 of the Certified Public Accountant Act on the independence of external
evaluating institution and Article 5 -14 of the Regulations on Issuance and
Announcement of Shares applies. The contents of said provisions are as
follows.
|
Article 21
(Restrictions on Functions)
|
(1) No
certified public accountant shall be allowed to carry out functions
relating to auditing or certifying financial statements (including
consolidated financial statements provided for in Article 1-2 of the Act
on External Audit of Stock Companies; hereinafter the same shall apply)
for persons falling under one of the following subparagraphs: <Amended
by Act No. 6994, Dec. 11, 2003; Act No. 7619, Jul. 29,
2005>
1. Any person
(including any company; hereafter the same shall apply in this Article)
for whom a certified public accountant or his spouse is holding an office
of directorship or equivalent position (including a position in charge of
works relating to financial matters), or has held such an office during
the preceding one year;
2. Any person
who employs certified public accountants or their spouses or has employed
them during the preceeding one year; or
3. Any
person, other than those provided for in subparagraphs 1 and
2, who is
recognized by the Presidential Decree as having obvious interests with a
certified public accountant or his spouse so as to make it difficult for
the certified public accountant to carry out his functions
fairly.
(2) Any
certified public accountant, who is contracted to perform the business of
auditing or certifying the financial statement of any specific company,
shall be prohibited from performing the business falling under each of the
following subparagraphs for such specific company during the contract
term: <Newly Inserted by Act No. 6994, Dec. 11, 2003>
1. The
business of making accounting records and compiling financial
statement;
2. The
business of conducting internal audit by proxy;
3. The
business of creating or operating the financial information system;
and
4. Other
businesses that are prescribed by the Presidential Decree as having
conflict with the business of auditing or certifying the financial
statement.
(3) The
certified public accountant referred to in paragraph (2) may perform any
business other than the business falling under each subparagraph of the
same paragraph in accordance with the procedures prescribed by the
Presidential Decree including internal control procedures, etc. <Newly
Inserted by Act No. 6994, Dec. 11,
2003>
|
|
Article 33
(Restrictions on Functions)
|
(1) An
accounting corporation may not perform functions of auditing
and
certifying
financial statements for a person falling under any of the
following
subparagraphs:
<Amended by Act No. 6994, Dec. 11, 2003; Act No. 7619,
Jul.
29,
2005>
1. Any person
(including any company; hereafter the same shall apply
in this
Article) of which shares are owned, or for which
contributions
are made by
the accounting corporation;
2. Any person
with whom members of the accounting corporation have
relations
provided for in each subparagraph of Article 21 (1); and
3. Any person
who is undeniably interested in any accounting corporation
other than
the accounting corporations referred to subparagraphs
1 and 2 or is
prescribed by the Presidential Decree as being recognized
to have been
interested in such accounting corporation during the
preceeding
one
year.
(2) The
provisions of Article 21 (2) and (3) shall apply mutatis
mutandis
to every
accounting corporation. <Newly Inserted by Act No. 6994, Dec. 11,
2003>
|
|
Enforcement
Decree Article 14 (Restrictions on Functions)
|
Article 14
(Restrictions on Functions)
(1) The term
“person as prescribed by the Presidential Decree” in Article
21 (1) 3 of
the Act means a person falling under any of the following
subparagraphs
who has a relationship with either a certified public
accountant
or his
spouse: <Amended by Presidential Decree No. 17238, Jun. 18, 2001;
Presidential
Decree No.
18352, Apr. 1, 2004; Presidential Decree No. 19374, Mar. 10,
2006>
1. A person
whose stocks or contributed shares are owned by a certified
public
accountant or his spouse;
2. A person
who has a credit or obligation worth not less than 30 million
won against a
certified public accountant or his spouse: Provided,
That the
credit or obligation falling under any of the following items
shall be
excluded:
(a) The
credit directly connected with the service of the certified
public
accountant
pursuant to the provisions of Article 2 of the Act;
(b) The
credit, such as deposit, installment savings within the
extent
of the amount
protected in accordance with the Depositor Protection
Act;
(c) The
credit, such as membership, license to a facility, which has
been
purchased in accordance with the standard stipulation or at
a normal
price;
(d) The
credit, such as retirement pension pursuant to the Guarantee
of Workers’
Retirement Benefits Act;
(e) The
obligation established after supplying collateral in
accordance
with the
normal procedures, such as a loan secured against house,
a loan
secured against saving, etc. which have been extended by
the
institutions pursuant to the provisions of Article 38 of the
Act
on the
Establishment, etc. of Financial Services Commission;
ENFORCEMENT
DECREE OF THE CERTIFIED PUBLIC ACCOUNTANT ACT
12
(f) The
obligation that has not been overdue from among the
obligations
with the date
of payment not longer than 2 months following the
use of credit
card pursuant to the provisions of subparagraph 3
of Article 2
of the Specialized Financial Credit Business Act; or
(g) The
credit or obligation occurred involuntarily from merger,
inheritance
or lawsuit,
etc. during the period of audit;
3. A person
who rents office premises to a certified public accountant
without
charging rents or for such rent as is considerably low
compared
to normal
transaction prices;
4. A person
who continues to remunerate a certified public accountant
or to provide
other special economic benefits with him for his services
other than
for what are considered as normal services by certified
public
accountants; and
5. A person
who has provided or committed to provide the stocks of his
own firm,
bonds with warrant, convertible bonds, or stock options to
a certified
public accountant as a price for rendering the services under
Article 2 of
the Act.
(2) The term
“business that is prescribed by the Presidential Decree” in
Article 21
(2) 4 of the Act means the business (hereinafter referred to
as the
“business of actual inspection, etc.”) of actual inspection,
financial
report, and
valuation of assets, capital, and other rights (including
those
not indicated
in financial statements; hereinafter referred to as the
“assets,
etc.”) of a
specific company and any other business of presenting any
opinion
on the
appropriateness of the transactions of the assets, etc. and
other
contracts
therefor, for the purposes of selling the whole or part of
the
assets, etc.
<Newly Inserted by Presidential Decree No. 18352, Apr. 1, 2004;
Presidential
Decree No.
19374, Mar. 10, 2006>
(3) Where a
council of creditors has been organized for the purpose of
collecting
bad credits, the business of actual inspection, etc. carried
out
by the
members of the council of creditors (hereinafter referred to
as
the
“members”) for the purpose of joint sale of assets, etc. which
had
been acquired
through conversion into investment or proffer of collateral,
etc. by the
largest stockholder may be carried out by a certified public
accountant,
notwithstanding the provisions of paragraph (2): Provided,
That the
certified public accountant falling under any of the
following
subparagraphs
shall be excluded: <Newly Inserted by Presidential Decree
No.
19374, Mar.
10, 2006>
1. The
certified public accountant rendering the service of auditing
or
identifying
the members who have charge of the service of joint
sale
|
|
Enforcement
Decree Article 15-2 (Restriction on Functions of Accounting Corporation
)
|
(1) The term
“person prescribed by the Presidential Decree” in Article
33 (1) 3 of
the Act means a person falling under any of the following
subparagraphs:
<Amended by Presidential Decree No. 19374, Mar. 10,
2006>
1. A person
who employs the staff member of an accounting corporation
in charge of
the business of auditing or certifying his financial
statements,
etc. or his
spouse within the past one year as his officer or other
equivalent
thereto
(including a staff member in charge of his financial
affairs);
2. A person
who has credits or obligations worth not less than 100
million
won against
an accounting corporation. In this case, the proviso to
Article 14
(1) 2 shall apply mutatis mutandis to the accounting
corporation;
or
3. A person
who has the relation as referred to in Article 14 (1) 3
through
5 with an
accounting corporation.
(2) The
provisions of Article 14 (2) through (5) shall apply mutatis
mutandis
to accounting
corporations. In this case, a “certified public accountant”
shall be
deemed an “accounting corporation”. <Amended by Presidential
Decree
No. 19374,
Mar. 10, 2006>
|
|
Regulations
on the Issuance and Announcement of Shares Articles 5 – 14
(Limitations
on the Evaluation by External Evaluating Institutions
Etc.)
|
The following
falls under “special relationships as designated and announced by FSC” as
stipulated in Article 176-5 Paragraph 8 of the Decree.
1.
Cases in
which the external evaluating institution holds 3% or more of its capital
into a company party to the merger or when a company party to the merger
holds 3% or more of its capital in the external evaluating
institution.
2.
When
shareholders holding 5% or more of the capital of the external evaluating
organization and shareholders holding 5% or more of the capital of the
company party to the merger are the same person or related parties.
However, if such person or related party is an institutional investor and
does not have the relationship stipulated in item 5 below with the
external evaluating institution or the company party to the merger, this
does not apply.
3.
When an
executive of the external evaluating institution holds 1% or more in the
company party to the merger, or an executive of the company party to the
merger holds 1% or more in the external evaluating
institution.
4.
When an
executive of the external evaluating institution or company party to the
merger is a related party of a main shareholder of the external evaluating
institution or company party to the merger.
5.
When the same
person is in a position to exercise actual influence over important
operational decisions of the external evaluating institution and the
company party to the merger, such as the appointment and dismissal of its
executives.
6.
When the
external evaluating institution is the accounting auditor (includes the
accounting auditors of financial statements subject to evaluation) of the
company party to the merger. <amended
2009.7.6>
|
Deloitte, which
conducted the evaluation of this merger ratio, does not fall under the cases
stipulated by the aforementioned Certified Public Accountant Act articles 21 and
33, the standards regulated by its enforcement decree, or article 5-14 of the
Regulations on Issuance and Announcement of Shares, and is therefore independent
to the companies party to the merger as of the time of evaluation of this merger
ratio.
(2)
Whether the ‘External Evaluation Guidelines’ were Followed when Evaluating the
Appropriateness by the External Evaluating Institution
The Financial
Supervisory Service Department of Corporate Disclosure announced the external
evaluation guidelines on its website (
http://www.fss.or.kr
)
as of June 25, 2009. Said guidelines regulate the standards to be followed by
external evaluating institutions when conducting external evaluations under
articles 176-5 and 176-6 of the Enforcement Decree of the Financial Investment
Services and Capital Markets Act.
The companies party
to the merger has verified whether the external evaluating institution reviewed
the eligibility of the external evaluator and abided by the guidelines including
the basic principles, analysis of financial/non-financial information, and the
selection and application of evaluation approaches and methods etc.
No side agreement
was entered into, promising the payment of any other fee, such as success
bonuses, other than the fee for services rendered as stipulated in the ‘Merger
Related Service Contract’.
(3)
Method of Evaluation of the Reliability and Rationality of the Merger Related
Data Provided to the External Evaluation Institution by the Company
Etc.
With regards to the
reliability, rationality and review methods, and logical grounds for assumptions
made during the evaluation regarding the materials provided by Webzen and NHN
Games to the external evaluating institution, Deloitte, please refer to the
attached document, the “Analysis Institution Evaluation Opinions”.
D.
Overview of Evaluation
The purpose of this
service is to receive a report on the appropriateness of the merger ratio
pertaining to the merger between Webzen, and NHN Games, to be used as an
attachment when submitting the relevant reports in accordance with the
provisions of the Financial Investment Services and Capital Markets
Act.
|
2.
|
Assumptions,
Restrictions and Note of Caution when using the
Report
|
The assumptions and
restrictions applied in conducting this evaluation and matters which require
sufficient attention to be paid to when using this report can be summarized as
follows.
|
1)
|
As this
report was drafted for the use by Webzen as an attachment when submitting
the relevant reports of the merger between Webzen and NHN Games in
accordance with the provisions of the Financial Investment Services and
Capital Markets Act, this report should not be used for any other
purpose.
|
|
2)
|
Deloitte
accepted all financial statements and other financial information provided
by the companies party to the merger over the course of evaluation as
provided, without conducting a separate review as to whether they
accurately and fully reflect the financial status and business
accomplishments of the companies party to the merger. As Deloitte did not
conduct any audit, review, or drafting of this information, it does not
certify in any form the said information, including audit
opinions.
|
|
3)
|
Public
information as well as industrial and statistical data was gathered from
sources deemed reliable by Deloitte. However, Deloitte did not conduct any
investigation as to the accuracy or completeness of such information and
did not take any steps to verify the
same.
|
|
4)
|
As future
events or situations may not unfold as expected by NHN Games, Deloitte
does not provide any assurances as to results expected to be posted by NHN
Games. That is to say, there may be significant differences between
expected results and actual results, and the achievement of expected
results is subject to change and reliant upon the actions, plans, and
assumptions of the management.
|
|
5)
|
The
evaluation results of Deloitte are based on the assumption that the
current level of expertise and effectiveness of the management of the
companies party to the merger are maintained, and that there are no
important or significant changes to the properties of the companies party
to the merger due to divesture, reorganization, business exchanges or
capital reduction by shareholders
etc.
|
|
6)
|
This report
and evaluation results are only for the companies party to the merger and
for the specific purpose mentioned in this report. Therefore, the report
cannot be utilized by third parties or for purposes other than the purpose
as specified. Additionally, this report and evaluation results are not in
any way drafted for investment advice or any similar purpose and may not
be construed as such. The evaluation results are only the opinions of the
evaluator based on the information provided by the companies party to the
merger and other sources.
|
|
7)
|
Unless
otherwise agreed upon in advance and in writing, no additional tasks such
as testimony or statements in court with regards to the contents of this
report can be demanded of Deloitte.
|
|
8)
|
No contents
of this report may be altered by anyone other than Deloitte, and Deloitte
will not be held liable for any such unauthorized
alterations.
|
|
9)
|
Unless
otherwise specified, Deloitte did not give any consideration or take any
measures with regards to the potential effects of future laws or
regulations on the companies party to the
merger.
|
|
10)
|
When
projected financial information drafted by the management was used by
Deloitte, Deloitte did not participate in investigating or drafting such
information. Therefore Deloitte does not express any form of
certification, including audit opinions with regards to such projected
financial information and related assumptions. Situations or events may
take place differently than expected and therefore differences can exist
between projected financial information and actual results, some of which
may be significant.
|
|
11)
|
Deloitte
conducted surveys of the management of the companies party to the merger
with regards to the past, present, and future business prospects of the
respective companies.
|
|
12)
|
Unless
otherwise specified, Deloitte relied on statements of shareholders,
management, and other third parties with regards to the value and
potential of usage of all facilities and equipment used for the business
and other assets or debt (however, exceptions exist when otherwise
specified in this report). Deloitte did not conduct any separate
verification process as to whether the assets used for business had any
securities or restrictions attached or whether the companies party to the
merger had complete ownership of
them.
|
|
13)
|
Deloitte
abided by the “external evaluation guidelines” announced by the Financial
Supervisory Services on June 25
th
,
2009. Said guidelines stipulate as to the items that need to be followed
when conducting evaluation work as per articles 176-5 and 176-6 of the
Enforcement Decree of the Financial Investment Services and Capital
Markets Act. As such, Deloitte abided by said guidelines in terms of the
basic principles, analysis of financial/non-financial information, and the
selection and application of evaluation approaches and methods when
conducting the evaluation.
|
|
14)
|
The effects
of the limitations or problems related to this report other than items 1)
through 13) must also be
considered.
|
Section
3 Investment Risk Factor
|
1.
|
Risk
Factors Related to Merger Accomplishment
Conditions
|
|
A.
|
Conditions
for Termination of the Merger Agreement per the Merger
Contract
|
The contract
termination conditions as per article 13 of the merger agreement are as
follows;
|
Article 13.
TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time of the Merger by any party (except by the party in
violation of this Agreement):
(a) by mutual
written consent of WEBZEN and NHN Games; or
(b) if there
are any insolvency, dissolution, liquidation, bankruptcy or work-out
procedures of, or application for such procedures by, either WEBZEN or NHN
Games; or
(c) if the
approval of the shareholders of WEBZEN and/or NHN Games regarding the
Merger has not been obtained in the three months period after the
shareholder list closing date; or
(d) if the
consummation of the Merger becomes illegal or impossible, due to any
changes in the relevant laws or government regulations, and no agreement
between WEBZEN and NHN Games is forthcoming in 30 days since such changes
became effective; or
(e) if a
party breaches the Agreement and does not remedy in 30 days after its
receipt of the other party’s written request for remedy; or
(f) if the
total amount of appraisal rights exercised exceeds KRW 30,000,000,000;
or
(g) if any
change that will have a material adverse impact on the finance, operation,
sales and prospects of either WEBZEN or NHN Games occurs.
In the event
of termination of this Agreement, this Agreement and all related
transactions shall retroactively become void and null except for the
liabilities already incurred.
|
|
B.
|
Possibility
of Merger being Voided at the General Assembly of Shareholders to Approve
the Merger
|
The merger may not
go through if the merger is not approved by two-thirds or more of the shares
with voting rights of attending shareholders or one-third or more of the total
shares issued at the extraordinary general assembly of shareholders held for the
approval of this merger.
|
C.
|
Regulations and Special Rules
in the Relevant Laws
|
If this merger
agreement requires the authorization, approval, acceptance of reports etc., this
merger will be voided if such approval etc., are not acquired by the date of the
merger.
|
2.
|
Listing
of New Merger Shares and Possibility of
De-Listing
|
|
A.
|
Expected
Date of Listing of New Merger
Shares
|
The expected date
of listing of the new shares issued by Webzen, following the merger is July
20
th
,
2010.
|
|
o
|
The
aforementioned date may be altered over the course of discussion with and
authorization by the relevant
institutions.
|
|
B.
|
Possibility
of De-Listing
|
The merger in
question satisfies the requirements of the KOSDAQ Listing Rules and thus is not
subject to the de-listing clause. The merged company NHN Games, is dissolved
under this merger.
|
C.
|
Whether
this is an Indirect Listing: Yes
|
Cases in which
where two or more items out of the total assets, capital, and sales of the
unlisted corporation as per the financial statements for the fiscal year
immediately preceding the fiscal year of the date of submitting this report are
greater than that of the listed corporation or when the largest shareholder as
stipulated by the KOSDAQ Market Listing Regulations Details Article 19 changes
upon the merger are deemed to be an indirect listings.
Although the total
assets, capital, and sales of the unlisted corporation NHN Games., are smaller
than those of the listed corporation Webzen, as per the financial statements for
the fiscal year immediately preceding the fiscal year of the date of submitting
this report, the merger is still deemed an indirect listing as there is a change
in the largest shareholder as stipulated in the KOSDAQ Market Listing
Regulations Details Article 19 Paragraph 1 Items 2 and 3.
[As of: 31 DEC
2009, Fiscal year 2009]
(unit:
KRW)
|
Company
Name
|
Total
Assets
|
Capital
|
Sales
|
|
NHN Games
Co., Ltd.
|
62,231,140,479
|
6,400,000,000
|
25,299,164,702
|
|
Webzen
Inc.
|
132,248,479,457
|
6,487,000,000
|
27,802,307,596
|
The merger of
Webzen and NHN Games is a case of Indirect Listing, but as the fiscal
requirements of Article 19 Paragraph 1 Item 2 of the KOSDAQ Market Listing
Regulations are met, there is no possibility of de-listing after the
merger.
|
Requirement
|
NHN Games
Co., Ltd.
|
Whether
Requirement is Met
|
|
Owner’s
Capital of 3 Billion KRW or Higher
|
Owner’s
Capital 22.625 Billion KRW
|
Yes
|
|
No Impaired
Capital
|
Capital: 6.4
billion KRW
Owner’s
Capital: 22.625 billion KRW
|
Yes
|
|
Positive
Ordinary Income Before Taxes
|
Ordinary
Income Before Taxes: 7.175 billion KRW
|
Yes
|
|
Net profits
of 2 billion KRW or higher or Return on Equity of 10% or
higher
|
Net profit of
term: 6.97 billion KRW
Return on
Equity: 30.81%
|
Yes
|
|
No change of
50% or more of capital within past year
|
N/A
|
Yes
|
|
Auditor’s
opinion of adequacy
|
Auditor
Opinion: Adequate
|
Yes
|
|
No change of
largest shareholder within 6 months
|
No change of
largest shareholder
|
Yes
|
|
Completion of
merger, in case merger with another company is in progress
|
N/A
|
Yes
|
|
There is no
conflict such as legal proceedings that may significantly affect company
management. If the corporation is under bankruptcy proceeding, cause for
such bankruptcy must be resolved at least 6 months before the submission
date of the important item report on the merger
|
N/A
|
Yes
|
|
3.
|
Risk
Factors to be Considered when Investing in Related Shares Upon Success of
Merger
|
|
A.
|
Merging
Company: Webzen Inc.
|
|
(1)
|
Business
Related Risks
|
In
the game industry, the amount of sales are generally determined by the success
of the games. Therefore if “hit” games are not produced, the profitability and
growth potential of the company will be negatively affected.
Since 2003, the
online game market has grown exponentially. Numerous online game, have been
introduced since the begining of the online game industry, but only a handfull
of ‘hit’ games account for most of the overall profits.
[Size and Growth
Rates of Online Game Market]
(unit: hundred
million KRW, %)
|
Year
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009(E)
|
|
Market
Size
|
7.541
|
10.186
|
14.397
|
17.768
|
22.403
|
26.922
|
34.999
|
|
Growth
Rate
|
66.8
|
35.1
|
41.3
|
23.4
|
26.1
|
20.2
|
30.0
|
Source: 2009
Republic of Korea Game White Paper, online game market size and growth rate data
quoted.
Due to such
characteristics of the game industry, it is important to invest large amounts of
capital and specialized personnel starting at the development stages to create
blockbuster games. Still, the investment of such large amounts of capital and
specialized personnel does not guarantee the success of the game.
In addition, in the
game genre of MMORPG, the main area of business of this company, products of
competitors such as Lineage 1 and 2, Aion, World of Warcraft etc., has achieved
considerable success and this significantly affected the profits of the games of
this company such as Mu and Sun over a considerable amount of time.
The release and
commencement of service of games such as Starcraft 2, which is expected to be
released in 2010, can significantly affect the profitability of the games of
this company and NHN Games, which will in turn negatively influence the
profitability of this company.
|
(2)
|
Risks
Related to Procuring Specialized
Personnel
|
|
One of the most important success
factor in the online game industry is the level of expertise of the game
developers. Due to the heightened competition in the industry, the demand
for such
game
developers is high, which increases the possibility of key personnel
leaving or moving to a competitor. Such
loss
of key game developers can weaken
the competitiveness of the company, and if the personnel required for
continued business expansion and
growth cannot be hired, our growth
potential and profitability can be negatively
affected.
|
Recently,
successful first and second generation game developers are actively leaving
their former companies and moving to other corporations or founding their own
businesses. Such moves are based on their past successes and can bring about new
changes to the overall game industry but can also lead to the birth of powerful
competitors to this company.
Also, this can lead
to a rapid increase in the transfers and movements of game developers in
general, which can adversely affect the development and upgrading of this
company’s games as well as customer service. This will negatively impact the
growth potential of this company.
|
(3)
|
Risks
Regarding Changes in Client Demand and Game
Portfolio
|
|
As
of December 31
st
,
2009, this company depends on the two games, MU and SUN, for substantially
all of its income.
|
Currently, this
company derives almost all of its income from MU and SUN, two online game
products. Commercial service of MU began in 2001, making the game one of the
longest tenured game in the industry. Commercial service of SUN began on January
1
st
,
2006, and comprises about 35% of sales as of December 31
st
,
2009.
The sales of MU are
on a steady decrease whereas SUN is showing a steady increase, and if the
decrease of MU sales is greater than expected, or the increase of SUN sales is
not as great as expected, or risks regarding new games mentioned below increase,
the profitability and result of operation of this company may be negatively
affected.
Highly loyal
customer groups maintain high level of communication within the game and
offline. Many customers also show strong interest and give feedback on
management policy and upgrade of games. If such customer feedback is not
reflected in the games, the breakaway rates of clients can increase drastically
and negatively affect the short term profitability of this company.
(4)
Risks by Competitors
|
There has been increases in
M&A activity and the appearance of large online game
developers, and such large game
developers are releasing more new games and services. This means the level
of competition
in
increasing
for this
company and that the competition as a whole will intensify in the
industry. This development can weaken the com
petitive
advantage
of this company which can lead to
reductions in the profitability and growth potential of this
company.
|
Since 2008, M&A
between domestic and foreign game companies
have been pursued
actively. Domestic cases include the acquisition of Hanbit Soft by T3
Entertainment, and Neople by Nexon, with the acquisition of J2M Soft by EA as a
foreign example.
Also, the rapid
growth of the world online game market has led to a great increase in game
companies into the field which intensified the level of competition in the
global game market. What is more, considering the high domestic popularity
enjoyed by Starcraft 1 and World of Warcraft by Blizzard, events such as the
expected release of Starcraft 2 are expected to have significant impacts on not
just online games but arcade and console games as well, and this could
negatively affect the profitability of this company. There are over 100 online
game developing companies in the country, in addition to market leaders such as
Blizzard and NC Soft and Chinese corporations developing and releasing new
games. This company is competing with other companies not just in the field of
MMORPG, but also in online casual games and game portals, and is currently
competing with console game companies such as Microsoft, Sony, and Nintendo.
Many of these competitors possess greater financial, marketing, and game
developing resources than this company and intensified competition under such
conditions can lead to undesired results in the online game market. Such
intensification of competition can negatively impact on this company’s
profitability.
(5)
Risks by Strengthened Regulations by Government Agencies and Related
Institutions
|
Online
games are subject to legal regulation and classification by the government
which can delay or prohibit the release of new games and reduce the
existing or potential client base. Such risks greatly affect the
profitability and growth of this
company.
|
In 2006, in an
effort to overcome the limits of the existing ‘Act on Records, Videos, and
Games’ and create policies that systematically reflect the characteristics of
the game industry, the ‘Game Industry Promotion Act’(the “Game Industry Act”)
was enacted, legislated, and announced. The enactment of the Game Industry Act
has positive effects such as the progressive improvement of regulations on the
game industry, but various regulations were implemented with regards to game
user protection guidelines and game conflicts. Also regulations against gambling
or obscenity have been strengthened.
Under the game
classification policy, a part of such regulations, the regulator can demand the
alteration of game contents, functions, or marketing strategies which can lead
to the delay or prohibition of the release of new games or upgrades of existing
games which in turn can hurt our client base and negatively affect the
transforming of potential client into actual clients.
Also, the fatigue
system(a system of applying certain handicaps within the game to users when
playing for a certain number of continuous hours or more) designed to prevent
game addiction of adolescents and game users, applies certain restrictions to
game use and may negatively affect the overall profitability of the
game.
(6)
Risks of Foreign Operations
|
Foreign
operations entail risks arising from different business, political, and
economic situations, and the profits from overseas business are always
subject to exchange rate
risks.
|
As of December
31
st
, 2009,
Webzen generated royalty and license income from China, Taiwan, Japan, the
Philippines, Vietnam, and the US through local affiliates or licensees. Also,
global service is provided to other foreign regions using the IDC located in
Korea and Europe, creating additional game usage profits.
Foreign operations are subject to
inhere
nt risks, including
disputes with our licensees or joint venture partners, uncertain legal
environments, different consumer preferences, unexpected regulatory
requirements, tariffs and other barriers, difficulties in training and retaining
staff and manag
i
ng foreign operations, difficulties in
obtaining or renewing required licenses and obtaining
adm
inistrative approvals and difficulties
in collecting foreign receivables. We will also be exposed to risks of foreign
exchange fluctuations as we record our li
c
ense and joint venture income in
KRW
in our financial
statements.
(7)
Risks Related to New Game Development Schedules
|
Delays
in new game development, both internally and through joint operations with
other companies, can lead to negative
results.
|
Webzen plans to
release several new games beginning in 2010. The domestic open beta testing and
commercialization of Huxley is scheduled for 2010. Also, the open beta testing
and commercial service of ‘BATTERY’, developed by NHN Games and the publishing
rights of which are owned by Webzen, is also scheduled for 2010.
Also, under a
development outsourcing contract with NHN Games, Webzen has resumed the
development of the game Parfait Station, the development of which was suspended
by this company in 2009. The development is currently going smoothly, but if the
development process is delayed due to unexpected technical or business
conditions, there can be delays to the servicing schedule of the new game and
this may negatively affect the future profitability of Webzen.
Webzen is also
developing MU2, the sequel to MU. The establishment of the development
organization and initial development began in early 2009 with goals for
completion by 2011, but if delays are to occur changes will be made to the mid
and long term profit diversification plans.
Also, Webzen has
entered into game development contracts with overseas developers such as Real
Time World Inc.(“RTW”), of England and RED 5 Studio Inc(“RED5”) of the
USA.
Under the contract
with RTW, Webzen will receive a certain share of the sales of APB, a game
currently under development by RTW. The development and release schedule of APB
can affect the profits of this company and as the currency used is US
dollars(“USD”), risks regarding exchange rates are also present.
A game called
T-project is being development under the contract with RED5. The development of
T-project by RED5 is constantly progressing, but recently it was reported that a
Chinese company called The9 was in the process of acquiring RED5. If the
development of T-project is delayed under these conditions, the profitability of
Webzen will be negatively affected and there exists the possibility of conflicts
regarding the ownership and copyrights of the game. Also, as the currency used
is USD, exchange rate risks exist.
B.
Merged Company: NHN Games
(1)
Risk Related Items
NHN Games, conducts
business in the same field of online game development as Webzen. As such, it is
subject to some of the same risks as Webzen, namely (1) business risk, (2) risks
related to procurement of specialized personnel, (4) risks by competitors, and
(5)risks by strengthened regulations by government agencies and related
institutions.
(2)
Risks Related to Changes in Client Demand and Game Portfolio
|
As
of December 31
st
,
2009, this company relies on the 3 products R2, Archlord, and C9 for most
of its income.
|
NHN Games began
open beta testing and commercial service of the new game C9 in 2009, but its
sales only comprise 5.78% of total sales for 2009. The following is data on the
sales of this company for 2008~2009.
(unit: KRW,
%)
|
Item
|
6
th
Term(Fiscal year 2009)
|
5
th
Term (Fiscal year 2008)
|
|
Sales
|
Percentage of
Sales
|
Compared to
Previous Year
|
Sales
|
Percentage of
Sales
|
|
Archlord
|
5,957,179,698
|
23.5%
|
-13.6%
|
6,898,782,460
|
28.4%
|
|
R2
|
16,138,695,620
|
63.8%
|
-5.3%
|
17,037,951,366
|
70.1%
|
|
C9
|
1,740,289,385
|
6.9%
|
0.0%
|
-
|
0.0%
|
|
Other
|
1,463,000,000
|
5.8%
|
285.4%
|
379,630,546
|
1.6%
|
|
Total
|
25,299,164,702
|
100.0%
|
4.0%
|
24,316,364,372
|
100.0%
|
As seen above, the
sales percentages of Archlord and R2 are quite high for the fiscal year 2009. C9
does not comprise a great part of the sales as the open beta testing and
commercialization began in the latter half of 2009, but an increase in sales is
expected in the fiscal year 2010.
However, if the
decrease in sales of existing games becomes high or the increase in sales of C9
after fiscal year 2010 is not as high as expected, the profitability of the
remaining company may be negatively affected.
(3)
Risks Related to the Development of New Games
|
NHN
Games is developing new games and reviewing, and developing plans for
sequels, but past successes do not guarantee the success of new games and
this may negatively affect the profitability of this
company.
|
The online game
industry is a market characterized by intense competition with a relatively low
threshold for entry into the market. These characteristics of the industry have
caused game development to require specialized star developers, large numbers of
developers, and lengthy development process, which in turn lead to new games
being large scale games.
Also, online games
can provide steady and constant high profit levels if they interest the
customers and become successful but if they fail to do so, companies may not be
able to even recoup the development costs.
Furthermore, making
accurate projections on the success of new games at the planning, development as
well as the open beta testing stages is extremely difficult. Therefore, the
involvement of star developers, the investment of large number of human
resources, and lengthy development process do not guarantee the success of the
game. If market reactions to new games in the future are negative, it may
negatively affect the profitability and stability of NHN Games and greatly
damage the potential base for growth of NHN Games.
(4)
Risks Related to Debts Such as Short Term Debt Convertible Bonds
|
The
rapidly changing domestic economic conditions can lead to additional risks
related to debts and convertible bonds of NHN Games, and when conversion
rights of convertible bonds are exercised, share values may become
diluted.
|
Short term debts as
per the audit reports of NHN Games as of December 31
st
, 2009
are as follows.
[ Short Term Debt
Status ]
(unit: 1,000
KRW)
|
Item
|
Loan
Source
|
Yearly
Interest Rate
|
This
Term
(Fiscal year
2009)
|
Previous
Term
(Fiscal year
2008)
|
|
Normal
Working Fund Loan
|
IBK
|
5.40%
|
6,000,000
|
-
|
|
Hana
Bank
|
5.27%
|
9,000,000
|
-
|
|
Share
Acquisition Funds
|
Search
Solution Co., Ltd.
|
7.50%
|
-
|
4,500,000
|
|
Samsung
Securities Co.
|
7.20%
|
-
|
1,000,000
|
|
|
15,000,000
|
5,500,000
|
Through the merger
of Webzen and NHN Games, the aforementioned short term debts will be assumed by
the Webzen, the company remaining after the merger as short term debts. This
leads to the occurrence of short term debts of Webzen as of the date of
submission of this report, and in the event that domestic and foreign economic
conditions worsen in the future, this could mean risk exposure to additional
cost resulting from high interest.
As of December
31
st
, 2009,
the convertible bonds of NHN Games as per its audit report are as
follows.
(unit: 1,000
KRW)
|
Item
|
Acceptor
|
Issue
Date
Expiration
Date
|
Face Interest
Rate
Guaranteed
Return
|
This
Term
(Fiscal year
2009)
|
Previous
Term
(Fiscal year
2008)
|
|
1
st
Convertible Bond
|
NHN
Corporation
|
2008.10.22
2013.10.21
|
0.00%
7.71%
|
12,500,000
|
12,500,000
|
|
Redemption
Premium
|
5,625,000
|
5,625,000
|
|
Conversion
Rights Adjustment
|
(6,079,032)
|
(7,600,320)
|
|
Subtotal
|
12,045,968
|
10,524,680
|
|
2
nd
Convertible Bond
|
NHN
Corporation
|
2008.10.22
2013.10.21
|
0.00%
7.71%
|
-
|
12,500,000
|
|
Redemption
Premium
|
-
|
5,625,000
|
|
Conversion
Rights Adjustment
|
-
|
(7,600,320)
|
|
Subtotal
|
-
|
10,524,680
|
|
Total
|
12,045,968
|
21,049,360
|
|
Contents
|
1
st
Convertible Bonds
|
2
nd
Convertible Bonds
|
|
Interest
Payment Date (redemption method)
|
Pay 145% of
unconverted bonds at once on the expiration date
|
|
Conversion
Request Term
|
22 JAN 2009 ~
20 OCT 2013
|
|
Type of
Shares to be Issued upon Conversion
|
Registered
normal shares
|
|
Number of
Shares to be Issued upon Conversion(*)
|
140,355
shares
|
140,355
shares
|
|
Conversion
Price(*)
|
89,060
KRW
|
89,060
KRW
|
|
Early
redemption rights of debenture holder
|
When request
is made by debenture holder between 3 years after the issue
date and before the expiration date, redemption is made with yearly simple
interest rate of 9% applied.
|
When request
is made by debenture holder between 3 months and 1 year after the issue
date or between 3 years after the issue date and before the
expiration date, redemption is made with yearly simple interest rate of 9%
applied.
|
|
Early
redemption rights of issuing company
|
-
|
When request
is made by issuing company between 3 months and 1 year after the issue
date, redemption is made with yearly simple interest rate of 9%
applied.
|
(*) Conversion
Price Adjustment
|
Conditions
|
Conversion
Price Adjustment
|
|
Occurrence of
shares below conversion price etc.
|
{issued
shares x (newly issued shares x issue value per share/previous conversion
price)}/(issued shares + newly issued shares)
|
|
Merger,
reduction of capital, capital increase without consideration
etc.
|
Adjust
conversion price so that same effects as before the occurrence of
condition can be achieved
|
|
When IPO
price is below conversion price upon IPO(Indirect Listing
included)
|
100% of IPO
price
|
The share value of
NHN Games was 5,000 KRW per share initially, but a stock splitting of one share
into 10 was conducted on January 14
th
, 2010.
Also, in the case of 2
nd
convertible bonds, early redemption of the total amount was completed in 2009
per the request of the issuing company, NHN Games. Therefore, in the contents
above, the number of shares to be issued upon conversion is the 140,355 shares
of the 1
st
convertible bonds, and following the effects of the stock split the total number
of shares is 1,403,550 and the conversion price per share is 8,906
KRW.
Upon completion of
this merger, if NHN Corporation does not make the requests to convert the bonds
into stock during the 2-year period between October 22
nd
, 2011,
and October 21
st
, 2013,
or early redemption rights are not exercised, Webzen, the company remaining
after the merger, must repay 18.121 billion won on October 21
st
, 2013.
This can cause temporary negative effects to the stability and profitability of
the company due to reduction in the company’s reserve capital and occurrence of
interest costs, and when conversion rights are exercised during the appropriate
term, the share values may be diluted significantly at that point.
(5)
Risks Regarding Concentration Levels of Operations
|
As
NHN Games relies heavily on NHN Corporation, the parent company, for its
operational activities, its profitability may decrease due to management
decisions by NHN Corporation
|
As of December
31
st
, 2009,
69.7% of the sales for fiscal year 2009 and 81.9% for fiscal year 2008 came from
NHN Corporation signifying that NHN Games heavily relies on NHN
Corporation.
Even after this
merger is completed, if NHN Corporation makes management decisions regarding the
games that were developed and currently serviced by NHN Games that are
disadvantageous towards Webzen, the surviving company, this may negatively
impact the profit and income structure of the surviving company.
(6)
Risks Related to Derivatives
|
The
exercise of appraisal rights related to NHN Games, which is classified as
derivatives, may affect the fiscal stability of NHN Games. The exercise of
such rights may cause the number of Treasury shares of Webzen, the
surviving corporation, to change. By the time Webzen disposes the shares
acquired through the merger within 3 years of acquisition, the share price
could change rapidly due to the increased
circulation.
|
Over the course of
acquiring Webzen shares, which are classified as investment shares under equity
method, appraisal rights were issued which allows the largest shareholder of
Webzen and 2 other people to request NHN Games to purchase their shares at a
certain price.
The contents of the
aforementioned appraisal rights are as below.
|
Round
|
Appraisal
Right Holder
|
No. of shares
subject to appraisal rights
|
Appraisal
value per share
|
Sales
price(KRW)
|
Term of
exercising appraisal rights
|
|
1
st
|
Kim, Nam Joo
and 2 others(FN 1)
|
389,219
|
18,000
|
7,005,942,000
|
30 business
days starting 01 JUN 2009(2009.06.01~2009.07.10) (FN2)
|
|
2
nd
|
Kim, Nam Joo
and 2 others
|
778,441
|
16,000
|
12,455,056,000
|
30 business
days starting 01 JUN 2010(2010.06.01~2010.07.12)
|
|
3
rd
|
Kim, Nam
Joo
|
87,653
|
16,000
|
1,402,448,000
|
30 business
days starting 01 JUN 2011(2011.06.01~2011.07.13)
|
|
Total
|
Kim, Nam Joo
and 2 others
|
1,255,313
|
|
20,863,446,000
|
|
(FN1) The parties
of the contract are the 3 previous largest shareholders of Webzen, Kim, Nam Joo,
Cho, Gi Yong, and Song, Gil Seop.
(FN2) The first
round of appraisal rights were exercised at 17,500 KRW per share following the
agreement between the parties on the appraisal value, and such result is noted
in the Report on Large Holding of Shares Etc., (general) of NHN Games dated June
19
th
,
2009.
The aforementioned
share transfer contract was entered into on September 3
rd
, 2008,
and the aforementioned appraisal rights were issued upon entering into the
contract. On this matter, please refer to the ‘Other Important Items’ announced
on September 4
th
, 2008,
and the notice of the ‘Change of Largest Shareholder’ announced on October
24
th
, 2008
by NHNGames co., Ltd as well as the ‘Report on Large Retaining of Shares
Etc.,(general)’ announced on September 10
th
, 2008,
the ‘Report on Ownership of Specific Shares by Executives and Main Shareholders’
dated October 10
th
, 2008,
and the Report on Large Retaining of Shares Etc.,(general) and Report on
Ownership of Specific Shares by Executives and Main Shareholders’ dated June
19
th
, 2009,
and announced by NHN Games.
With regards to the
aforementioned share transfer contract, in the event that NHN Games and Webzen
consummate the merger, the exercise period of the second and third round of
appraisal rights is changed to 30 business days from the day the holders of the
appraisal rights are notified of the board resolution on the merger, and if such
rights are not exercised within the exercise period, such rights will cease to
exist. Also, if the share value of Webzen remains 18,000 KRW or higher for 30
consecutive business days, the appraisal rights will cease to
exist.
NHN Games
classifies these appraisal rights as derivatives, which fall under sales
transactions for accounting purposes, and the amount of derivative evaluation
profits (non-operative revenues) occurring with regards to derivative
transactions in 2009 was 4,883 million KRW. Partial appraisal rights were
exercised in 2009 to reduce derivative debt by 5,203 million KRW, and as of the
end of 2009, 4,442 million KRW in derivative debts are appropriated as
non-liquid debts.
In order to
evaluate the value of appraisal rights, NHN Games reviews the matter at the end
of each year. The review consisted of calculating the value of the European
Option with no extinction option attached and the Barrier Option with the
Knock-Out condition attached to evaluate the appropriateness of such derivative
debt. The number attained by subtracting the value of the first group appraisal
rights already executed and the amount noted as derivative debt on the financial
statements from the value calculated at the time of the initial contract was
deemed to be the value of derivative evaluation profit.
If this merger is
consummated, the term of appraisal rights will be reduced and the term of
exercising said rights will end before the date of the merger. Therefore if the
appraisal rights are exercised, the shares of Webzen owned by NHN Games will
increase by 866,094 shares from the 3,469,784 shares to 4,335,878 shares (33.4%
of issued shares) and these shares will become Treasury shares of Webzen after
the date of merger. Such shares are expected to be disposed of within 3 years of
the date of merger in accordance with the Financial Investment Services and
Capital Markets Act and its subordinate laws.
(7)
Stock Option Status
|
The
number of circulated shares may increase due to the exercising stock
options, and this can cause share price to
change.
|
The dissolving
company NHN Games has granted 155,150 shares to 38 employees over 3 occasions
from 2007 through March, 2010, and details are as follows.
[As of: 21 APR
2010] (unit:
share, KRW)
|
Receiving
Party
|
Relationship
|
Date
|
Method
|
Type of
Share
|
Changed
Numbers
|
Unexercised
no.
|
Exercise
Term
|
Price
|
|
Granted
|
Exercised
|
Cancelled
|
|
No, Dong Hwan
and 35 others
|
Employee
|
2007-12-01
|
New
Shares
|
Common
Shares
|
178,200
|
-
|
168,800
|
9,400
|
2009-12-01
2012-11-30
|
700
|
|
Lee, In Kyu
and 54 others
|
Employee
|
2008-12-01
|
New
Shares
|
Common
Shares
|
225,650
|
-
|
115,900
|
109,750
|
2010-12-01
2013-11-30
|
8,906
|
|
Park, Jung
Suk and 7 others
|
Employee
|
2010-03-08
|
New
Shares
|
Common
Shares
|
39,000
|
-
|
3,000
|
36,000
|
2012-03-08
2015-03-07
|
8,906
|
|
Total
|
-
|
-
|
-
|
-
|
442,850
|
-
|
287,700
|
156,150
|
-
|
-
|
When such stock
options are exercised, the surviving company Webzen will satisfy its obligations
by issuing new shares or utilizing treasury shares. The stock options will be
exchanged for common shares of Webzen based on the merger ratio, 1.57262712
shares of Webzen per each underlying NHN Games common share of the stock option
granted by NHN Games, a total of 243,993 shares.
In the case such
granted stock options, the issuance of new shares or treasury shares can
increase the number of circulated shares upon exercise of such options, and this
can impact the share prices in the short term.
(8)
Risk related to Revenue Projections
|
NHN
Games is planning to offer C9, which was launched in 2009 and Battery, a
first person shooter (“FPS”) game which underwent closed beta testing in
2010, overseas. If such global expansion is successful, such strategy will
increase the company’s value, but if the global expansion generate less
revenue than expected or such expansion is delayed, it might negatively
impact the company’s
value.
|
C9 was developed by
NHN Games and underwent closed and open beta testing in 2009. Commercial service
of C9 started in the fourth quarter of 2009. The release of C9 was highly
anticipated even before its launch, and it has positively contributed to NHN
Games’ revenue since the launch of the commercial service in 2009. Battery, a
FPS game, underwent closed beta testing in 2010, and is expected to undergo open
beta testing and be offered as a commercial service in the second half of
2010.
NHN Games have
spent the last three years developing these two games, which the company has
high hopes for. A publishing agreement is already in place with Tencent, a major
Chinese publisher, for C9.
Tencent is the
largest internet company in China and is a major online game developer and
publisher. Tencent offers Korean games such as Dungeon Fighter, Cross Fire, Abba
as well as games that it developed on its own. Please refer to Tencent’s website
at
www.tencent.com
.
Details of the publishing agreement cannot be disclosed here due to the
confidentiality provision that both corporations have agreed upon.
NHN Games is
continuing to make efforts to expand globally in 2010. NHN Games is seeking
minimum guarantee when contemplating entering into publishing agreement in a
particular country. This approach is expected to help increase NHN Games’
revenue steadily.
But if revenues in
certain countries are below expectations, reaction to the game is muted, or if
servicing of the games become difficult due to internal conditions of certain
countries, it may negatively impact the value of the company.
C.
Other Investment Risks
The information in
this stock report is finalized as of the date of submission of the report and
there are no factors that will significantly affect or cause changes to the
assets, debts, cash flow, or profit and loss that can affect the merger other
than those mentioned in this report.
However, over the
course of pursuing the merger as per this stock report, the merger schedule may
be altered due to the discussion with and authorization process of the relevant
agencies and the consummation of the merger may be impacted by the results of
the shareholders meeting on the merger.
Please note that
significant changes in share prices after the merger could take place due to the
issuance of new shares of the surviving corporation following this merger and
selling of such shares.
Therefore,
shareholders and investors are advised to refer not only to this stock report
but also to recent notices and reports of the merging company Webzen and merged
company NHN Games on the Financial Supervisor Service’s electronic notice
homepage (
http://dart.fss.or.kr
)
when making investment decisions.
Section
4 Item Regarding the Appraisal Rights of Objecting Shareholders
1.
Overview of Appraisal Rights of Objecting Shareholders and other related
matters
A.
Requirements of Appraisal Rights of Objecting Shareholders
As
per Article 522-3 of the Commercial Code and Article 165-5 of the Financial
Investment Services and Capital Markets Act, shareholders of record, as of the
date closure of the shareholder list, who object to the resolution of the board
of directors approving the merger can demand that the corporation in question to
purchase the shares they own, within 20 days from the date of the approval of
the merger by the general shareholders meeting, in written form by specifying
the type and number of shares to be purchased, as long as they have notified
their objection to the resolution of the board of directors by the day before
the general shareholders meeting (only applies to shares verified to have been
acquired by the objecting shareholder before the resolution of the board of
directors or those verified to have been acquired after announcement of the
resolution of the board of directors but acquired under a stock purchasing
contract which was executed by the day after announcement of the said
resolution). Appraisal rights can be exercised on just a portion of shares owned
as well. However, in accordance with Article 522-3 of the Commercial Code and
Article 165-5 of the Financial Investment Services and Capital Markets Act,
appraisal rights of objecting shareholders are only given to shareholders
continuously holding shares from the date of closure of the list of shareholders
to the date of exercising appraisal rights of objecting shareholders. Holders of
the shares sold and reacquired during such period lose such appraisal rights.
Once the appraisal rights are exercised, it is final.
Also, shareholders
who submitted to the corporation a written objection regarding the resolution of
the board of directors on the merger, but voted in favor of the merger at the
general shareholders meeting cannot exercise appraisal rights of objecting
shareholders. Of the parties to the agreement, Webzen, the KOSDAQ listed
corporation, must purchase the shares subject to the exercising of such
appraisal rights within one month from the last date the appraisal right
exercise period, and NHN Games, the unlisted corporation, must purchase those
shares within one month from the last date the appraisal right exercise
period.
|
※
|
In accordance
with Article 165-5 of the Financial Investment Services and Capital
Markets Act, this only applies to shares verified to have been acquired by
the objecting shareholder before the resolution of the board of directors
and those verified to have been acquired after announcement of the
resolution of the board of directors but acquired under a stock purchasing
contract which was entered into by the day after announcement of said
resolution.
|
B.
Expected Price of Appraisal Rights
(1)
Expected purchase price of share for Webzen in response to the exercise of
appraisal rights
|
Proposed
Price by Company for Agreement
|
KRW 12,144
per Share
|
|
Basis for
Calculation
|
Value
calculated in accordance with Article 176-7 of the Enforcement Decree of
the Financial Investment Services and Capital Markets
Act
|
|
Procedure if
agreement is not made
|
When the
company in question or the shareholder exercising appraisal rights
disagree on the proposed price of the company, request can be made to a
court to determine the price in accordance with Article 165-5 Paragraph 3
of the Financial Investment Services and Capital Markets
Act
|
|
※
|
Formula for
Calculating Expected Share Purchase Price (As of April 14
th
,
2010)
|
|
Item
|
Price
|
Period
related to the Calculation
|
|
①
Weighted
average stock price of traded volume within past two
months
|
12,224
|
16 FEB 2010 ~
14 APR 2010
|
|
②
Weighted
average stock price of traded volume within past one month
|
12,068
|
15 MAR 2010 ~
14 APR 2010
|
|
③
Weighted
average stock price of traded volume within past one week
|
12,140
|
08 APR 2010 ~
14 APR 2010
|
|
Calculated
purchase price {(
①
+
②
+
③
)/3}
|
12,144
|
-
|
The share values
and traded volumes for the two months prior to April 14
th
, 2010
used to calculate the aforementioned price are as follows.
|
Date
|
Closing
Price
|
Traded
Volume
|
Traded Volume
times Closing Price
|
|
16 FEB
2010
|
12,550
|
154,571
|
1,939,866,050
|
|
17 FEB
2010
|
12,700
|
110,231
|
1,399,933,700
|
|
18 FEB
2010
|
12,750
|
67,831
|
864,845,250
|
|
19 FEB
2010
|
12,600
|
221,725
|
2,793,735,000
|
|
22 FEB
2010
|
12,600
|
131,854
|
1,661,360,400
|
|
23 FEB
2010
|
12,800
|
159,268
|
2,038,630,400
|
|
24 FEB
2010
|
12,650
|
73,337
|
927,71
3,050
|
|
25 FEB
2010
|
12,600
|
95,065
|
1,197,819,000
|
|
26 FEB
2010
|
12,800
|
106,250
|
1,360,000,000
|
|
02 MAR
2010
|
12,600
|
65,835
|
829,521,000
|
|
03 MAR
2010
|
12,400
|
74,067
|
918,430,800
|
|
04 MAR
2010
|
12,350
|
125,449
|
1,549,295,150
|
|
05 MAR
2010
|
12,000
|
134,856
|
1,618,272,000
|
|
08 MAR
2010
|
11,850
|
150,788
|
1,786,837,800
|
|
09 MAR
2010
|
11,800
|
104,461
|
1,232,639,800
|
|
10 MAR
2010
|
12,200
|
118,711
|
1,448,274,200
|
|
11 MAR
2010
|
12,100
|
65,493
|
792,465,300
|
|
12 MAR
2010
|
12,150
|
58,042
|
705,210,300
|
|
15 MAR
2010
|
12,150
|
60,983
|
740,943,450
|
|
16 MAR
2010
|
11,900
|
77,284
|
919,679,600
|
|
17 MAR
2010
|
11,900
|
137,104
|
1,631,537,600
|
|
18 MAR
2010
|
11,750
|
60,607
|
712,132,250
|
|
19 MAR
2010
|
11,750
|
155,894
|
1,831,754,500
|
|
22 MAR
2010
|
11,450
|
100,669
|
1,152,660,050
|
|
23 MAR
2010
|
11,700
|
81,950
|
958,815,000
|
|
24 MAR
2010
|
11,550
|
35,591
|
411,
076,050
|
|
25 MAR
2010
|
11,450
|
63,073
|
722,185,850
|
|
26 MAR
2010
|
11,600
|
45,778
|
531,024,800
|
|
29 MAR
2010
|
12,000
|
122,115
|
1,465,380,000
|
|
30 MAR
2010
|
12,300
|
244,736
|
3,010,252,800
|
|
31 MAR
2010
|
12,550
|
211,329
|
2,652,178,950
|
|
01 APR
2010
|
12,500
|
85,945
|
1,074,312,500
|
|
02 APR
2010
|
12,500
|
91,711
|
1,146,387,500
|
|
05 APR
2010
|
12,050
|
69,492
|
837,378,600
|
|
06 APR
2010
|
11,900
|
59,211
|
704,610,900
|
|
07 APR
2010
|
12,100
|
130,855
|
1,583,345,500
|
|
08 APR
2010
|
12,100
|
115,379
|
1,396,085,900
|
|
09 APR
2010
|
12,350
|
180,251
|
2,226,099,850
|
|
12 APR
2010
|
12,350
|
166,751
|
2,059,374,850
|
|
13 APR
2010
|
12,200
|
53,629
|
654,273,800
|
|
14 APR
2010
|
11,800
|
210,387
|
2,482,566,600
|
|
Weighted
average stock price of traded volume within past two months
(A)
|
4,578,558
|
55,968,906,100
|
|
Weighted
average stock price of traded volume within past one month
(B)
|
2,560,724
|
30,904,056,900
|
|
Weighted
average stock price of traded volume within past one week
(C)
|
726,397
|
8,818,401,000
|
|
Average(D)={(A+B+C)/3}
|
|
12,144
|
(2)
Expected Purchase Price for NHN Games in response to the exercise of the
appraisal rights
In
accordance with Article 374-2 Paragraph 3 of the Commercial Code, the stock
purchase price is determined through an agreement between the shareholders
requesting purchase and the company. However, if an agreement is not reached
within two months of NHN Games having received the request for shares purchase,
the company in question or the shareholder requesting the purchase can request
that a court determine the purchase price in accordance with Article 374-2
Paragraph 4 of the Commercial Code. As such, NHN Games plans to confer with the
shareholders, who gave notification of their objection to the merger in written
form prior to the day before the date of the special general shareholders
meeting, on the purchase price.
C.
Process, Method, Term and Location
(1)
Process of Exercising Appraisal Rights
(A)
Notification of Objection
In
accordance with Article 522-3 of the Commercial Code and Article 165-5 of the
Financial Investment Services and Capital Markets Act, shareholders of record as
of the day before the closure of the list (May 06, 2010) must notify their
objection with the resolution of the board of directors on the merger in written
form not later than the day before the general shareholders meeting (June 04,
2010). However, beneficial shareholders who have entrusted their stocks to stock
companies must notify the stock company. In this case, notification of objection
must be made not later than 3 working days prior to the general shareholders
meeting. Stock companies must compile the object notifications of beneficial
shareholders and notify the securities agency, the Korea Securities Depository,
not later than 2 working days before the general shareholders meeting. The Korea
Securities Depository must notify the company of such objection as proxy of the
beneficial shareholders before the general shareholders meeting.
(B)
Method of Requesting Appraisal
In
accordance with Article 522-3 of the Commercial Code and Article 165-5 of the
Financial Investment Services and Capital Markets Act, shareholders that made
the aforementioned notification of objection can exercise their appraisal rights
by submitting to the company the relevant stock certificates and a written form
with the number and types of shares owned within 20 days of the resolution of
the general shareholders meeting (June 25, 2010). However, beneficial
shareholders who have entrusted their stock certificates to stock companies can
exercise their appraisal rights by submitting an appraisal rights of objecting
shareholders request form to the stock company where their shares are and
entrusted. If beneficial shareholders make such request to their stock company
not later than 2 working days before the termination of the appraisal rights
exercise period, the Korea Securities Depository will make the request in their
place.
(2)
Appraisal Rights Exercise Period of Objecting Shareholders
In
accordance with Article 522-3 of the Commercial Code and Article 165-5 of the
Financial Investment Services and Capital Markets Act, shareholders that have
notified their objection to the resolution of the board of directors on the
merger can exercise their appraisal rights within 20 days of the resolution of
the general shareholders meeting.
(
3) Location
(A)
Shareholders of Record
|
Name of
Company
|
Location
|
|
Webzen
Inc.
|
14F, Daerung
Post Tower 2
nd
,
182-13 Guro-dong, Guro-gu, Seoul
|
|
NHN Games
Co., Ltd.
|
13F, Daerung
Post Tower 2
nd
,
182-13 Guro-dong, Guro-gu, Seoul
|
(B) Beneficial Shareholders
Entrusting Stock Certificates to Securities Companies
:
the relevant stock
companies
D. The Impact of the Results of
Appraisal Rights of Objecting Shareholders on the Effectiveness of the Merger
Contract Etc
.
With regards to the
merger of Webzen, and NHN Games, as per Article 522-3 of the Commercial Code,
Article 165-5 of the Financial Investment Services and Capital Markets Act, and
Article 176-7 of its Enforcement Decree, if the aggregate amount of the purchase
price that needs to be paid by NHN Games and Webzen in response to the exercise
of aforementioned appraisal rights exceeds KRW 30,000,000,000, the parties to
the merger can mutually agree in written form to cancel the merger or revise its
process, schedule, and dates.
E.
Method of Acquiring, Expected Date and Method of Payment of Appraisal
Funds
(1) Method of Acquiring Appraisal
Funds
:
Use existing funds
or procure funds
(2)
Method of Payment
|
Shareholders
of Record
|
Cash payment
or transfer to registered account of shareholder
|
|
Beneficial
Shareholders
|
Transfer to
personal account with the relevant financial investment business (stock
company)
|
(3)
Expected Date of Payment
|
Item
|
Name of
Company
|
Expected Date
of Payment
|
|
Surviving
Corporation
|
Webzen
Inc.
|
Payment is
expected to be made within 1 month from termination of the appraisal right
exercise period
|
|
Dissolving
Corporation
|
NHN Games
Co., Ltd.
|
Payment is
expected to be made within 2 months of receiving appraisal
requests
|
(4)
Please note appraisal prices or other terms or procedures related to the
exercise of appraisal rights are subject to change over the course of conferring
with shareholders when necessary.
(5)
Method of Selling of Shares Acquired through the Appraisal Process
The shares acquired
through the appraisal process are expected to be sold within 3 years of
purchasing such shares, in accordance with Article 165-5 Paragraph 4 of the
Financial Investment Services and Capital Markets Act and Article 176-7
Paragraph 3 of its Enforcement Decree.
F.
When Appraisal Rights are Limited or not Recognized
Not
Applicable.
Section
5 Relationship of the Parties
1.
Relationship of the Parties
A.
Share Relationship
As of the date of
submission of the Report on Important Items, NHN Games, owned 3,469,784shares
(26.74% of issued shares) of the issued stocks of Webzen
B.
Concurrently held Executive Positions
Mr. Byoung Gwan
Kim, the director of strategy and registered executive of Webzen, is also the
CEO of NHN Games. Mr. Kim was elected as director of Webzen by the vote of the
special general shareholders meeting convened on October 24
th
, 2008.
Mr. Kim was elected and registered as the CEO of NHN Games, from September
12
th
, 2005
through the date of the submission of the Report on Important Items in
Koreat.
C.
Cases in which major shareholders of one corporation is a related party to the
other corporation
The largest
shareholder of the surviving corporation, Webzen, is NHN Games, and the CEO of
NHN Games is a related party to NHN Corporation.
The status of major
shareholders of Webzen and NHN Games are as follows.
|
Name of Major
Shareholder
|
Webzen
Inc.
|
NHN Games
Co., Ltd.
|
|
Owned
Shares
|
Percentage
(base on total issued shares)
|
Owned
Shares
|
Percentage
(base on
total issued shares)
|
|
Major
Shareholder Etc.
|
NHN
Corp.
|
-
|
-
|
6,000,000
|
46.88%
|
|
Related Party
(note 1)
|
-
|
-
|
5,978,450
|
46.71%
|
|
Major
Shareholder Etc.
|
NHN Games
Co., Ltd.
|
3,469,784
|
26.74%
|
-
|
-
|
|
Related
Party(note 2)
|
10,000
|
0.08%
|
-
|
-
|
(Note 1) As of the
date of submission of the Report on Important Items in Korea, Mr. Byoung Gwan
Kim, the CEO of NHN Games (the largest shareholder of Webzen), is a related
party to NHN Corporation.
(Note 2) As of the
date of submission of the Report on Important Items in Korea, Mr. Chang Keun
Kim, the CEO of Webzen, is a related party of NHN Games, the largest shareholder
of Webzen.
D.
Other Competitive or Supplementary Relationships and other Relevant
Items
Webzen expects to
enhance its efficiency by implementing measures involving efficient development
of online games, cost reductions, and avoidance of overlapping investments, made
possible through the integrated operation of shared management resources
including game development personnel, R&D facilities and networks, game
service infrastructure, and other support personnel.
Additionally, this
merger is expected to increase the number of online game services Webzen offers.
Also, constant growth in sales and profits are expected through, among other
things, the offering of new games currently under development. As such, the
achievements of NHN Games will be reflected as results of Webzen following the
merger and will thus contribute to increasing sales and profits of
Webzen.
2.
Transactions between Parties
A.
Obligation Guarantees and Provision of Securities for Parties
Not
applicable.
B.
Purchasing, Sales, Business Receivables, Obligations, Accounts Payable,
Outstanding Payments Etc.
Significant
transactions between Webzen and related parties for this fiscal term and the
previous term as per the audit report as of and for the year ended
December 31, 2009 and the related receivables and obligations as of December
31
st
, 2008
and 2009 are as follows (unit: KRW 1,000).
|
Account
Item
|
Sales
Etc.
|
Purchases
Etc.
|
Receivables
|
Obligations
|
|
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
|
Companies
with major influence
|
|
NHN Games
Co., Ltd.
|
634,375
|
-
|
461,630
|
-
|
206,598
|
-
|
563,291
|
-
|
|
NHN
Corp.
|
217,509
|
-
|
61,931
|
-
|
31,119
|
-
|
6,946
|
-
|
|
|
851,884
|
-
|
1,523,561
|
-
|
237,717
|
-
|
570,237
|
|
|
Subsidiary
Companies
|
|
9Webzen
Limited
|
345,934
|
360,445
|
-
|
-
|
17,933
|
40,038
|
-
|
-
|
|
Webzen
Taiwan Inc..
|
710,171
|
768,140
|
-
|
-
|
3,383,130
|
3,740,210
|
-
|
-
|
|
Webzen
America
Inc.
|
-
|
207,492
|
-
|
-
|
5,119,743
|
5,451,065
|
-
|
-
|
|
Flux Co.,
Ltd.
|
-
|
-
|
-
|
-
|
60,000
|
60,000
|
-
|
-
|
|
|
1,056,105
|
1,336,077
|
-
|
-
|
8,580,806
|
9,291,313
|
-
|
-
|
C.
Transactions with Major Shareholders of Parties to the Merger
(1)
Credit Grants to Major Shareholders Etc.
Not
applicable.
(
2) Asset Transfer to and from Major
Shareholders
Not
Applicable.
Section 6 Other Items Required for the
Protection of Investors
.
1.
Previous Mergers
Both parties have
had no previous mergers.
2.
Shares of Major Shareholders
A.
Share Holdings of the Largest Shareholders and Related Parties Before and After
the Merger
|
Shareholder
|
Type
|
Before
Merger
|
After
Merger
|
Note
|
|
No. of
Shares
|
Share
|
No. of
Shares
|
Share
|
|
|
NHN Games
Co., Ltd.
|
Common
|
3,469,784
|
26.74%
|
-
|
-
|
Convert to
treasury shares after merger
|
|
NHN
Corp.
|
Common
|
-
|
-
|
9,435,763
|
28.50%
|
|
|
Chang Keun
Kim
|
Common
|
10,000
|
0.08%
|
10,000
|
0.03%
|
CEO of Webzen
Inc.
|
|
Byoung Gwan
Kim
|
Common
|
-
|
-
|
9,401,873
|
28.40%
|
CEO of NHN
Games Co., Ltd.
|
|
Total
|
Common
|
3,479,784
|
26.82%
|
18,847,636
|
56.93%
|
|
|
Total No. of
Issued Shares
|
Common
|
12,974,000
|
100.00%
|
33,103,627
|
100.00%
|
|
B.
Plan for Transfer of Shares of Largest Shareholder Etc., After
Merger
Not
Applicable
C.
Restriction of Sale of Shares of Largest Shareholder Etc., and
Authority
This is a merger by
the KOSDAQ-listed corporation Webzen of the unlisted company NHN Games and is
deemed an “indirect listing” in accordance with Article 19 Paragraph 1 of the
KOSDAQ Market Listing Rules stipulating the change of largest shareholder.
Therefore, in accordance with Article 22 Paragraph 1 of the KOSDAQ Market
Listing Rules the largest shareholder of the dissolving corporation (NHN Games),
NHN Corp. and related parties must put Webzen shares acquired from the merger in
protective entrustment of the Korea Securities Depository for 2 years from the
day of merger (“Sale Restriction Period”). However, after the first year of the
Sale Restriction Period, up to 5% of the shares so acquired during the merger
may be sold each month.
[Protective
Entrustment of the Largest Shareholder of Dissolving Corporation]
|
Name of
Shareholder
|
Relationship
|
Shares in
Protective Entrustment
|
Term of
Entrustment
|
Note
|
|
NHN
Corp.
|
Largest
Shareholder
|
9,435,763
|
2
years
|
Mandatory
protective entrustment
|
|
Byoung Gwan
Kim
|
Related
Party
|
9,401,873
|
2
years
|
Mandatory
protective entrustment
|
|
Total
|
18,837,636
|
|
|
3.
Change in Capital After Merger
(Unit: share,
KRW)
|
Item
|
Type
|
Before Merger
(note 1)
|
After
Merger
|
|
No. of
Authorized Shares
|
Common
Shares
|
40,000,000
|
40,000,000
|
|
No. of Issued
Shares
|
Common
Shares
|
12,974,000
|
33,103,627
|
|
Capital
|
6,487,000,000
|
16,551,813,500
|
|
Total Capital
Reserve (note 2)
|
129,975,413,130
|
-
|
(Note 1) The number
of authorized shares, issued shares, and capital before merger are as of the
date of this stock report (merger).
(Note 2) The total
of capital reserve before merger is the sum of the capital surplus, earned
surplus and capital adjustment, and other integrated total income and loss as of
December 31
st
, 2009.
However, the reserves that may increase due to the merger is omitted as it will
be decided according to the related laws and corporate accounting standards
applied to the fiscal status of Webzen.
4.
Management Policy and Executive Composition
The directors and
auditors of Webzen will be decided after the merger. Currently, Webzen has no
plans to change the senior management or the board members other than filling in
a vacant board seat.
5.
Business Plan Etc.
Through the
acquisition of NHN Games, Webzen plans to integrate the online game and
publishing field, reinforce its product portfolio, integrate human resources and
material and net work resources, and efficiently allot and manage business
resources so as to achieve stable growth, thereby increasing its share
value.
6.
Select Post-Merger Financial Information
A.
Pro Forma Balance Sheet
(unit:
million won)
|
Account
Item
|
Before
Merger
(As of
December 31
st
,
2009)
|
After
Merger
|
|
Webzen
Inc.
|
NHN Games
Co., Ltd.
|
|
[Liquid
Assets]
|
88,921
|
5,444
|
94,365
|
|
Quick
Assets
|
88,921
|
5,444
|
94,365
|
|
Inventory
|
-
|
-
|
|
|
Non Liquid
Assets
|
43,327
|
56,787
|
100,114
|
|
Investment
Assets
|
459
|
54,142
|
54,601
|
|
Tangible
Assets
|
3,879
|
329
|
4,208
|
|
Intangible
Assets
|
5,344
|
782
|
6,126
|
|
Other Non
Liquid Assets
|
33,646
|
1,534
|
35,180
|
|
Total
Assets
|
132,248
|
62,231
|
194,479
|
|
[Liquid
Debt]
|
7,159
|
20,649
|
27,808
|
|
[Non Liquid
Debt]
|
4,852
|
18,957
|
23,809
|
|
Total
Debt
|
12,012
|
39,606
|
51,618
|
|
[Capital]
|
6,487
|
6,400
|
12,887
|
|
[Capital
Surplus]
|
135,892
|
7,027
|
142,919
|
|
[Capital
Adjustment]
|
(18,717)
|
724
|
-17,993
|
|
[Other
Integrated Total Income and Loss]
|
(1,442)
|
372
|
-1,070
|
|
[Profit
Surplus]
|
(1,983)
|
8,103
|
6,120
|
|
Total
Capital
|
120,237
|
22,625
|
142,862
|
|
B.
|
Pro
Forma Income Statement
|
(unit:
million won)
|
Account
Item
|
Before
Merger
(As of
December 31
st
,
2009)
|
After
Merger
|
|
Webzen
Inc.
|
NHN Games
Co., Ltd.
|
|
Sales
|
27,802
|
25,299
|
53,101
|
|
Business
Profits
|
-1,546
|
12,473
|
10,927
|
|
Non-operating
Revenue
|
6,418
|
5,420
|
11,838
|
|
Non-operating
Costs
|
3,499
|
10,718
|
14,217
|
|
Net Profits
Before Corporate Tax
|
1,373
|
7,175
|
8,548
|
|
Corporate Tax
Costs
|
1,055
|
204
|
1,259
|
|
Net Profit
for Term
|
318
|
6,971
|
7,289
|
* The estimated
balance sheet and income statement above are simple addition of the numbers on
the audit reports as of December 31
st
, 2009,
and can be different from financial statements drafted in accordance with
corporate Generally Accepted Accounting Principles.
7.
Publishing and Dissemination of Investment Guidebooks
A.
Publishing of Investment Guidebooks
In accordance with
Article 123 of the Financial Investment Services and Capital Markets Act, once
this stock report (merger etc.,) is put in effect by the FSC, Webzen will draft
an investment guidebook and publish it on the electronic announcement homepage
of the Financial Supervisory Service (
http://dart.fss.or.kr
).
Also, the guidebooks will be placed at Webzen’s company headquarters, the FSC,
and KRX so that the shareholders of Webzen and NHN Games may view
it.
B.
Dissemination of Investment Guidebooks
Shareholders of NHN
Games that will receive registered common stocks of Webzen due to this merger
(except professional investors stipulated in Article 9 Paragraph 5 of the
Financial Investment Services and Capital Markets Act and those who are exempt
from dissemination of investment guidebooks as per Article 132 of the
Enforcement Decree) must receive investment guidebooks prior to the special
general shareholders meeting for the approval of the merger.
(1)
Parties that Need to Receive Investment Guidebooks and Method of
Dissemination
(A)
Parties
Shareholders of
Webzen and NHN Games listed on the shareholder list as of the date of
determination of shareholders for the general shareholders meeting on the merger
(06 MAY 2010).
(B) Method of
Dissemination
Investment
guidebooks to be sent via registered mail to addresses registered on the
shareholder list.
(2)
Other Items
(A) Of the
shareholders of NHN Games that will receive registered normal stocks of Webzen
due to this merger, those who cannot receive such guidebooks through registered
mail should receive the guidebooks through electronic documents or express their
will to deny acceptance as per Article 385 of the Enforcement Decree of the
Financial Investment Services and Capital Markets Act.
(B) For details on
the receiving of guidebooks please contact Webzen or NHN Games using the
following contact information.
|
Item
|
Telephone
Number
|
|
Webzen
Inc.
|
(02)
3498-1600
|
|
NHN Games
Co., Ltd.
|
(02)
6330-3300
|
|
Financial Investment Services and
Capital Markets Act
|
|
Article
9 (Definition of Other Terms)
(5) The term
“professional investor” in this Act shall mean an investor falling under
any of the following subparagraphs who has risk-taking capacity over the
investment when taking into account his/her expertise for the financial
investment products and asset size: Provided, That where a professional
investor designated by the Presidential Decree notifies a financial
investment firm, in writing, of the intention to be treated as a
non-professional investor, the financial investment firm shall agree with
such treatment unless there is any justifiable cause, and the investor who
obtains the agreement from the financial investment firm shall be regarded
as a non-professional investor: <Amended on Feb. 3,
2009>
1.
Government;
2. The Bank
of Korea;
3. Financial
institutions designated by the Presidential Decree;
4.
Stock-listed corporations: Provided, That in the case of trading
over-the-counter derivatives with a financial investment firm, the same
shall be limited only to cases where a stock-listed corporation notifies
the financial investment firm, in writing, of its intention to be treated
as a professional investor; or
5. Others
prescribed by the Presidential Decree.
Article
124 (Justifiable Use of Prospectus)
(1) No one
shall be permitted to allow a person (excluding professional investors or
others prescribed by the Presidential Decree) who intends to acquire the
securities whose registration has taken effect to acquire such securities,
or to sell such securities to the person before a prospectus prepared in
accordance with Article 123 is distributed. In such a case, when a
prospectus is provided in the form of electronic documents in accordance
with Article 436, the prospectus shall be regarded as being distributed
when each of the following requirements is satisfied:
1. A person
who receives an electronic document (hereinafter referred to as “recipient
of electronic documents”) is required to agree to receive a prospectus in
the form of electronic documents;
2. A
recipient of electronic documents is required to designate the type of
electronically transferable media and the place at which the recipient
receives the electronic documents; 3. It must be confirmed whether a
recipient of electronic documents has received the electronic documents;
and
4. The
contents of electronic documents are required to be identical to those of
the written
prospectus.`
|
|
Enforcement
Decree of the Financial Investment Services and Capital Markets
Act
|
|
Article
11 (Public Offering and Secondary Distribution of Securities)
(1) In
calculating 50 investors pursuant to Articles 9 (7) and 9 (9) of the Act,
the number of persons who have been solicited to subscribe for securities
without a public offering or secondary distribution of the same type of
securities within the six months preceding the date on which the
solicitation for offer is made shall be added, and the number of persons
falling under any of the following subparagraphs shall be
subtracted:
1. A
professional falling under any of the following items:
(a) A person
falling under Articles 10 (1) 1 through 10 (1) 4 of this
Decree;
(b) A person
prescribed and publicized by the Financial Services Commission among the
persons falling under Articles 10 (3) 12 and 10 (3) 13 of this
Decree;
(c) An
accounting firm under the Certified Public Accountant Act;
(d) A credit
rating agency (hereinafter referred to as “credit rating agency”) under
the Use and Protection of Credit Information Act;
(e) A person
who holds a certificate as a certified public accountant, appraiser,
attorney at-law, patent attorney, tax accountant, etc. and provides
services, such as accounting and advisory services to an issuer;
or
(f) Others
prescribed and publicized by the Financial Services Commission as
professionals who understand the financial status or the business
operation of the issuer;
Article
132 (Person Exempted from Distributing Prospectus)
The term
“others prescribed by the Presidential Decree” under the former part of
Article 124
(1) of the
Act other than each subparagraph shall mean persons falling under either
of the following subparagraphs:
1. A person
falling under Articles 11 (1) 1 (c) through 11 (1) 1 (f) of this Decree
and each item of Article 11 (1) 2 of this Decree; or 2. A person who gives
notice, in writing, that he/she refuses to receive a
prospectus.
|
1
These selected sections
of the Financial Investment Services and Capital Markets Act and the Enforcement
Decree is part of the English text prepared by the Korea Financial Investment
Association (“KOFIA”) to help foreign investors understand the Financial
Investment Services and Capital Markets Act and the FSC is not involved with the
texts any way. Thus, these English texts have no authority of the
FSC.
Only the original
Korean texts of the Financial Investment Services and Capital Markets Act and
Enforcement Decree thereof have legal effect, and the translations are to be
used solely as reference material to aid in understanding of this
Act.
For all purposes of
interpreting and applying law to any legal issue or dispute, users should
consult the original Korean texts published in the Official Gazette. If you have
any question regarding the translation, contact the KOFIA.
8.
Other Matters Related to Investment Decisions
The following
documents are placed at headquarters from 2 weeks prior to the general
shareholders meeting stipulated in Article 522 Paragraph 1 of the Commercial
Code until 6 months after merger.
A. Agreement and
Plan of Merger
B. Document stating
the allotment of shares to shareholders of company dissolving upon merger and
grounds thereof.
C. Financial
statements (balance sheet) and income statement of each company.
Shareholders and
creditors of each company can request viewing or pay company designated fees and
request issuance copies or extracts any time during operating
hours.
9.
Other Items
A.
Regarding NASDAQ Listing
Webzen registered
and listed its depositary receipts (“DR”) with the NASDAQ market located in the
US on December 16, 2003. The number of shares transacted in the form of DR as of
December 31
th
, 2009
is 1,336,290 shares (4,454,300 DR, or 10.30% of issued shares). DR shareholders
can exercise rights as shareholders just like shareholders of common shares, the
process of which is as follows.
When a standard
date for the shareholders’ meeting or closing the register of shareholders is
set, the DR deposit institution (JP Morgan Chase Bank in the case of this
company) is notified two weeks prior to said standard date and the DR deposit
institution notifies the DR owners of the date, location, and agenda of the
shareholders’ meeting. Upon receiving such notice, DR owners express their
intentions to the DR deposit institution which in turn, notifies the Korea
Securities Depository (“KSD”) of the exercise of voting rights, and KSD then
attends the shareholders’ meeting to exercise the votes on behalf of DR owners
and DR deposit institution. At this time, the votes of DR owners are cast
according to their approval or opposition to each item, and in the case of
Shadow Voting, votes are cast in accordance with the approving or opposing share
percentages of other shareholders. After the shareholders meeting is over, the
KSD notifies the results to the DR deposit institution.
With regards to
this merger, the announcements the company makes to the NASDAQ market are as
follows.
|
Date
|
Form
|
Item
|
Contents of
Announcement
|
|
04/16
|
6-K
|
Merger
Decision
|
Domestic
Announcement: 04/15 decision to merge company
Announcement
of the merger contract resolved on 04/15
|
|
04/19
|
6-K
|
Decision on
Calling Shareholders’ Meeting
|
Domestic
Announcement: 04/19 decision to call shareholders’ meeting
Decision to
call shareholders’ meeting to authorize the merger
contract
|
|
04/20
|
6-K
|
Closing of
the Register of Shareholders
|
Domestic
Announcement: 04/20 Notice of closing the register of
shareholders
Notice of the
closing of the register of shareholders for the shareholders’ meeting for
authorizing the merger
|
|
04/26
|
6-K
|
Background
and Plan of Merger
|
Domestic
Announcement: 04/16 Report of Important Items
Announcement
of the method, process, and ratio etc., of the merger
|
|
04/28
|
13D/A
|
-
|
Report of the
shares of largest shareholders etc., as of the date of decision to
merge
|
Assuming that this
merger goes through according to the schedule in this report, announcements to
be made to the NASDAQ are as follows.
|
Date
|
Form
|
Contents of
Announcement
|
|
05/28
|
6-K
|
Domestic
Announcement: Results of shareholders’ meeting
Announcement
of the results of the shareholders’ meeting to authorize
merger
|
|
06/30
|
20-F
|
Domestic
Announcement: Domestic announcement of important items of announcement
reported to overseas stock exchanges etc.
|
|
07/01
|
6-K
|
Report on
completion of merger.
|
|
07/05
|
6-K
|
Domestic
Announcement: Report on stock issuance(merger)
Announcement
of merger registration items and stock issuance.
|
|
07/05
|
13D
|
Report on
changes in shares of new largest shareholder after merger
etc.
|
|
07/20
|
6-K
|
Items on
registration of new shares.
|
Webzen is in the
process of translating the contents of this stock report into English before its
announcement, and the investment guidebook is expected to be translated and
announced when this stock report comes into effect.
For your
information, Webzen discloses on NASDAQ by the following day all items announced
domestically. If you wish to check these announcements made on the NASDAQ,
please refer to http://edgar.sec.gov.
B.
Contents of Applied or Reviewed NASDAQ Regulations WRT this Merger
(1)
Registration of New Shares
Unless there is a
valid exemption, Webzen must register all of its shares to be issued to the
shareholders of NHN Games under this merger in accordance with U.S. Securities
Act of 1933, as amended (the “Securities Act”) with the U.S. Securities and
Exchange Commission (the “SEC”).
As
the transaction of shares related to this merger is deemed an offshore
transaction pursuant to Regulation S under the Securities Act, the transaction
is exempt from registration. Therefore there is no need to submit a registration
statement such as the Form F-4 to the SEC.
(2)
Shareholder Approval Requirements under NASDAQ Rules
NASDAQ Rule 5635(a)
states that approval of the shareholders must be obtained in advance when NASDAQ
listed corporations newly issue shares that exceed 20% of outstanding shares or
newly issue shares that exceed 5% of outstanding shares to a “related party”
(related party: usually refers to the directors, executives, or large
shareholders of the company). However, when the NASDAQ listed corporation is a
foreign private issuer, the corporation may choose to have the laws or
regulations of its home country apply in the place of the NASDAQ Rules. As
Webzen has decided to follow the relevant Korean laws, it is conducting the
shareholder approval process related this merger in accordance with the relevant
Korean laws.
(3)
Relisting Requirements in under NASDAQ “Backdoor Listing” Rule
Under NASDAQ Rule
5110(a), a NASDAQ listed corporation must apply for initial listing in
connection with a transaction whereby the NASDAQ listed corporation combines
with a non- NASDAQ entity, resulting in a change of control of the NASDAQ listed
corporation and potentially allowing the non- NASDAQ entity to obtain a NASDAQ
listing. On May 14, 2010, NASDAQ issued a letter notifying the staff’s
conclusion that the merger would constitute a change of control under NASDAQ
Rule 5110(a). Webzen is evaluating its options and contemplating whether to
re-apply for initial listing.
(4)
Reporting Duties
(a)
Form 6-K
With regards to
this merger, Webzen plans to announce the merger through press releases,
disclosure material, shareholder guidebooks and other notices, both voluntarily
and as required by law.
As
a company registered with the SEC, Webzen is required to translate into English
materials that are disclosed domestically or information given to domestic
shareholders and promptly submit them to the SEC as attachments to Form 6-K, and
such contents will be announced to US investors immediately. The information
reported through Form 6-K is as follows.
-
Information already made public domestically or information required to be made
public by domestic regulations.
-
In case the company is listed on exchanges other than the NASDAQ, information
released or required to be released in accordance with the regulations of such
exchange.
-
Information provided to or required to be provided to shareholders and creditors
of Webzen
Unless information
is clearly not material, such information must be promptly disclosed in the US
through Form 6-K.
(b)
Scheduled 13(d) and 13 (g)
In accordance with
U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) articles
13(d) and 13(g), persons acquiring 5% or more of shares with voting rights of
companies registered with the SEC must report such acquisition to the SEC. Rule
13d-1(a) of the Exchange Act requires that the acquiring party submit Schedule
13D within 10 days of acquisition. As Webzen is a company registered with the
SEC, acquisitions of shares of Webzen are subject to articles 13(d) and 13(g) of
the Exchange Act.
NHN Games and the
founders of Webzen have been jointly submitting Schedule 13D. Pursuant to Rule
13d-2(a) of the Exchange Act, NHN Games and the founders of Webzen are required
to report any material changes to the facts set forth in the Schedule 13D by
filing an amendment to such Schedule 13D. Grounds for having to submit reports
of amendments include changes in the purpose or intent of stock ownership, or
the increase or reduction of beneficially owned shares in comparison to
outstanding shares (1% or more). As the purpose of share ownership by large
shareholders including NHN Games is changed due to the merger, an amendment to
Schedule 13D must be submitted to the SEC.
Also, large
shareholders of NHN Games, who will have ownership of 5% or more of outstanding
Webzen shares as of the date of completion of the merger, must submit the
relevant Schedule 13D to the SEC within 10 days.
Section
II. Merged Company : NHN Games Co., Ltd
1.
Company Outline
A.
Legal, Commercial Name of Company
The legal and
commercial name of the company is ‘
엔에이치엔게임스
주식회사
’ and its English name is
‘NHN Games Co., Ltd.’. In short it is written ‘NHN
게임스㈜
’ or ‘NHN
Games’.
B.
Date of Incorporation and whether it is a Small and Medium Business
NHN Games was
incorporated on October 26
th
, 2004,
for the purpose of developing computer games and software etc., and is currently
an unlisted corporation. As of the date of submission of this report, it is not
a small and medium business under Article 2 of the Fundamental Small and Medium
Business Act or Article 3 of its Enforcement Decree.
C.
Address of Headquarters, Telephone Number and Homepage
The address of
headquarters, telephone number, and homepage of NHN Games is as
follows:
|
-
|
Address:
13
th
Floor, Daerung Post Tower 2
nd
,
182-13 Guro-dong, Guro-gu, Seoul
|
|
-
|
Homepage:
www.nhngames.com
|
D.
Contents of Key Areas of Business
NHN Games’s main
areas of business consist of the development of online MMORPG’s such as R2,
Archlord, C9, the FPS game Battery, and the servicing of games through contracts
with publishing companies such as Hangame. Please refer to ‘
Ⅱ
. Contents of Business’ in
‘Part 2- Items on the Parties’ for details.
E.
Subsidiaries or Related Corporation
Important items on
subsidiaries or related corporations of NHN Games are as follows.
|
Company
name
|
Location
|
Size of
Holding by NHN Games
|
Size of
Holding in NHN Games
|
Area of
Business
|
Listing
|
|
NHN
Corporation
|
Korea
|
-
|
46.88%
|
Internet
portal etc.
|
Korean Stock
Exchange Listed Corporation
|
|
Webzen
Inc.
|
Korea
|
26.74%
|
-
|
Online game
service
|
KOSDAQ Listed
Corporation
|
2.
Company History
A.
Date of Incorporation: October 26
th
,
2004
B.
Location of Headquarters and Change of Address
|
Date of
Change
|
HQ
Location
|
Note
|
|
2004.10.26
|
Yeoksam-dong,
Gangnam-gu, Seoul
|
Incorporation
|
|
|
Bundang
Venture Town Jeongja-dong, Seongnam Si Bundang-gu,
Gyeonggi-Do
|
-
|
|
2006.03.24
|
9 I-Park
1
st
Bundang Jeongja-dong, Seongnam Si Bundang-gu, Gyeonggi-Do
|
-
|
|
2010.01.04
|
13F, Daerung
Post Tower 2
nd
,
182-13 Guro-dong, Guro-gu, Seoul
|
Current
|
C.
Important Changes in Management
This company has
experienced no change in representative director or a change of one-third or
more of its executives in the term subject to notice, and the changes in
executives since incorporation are as follows.
|
Date of
Change
|
Important
Changes in Management
|
Note
|
|
Appointment
|
Resignation
|
|
2004.10.26
|
Representative
Director Moon, Tae Sik
Director Kim,
Byung Gwan
Director Kim,
Bum Soo
Director Heo,
Hong
Auditor Lee,
Suk Woo
|
|
Incorporation
|
|
2005.09.12
|
Representative
Director Kim, Byung Gwan
|
Representative
Director Moon, Tae Sik
|
Change of
Representative Director
|
|
2006.03.31
|
Director
Chun, Yang Hyeon
|
Director Kim,
Bum Soo
Director
Moon, Tae Sik
|
|
|
2007.03.28
|
Director Kim,
Chang Geun
Director Heo,
Hong
|
|
|
|
2008.11.28
|
Director
Hwang, In Jun
Director Kim,
Jung Ho
Auditor Kim,
Hyun Sung
|
Director Kim,
Chang Geun
Director Heo,
Hong
Auditor Lee,
Suk Woo
|
|
|
2010.03.26
|
Director
Jung, Wook
|
Director Kim,
Jung Ho
|
|
D.
Change of Largest shareholder
The largest
shareholder of NHN Games is NHN Corporation, and there has been no change in the
largest shareholder during the period subject to disclosure.
E.
Change of Company Name
There has been no
change of company name.
F.
Other Important Items Related to Management Activities
NHN Games acquired
1,324,000 registered common shares of Webzen, per resolution of the board of
directors in June 2008, purchased 70,216 shares in the market, and acquired
1,686,349 shares in September 2008, per resolution of the board of directors to
become the largest shareholder of Webzen. Then in June 2009, it acquired 389,219
shares from the previous largest shareholder of Webzen and 2 other persons to
own a total of 3,469,784 (26.74% of issued shares) shares.
3.
Changes in Capital
(unit: share,
KRW)
|
Date of Share
Issue
|
Issue(reduction)
Format
|
Contents of
Shares Issued
|
|
Type
|
Number
|
Face Value
per Share
|
Issue Value
per Share
|
Note
|
|
2004.10.26
|
-
|
Common
share
|
400,000
|
50,000
|
50,000
|
Incorporation
|
|
2005.04.13
|
Paid-in
Capital Increase
|
Common
share
|
200,000
|
5,000
|
50,000
|
|
|
2006.02.21
|
Paid-in
Capital Increase
|
Common
share
|
276,923
|
5,000
|
5,000
|
|
|
2006.07.21
|
Paid-in
Capital Increase
|
Common
share
|
46,155
|
5,000
|
5,000
|
|
|
2007.06.05
|
Paid-in
Capital Increase
|
Common
share
|
356,922
|
5,000
|
7,000
|
|
|
2009.01.14
|
Stock
Split
|
Common
share
|
11,520,000
|
500
|
-
|
Stock
Split
|
B. Stock Related
Bond Issue Status
NHN Games issued
first and second rounds of convertible bonds on October 22, 2008. 12.5 billion
KRW were issued in each round to give a total of 25 billion KRW. The redemptions
for the second round of convertible bonds were made early in April and August of
2008 following the exercise of early redemption request rights by this company.
The first round of convertible bonds are currently sustained with details as
follows.
(unit: 1,000
KRW)
|
Item
|
Acceptor
|
Issue
Date
Expiration
Date
|
Face Interest
Rate
Guaranteed
Profit Rate
|
This
Term
(Fiscal year
2009)
|
Previous
Term
(Fiscal year
2008)
|
|
1
st
round of Convertible Bond
|
NHN
Corporation
|
2008.10.22
2013.10.21
|
0.00%
7.71%
|
12,500,000
|
12,500,000
|
|
Redemption
Premium
|
5,625,000
|
5,625,000
|
|
Conversion
Rights Adjustment
|
(6,079,032)
|
(7,600,320)
|
|
Subtotal
|
12,045,968
|
10,524,680
|
|
2
nd
round of Convertible Bond
|
NHN
Corporation
|
2008.10.22
2013.10.21
|
0.00%
7.71%
|
-
|
12,500,000
|
|
Redemption
Premium
|
-
|
5,625,000
|
|
Conversion
Rights Adjustment
|
-
|
(7,600,320)
|
|
Subtotal
|
-
|
10,524,680
|
|
Total
|
12,045,968
|
21,049,360
|
|
Contents
|
1
st
Convertible Bonds
|
2
nd
Convertible Bonds
|
|
Interest
Payment Date (redemption method)
|
Pay 145% of
unconverted bonds at once on the expiration date
|
|
Conversion
Request Term
|
22 JAN 2009 ~
20 OCT 2013
|
|
Type of
Shares to be Issued upon Conversion
|
Registered
Common Shares
|
|
Number of
Shares to be Issued upon Conversion(*)
|
140,355
shares
|
140,355
shares
|
|
Conversion
Price(*)
|
89,060
KRW
|
89,060
KRW
|
|
Early
redemption rights of debenture holder
|
When request
is made by debenture holder between 3 years after the issue
date and before the expiration date, redemption is made applying simple
interest rate of 9% per annum
|
When request
is made by debenture holder between 3 months and 1 year after the issue
date or between 3 years after the issue date and before the
expiration date, redemption is made applying simple interest rate of 9%
per annum
|
|
Early
redemption rights of issuing company
|
-
|
When request
is made by issuing company between 3 months and 1 year after the issue
date, redemption is made with applying simple interest rate of 9% per
annum
|
(*) Conversion
Price Adjustment
|
Conditions
|
Conversion
Price Adjustment
|
|
Occurrence of
shares below conversion price etc.
|
{issued
shares x (newly issued shares x issue value per share/previous conversion
price)}/(issued shares + newly issued shares)
|
|
Merger,
reduction of capital, capital increase without consideration
etc.
|
Adjust
conversion price so that same effects as before the occurrence of
condition can be achieved
|
|
When IPO
price is below conversion price upon IPO(Indirect Listing
included)
|
100% of IPO
price
|
(*) The number of
issued shares and conversion prices are as of before the share split(face value
5,000 KRW). This company conducted a share split of 1 share into 10 shares(face
value of 5,000 KRW to 500 KRW) on January 14
th
, 2009.
As such, the number of shares to be issued upon conversion is changed from
140,355 to 1,403,550 and the conversion price changes from 89,060 KRW to 8,906
KRW.
4.
Total Number of Shares Etc.
A. Total Number of
Shares
The total number of
shares to be issued as per the Articles of Incorporation of this company is
30,000,000, and the total number of issued shares is 12,800,000. This company
has not issued any stocks such as preferred shares etc. besides Common
Shares.
[As of: December
31
st
,
2009] (unit:
share)
|
Category
|
Type of
Share
|
Note
|
|
Common
Share
|
Preferred
Share
|
Total
|
|
1. Total
number of shares to be issued
|
30,000,000
|
-
|
30,000,000
|
|
|
2. Shares
issued as of now
|
12,800,000
|
-
|
12,800,000
|
|
|
3. Number of
shares reduced until now
|
-
|
-
|
-
|
|
|
4. Total
issued shares
|
12,800,000
|
-
|
12,800,000
|
|
|
5. Owner’s
shares
|
-
|
-
|
-
|
|
|
6. Circulated
shares
|
12,800,000
|
-
|
12,800,000
|
|
B.
Owner’s Share Status
This company has no
treasury shares.
5.
Status of Voting Rights
[As of: December
31
st
,
2009] (unit:
share)
|
Category
|
Shares
|
Note
|
|
Total Issued
Shares(A)
|
Common
Shares
|
12,800,000
|
-
|
|
Preferred
Shares
|
-
|
-
|
|
Shares
Without Voting Rights(B)
|
Common
Shares
|
-
|
-
|
|
Preferred
Shares
|
-
|
-
|
|
Other Shares
Voting Rights of which are Limited by Law(C)
|
Common
Shares
|
-
|
-
|
|
Preferred
Shares
|
-
|
-
|
|
Shares with
Voting Rights Revived(D)
|
Common
Shares
|
-
|
-
|
|
Preferred
Shares
|
-
|
-
|
|
Total Number
of Shares with Voting Rights (E=A-B-C+D)
|
Common
Shares
|
12,800,000
|
-
|
|
Preferred
Shares
|
-
|
-
|
6.
Items on Dividends
A. Items on
Dividends
Matters regarding
dividends as per the Articles of Incorporation of this company are as
follows.
|
Article 49
(Disposal of Profits)
The
appropriated retained earnings of each fiscal year are disposed of as
follows.
1. Earned
surplus reserve.
2. Other
legal reserves.
3.
Dividends.
4. Voluntary
reserves.
5. Other
retained earnings disposals.
Article 50
(Dividend)
①
Dividend can be paid
in cash and shares.
②
When the company has
issued multiple types of shares and dividends are paid out in shares, the
general assembly of shareholders can make payments in other types of
shares by resolution.
③
The dividends of
paragraph 1 are paid to shareholders listed in the shareholder’s list as
of the end of each settlement term and registered pledgees.
Article 51
(Extinctive Prescription of Dividend Payment Request Rights)
①
Dividend payment
request rights are become extinct if not exercised for 5
years.
②
Dividends left by the
extinction stipulated in paragraph 1 are retained by this
company.
|
B.
Dividends of Past 3 Fiscal years
There have been no
dividends of this company for the past 3 fiscal years.
|
Item
|
Term
6
|
Term
5
|
Term
4
|
|
Face Value
per Share(KRW)
|
500
|
5,000
|
5,000
|
|
Net Profit
for Term (million KRW)
|
6,971
|
3,609
|
3,373
|
|
Net Profit
per Share(KRW)
|
545
|
2,819
|
2,635
|
|
Total Cash
Dividends(million KRW)
|
-
|
-
|
-
|
|
Cash Dividend
Ratio(%)
|
-
|
-
|
-
|
|
Cash Dividend
Profit Rate(%)
|
Common
Share
|
-
|
-
|
-
|
|
Preferred
Share
|
-
|
-
|
-
|
|
Share
Dividend Profit Rate(%)
|
Common
Share
|
-
|
-
|
-
|
|
Preferred
Share
|
-
|
-
|
-
|
|
Cash Dividend
per Share(KRW)
|
Common
Share
|
-
|
-
|
-
|
|
Preferred
Share
|
-
|
-
|
-
|
|
Share
Dividend per Share(share)
|
Common
Share
|
-
|
-
|
-
|
|
Preferred
Share
|
-
|
-
|
-
|
II.
Contents of
Business
1.
Business Outline
A.
Industry Status
Developing IT
technology has caused the game industry to grow rapidly, and the domestic online
game market is growing at a greater rate compared to the arcade game or video
game market. Although the growth rate of domestic online game users is slowing
down, higher participation by older clients with purchasing power is leading to
the qualitative increase of paid usage and ARPU etc., which will lead to stable
and constant growth in the future.
According to the
Game White Paper, the success of blockbuster MMORPG’s and increased M&A’s
between companies are causing the online game corporation to build up their
size, leading to increased competitiveness and increase in expansion into
overseas markets, which will help the online game market to grow
constantly.
As online game
infrastructure expands worldwide, the online game market, which possessed
strengths such as accessibility and relatively low price, is growing
exponentially. Initially, exports were focused on Japan, China, and Taiwan etc.,
but recently exports have expanded to include the USA and Europe etc., allowing
domestic corporations to lead the world online gaming market. As large
investments and long development periods are required for game services and the
probability of success for new games decreases, it is expected that domestic
online games will have the upper hand in the world online game market and
maintain their growth rate for now.
B.
Company Status
(1)
Operation Overview
This company
specializes in the development of online games and services through contracts
with domestic and foreign publishers. 3 MMORPG’s are currently being serviced
with 1 FPS game completing closed beta testing and preparing for official
service.
(2)
Market Share
Market shares of
the online game market are difficult to calculate due to the lack of objective
data or statistics.
2.
Main Products Etc.
The main products
of this company are MMORPG’s such as Archlord released in 2005, R2
commercialized in October 2006, and C9 released in September 2009. Also, the FPS
game Battery has completed its closed beta testing in March 2010, and is
scheduled to begin official service soon.
(unit: KRW,
%)
|
Sales
Type
|
Game
name
|
Sales
|
Rate
|
|
Online
Game
|
Archlord
|
5,957,179,698
|
23.55%
|
|
R2
|
16,138,695,620
|
63.79%
|
|
C9
|
1,740,289,385
|
6.88%
|
|
Other
|
1,463,000,000
|
5.78%
|
|
Total
|
25,299,164,702
|
100.00%
|
3.
Items on Production and Equipment
Not
applicable.
4.
Items on Sales
A.
Sales Achievements
(unit:
KRW)
|
Area of
Business
|
Sales
Type
|
Product
|
|
Term
6
(2009)
|
Term
5
(2008)
|
Term
4
(2007)
|
|
Game
Business
|
Online
Game
|
Archlord
|
Domestic
|
3,050,287,101
|
3,503,759,972
|
1,752,67,867
|
|
Overseas
|
2,906,892,597
|
3,395,022,488
|
1,817,168,796
|
|
Total
|
5,957,179,698
|
6,898,782,460
|
3,569,839,663
|
|
R2
|
Domestic
|
13,835,241,544
|
16,046,366,176
|
7,460,959,312
|
|
Overseas
|
2,303,454,076
|
991,585,190
|
43,538,456
|
|
Total
|
16,138,695,620
|
17,037,951,366
|
7,504,497,768
|
|
C9
|
Domestic
|
1,740,289,385
|
|
|
|
Overseas
|
|
|
|
|
Total
|
1,740,289,385
|
-
|
-
|
|
Other
|
Domestic
|
1,463,000,000
|
379,630,546
|
967,967,232
|
|
Overseas
|
|
|
|
|
Total
|
1,463,000,000
|
379,630,546
|
967,967,232
|
|
Total
|
Domestic
|
20,088,818,030
|
19,929,756,694
|
10,181,597,411
|
|
Overseas
|
5,210,346,672
|
4,386,607,678
|
1,860,707,252
|
|
Total
|
25,299,164,702
|
24,316,364,372
|
12,042,304,663
|
B.
Sales Route and Sales Method Etc.
(1)
Sales Organization
There is no
separate sales organization as sales are made through contracted publishing
companies.
(2)
Sales Route
Products are
provided through the sites of companies with publishing contracts (publishers).
Domestically, products are provided through Hangame (hangame.com) and Webzen
(
www.webzen.co.kr
),
and overseas products are provided through the sites of local
companies.
(3)
Sales Method and Conditions
Products are sold
per method and conditions determined by the publisher and conferred upon with
this company.
5.
Order Status
[not
applicable]
6.
Items on Derivatives Etc.
Over the course of
acquiring Webzen shares, which are classified as investment shares under equity
method, appraisal rights allowing the largest shareholder of Webzen and 2 other
people to request the company to purchase their shares at a certain price were
recognized.
The company
classifies these appraisal rights as derivatives which fall under sales purpose
transactions for accounting purposes, and the derivative evaluation profits
(non-operative revenues) occurring with regards to derivative transactions in
2009 was 4,883 million KRW. Partial appraisal rights were exercised in 2009 to
reduce derivative debt by 5,203 million KRW, and as of the end of 2009, 4,442
million KRW in derivative debts are appropriated as non-liquid
debts.
7.
Important Operational Contracts Etc.
[not
applicable]
8.
Research and Development (R&D) Activity
A.
Outline of R&D Activity
(1)
R&D Organization
-
Name: NHN Games Affiliated Research Lab(founded in June, 2008)
-
Researchers: 109 (1 director, 108 researchers)
-
[Research Tasks]
1.
High performance shadow algorithm development and formation
2.
Study on the optimization of physical engines and connection with game
play.
3.
Study on the network synchronization technologies of online games
B.
R&D Achievements
1.
C9: Development of engine related to data information, character action, and
object movement.
Development of
artificial intelligence script engine for processing monster actions and action
combat etc.
2.
Battery: Development of server database connection module, direct x 9.0 Shader,
client optimization and map optimization etc.
3.
Bacchus: Development of PC model structure prototype etc.
9.
Other Items Relevant to Investment Decisions
A.
External Fund Appropriation Summary
(unit: 1,000
KRW)
|
Source
|
Base
|
New
Appropriation
|
Repayment and
other Reductions
|
End of Term
Balance
|
Note
|
|
Bank
|
-
|
15,000,000
|
-
|
15,000,000
|
|
|
Insurance
Company
|
-
|
-
|
-
|
-
|
|
|
Merchant
Bank
|
-
|
-
|
-
|
-
|
|
|
Other
Financial Institutions
|
1,000,000
|
-
|
1,000,000
|
-
|
|
|
Financial
Institution Total
|
1,000,000
|
15,000,000
|
1,000,000
|
15,000000
|
|
|
Company
Stock(public issue)
|
-
|
-
|
-
|
-
|
|
|
Company
Stock(private issue)
|
-
|
-
|
-
|
-
|
|
|
Paid-in
Capital Increase(public issue)
|
-
|
-
|
-
|
-
|
|
|
Paid-in
Capital Increase(private issue)
|
-
|
-
|
-
|
-
|
|
|
Asset
Liquidation (public issue)
|
-
|
-
|
-
|
-
|
|
|
Asset
Liquidation (private issue)
|
-
|
-
|
-
|
-
|
|
|
Other
Financial Institutions
|
-
|
-
|
-
|
-
|
|
|
Capital
Market Total
|
-
|
-
|
-
|
-
|
|
|
Loans of
Shareholder Executives and Subsidiaries
|
4,500,000
|
-
|
4,500,000
|
-
|
|
|
Other
|
-
|
-
|
-
|
-
|
|
|
Total
|
5,500,000
|
15,000,000
|
5,500,000
|
15,000,000
|
|
B.
Credit Rating for Past 3 Years
[not
applicable]
C.
Other Important Items
[not
applicable]
III
. Financial
Items
1.
Financial Information Overview
(unit: million
KRW)
|
Fiscal
year
|
Term
6
(2009)
|
Term
5
(2008)
|
Term
4
(2007)
|
Term
3
(2006)
|
Term
2
(2005)
|
|
[Liquid
Assets]
|
5,444
|
3,247
|
6,053
|
7,479
|
5,397
|
|
-Quick
Assets
|
5,444
|
3,247
|
6,053
|
7,479
|
5,397
|
|
-
Inventories
|
-
|
-
|
-
|
-
|
-
|
|
[Non-liquid
Assets]
|
56,787
|
57,915
|
6,933
|
4,193
|
4,104
|
|
-Investment
Assets
|
54,142
|
55,962
|
5,919
|
2,070
|
22
|
|
-Tangible
Assets
|
329
|
340
|
335
|
440
|
695
|
|
- Intangible
Assets
|
782
|
272
|
269
|
1,684
|
3,387
|
|
- Other
non-liquid assets
|
1,534
|
1,341
|
410
|
-
|
-
|
|
Total
Assets
|
62,231
|
61,162
|
12,987
|
11,672
|
9,501
|
|
[Liquid
Debt]
|
20,649
|
11,995
|
4,993
|
9,409
|
3,501
|
|
[Non-liquid
Debt]
|
18,957
|
37,792
|
1,597
|
2,614
|
2,920
|
|
Total
Debt
|
39,606
|
49,788
|
6,589
|
12,022
|
6,421
|
|
[Capital]
|
6,400
|
6,400
|
6,400
|
4,615
|
3,000
|
|
[Capital
Surplus]
|
7,027
|
4,949
|
1,493
|
806
|
8,985
|
|
[Capital
Adjustment]
|
724
|
388
|
33
|
80
|
-
|
|
[Other
Overall Profit and Loss Total]
|
372
|
(1,494)
|
949
|
-
|
-
|
|
[Profit
Surplus]
|
8,103
|
1,132
|
-2,477
|
(5,850)
|
(8,904)
|
|
Total
Assets
|
22,625
|
11,374
|
6,397
|
(350)
|
3,081
|
|
Sales
|
25,299
|
24,316
|
12,042
|
4,095
|
3,430
|
|
Operating
Profit(Operating Loss)
|
12,473
|
14,492
|
3,547
|
(5,202)
|
(7,173)
|
|
Net
Profit(Loss) for Term
|
6,971
|
3,609
|
3,373
|
(5,100)
|
(7,775)
|
|
Net
Profit(Loss) per Basic Share(KRW)
|
545
|
2,819
|
2,635
|
(5,525)
|
12,958
|
2.
Summary of Consolidated Financial Information
This company has
nothing applicable in this category as of the date of submission of this stock
report.
3.
Points of Caution in Using Financial Information
The financial
statements of this company appropriately display the financial status of NHN
Games, as of December 31
st
, 2009,
the operational results of the fiscal year ending the same day, profit surplus,
capital change, and cash flow in accordance with their relative importance as
well as the generally acknowledged accounting standards of Korea.
As a matter that
does not affect the auditor’s opinion, the sales ratio of the special interest
party NHN Corporation of this company is 69.7% of the total sales as explained
in footnote 21. As such, the operation of this company is heavily reliant on
said company, and the financial statements are drafted under the assumption that
such a relationship will continue in the near future.
4.
Financial Statement Drafting Standards Employed by this Company
This company drafts
financial statements in accordance with the generally acknowledged accounting
standards of Korea, and applied the same accounting policies which was applied
to the financial statements of the previous term.
(1)
Recognition of Earnings
This company
assesses earnings through the prices of the funds received or to be received in
exchange for the sales of products, provision of services, or usage of capitals
and value added tax, sales overcharge, discounts, and refunds are excluded from
earnings. The earnings of this company can be assessed reliably, and earnings
are recognized when there is a high probability of realizing related beneficial
financial effects.
Earnings from game
sales are recognized at the time internet service is commenced, and in the case
of copyright revenue such as royalty earnings and license earnings, the earnings
are recognized as per the revenue occurrence standards of the relevant
contracts.
(2)
Cash and Cash Like Assets
This company
considers currency, currency equivalents such as personal checks, checking
accounts, normal accounts, and financial products that can be easily transferred
into cash, are not significantly affected by changes in value due to changes in
interest rates, and have an expiration date of 3 months or less from the date of
acquisition as cash and cash like assets.
(3)
Allowance for Bad Debts
With respect to the
sales debentures and other debentures as of the end of the reporting term, this
company has allotted allowance for bad debts calculated reasonably and
objectively.
(4)
Valuation of Securities
The costs of
securities are calculated using the moving average, and in the case of equity
securities and debt securities, this company categorizes them into short term
sales securities, sellable securities, and held-to-maturity securities according
to the purpose of acquisition and holding.
Held-to-maturity
shares are valuated at amortized costs, and short term sales securities and
sellable securities are valuated at fair value. However, in the case of
non-marketable equity securities the fair value of which cannot be reliably
determined, valuation is done using the acquisition cost.
Valuation profit
and loss of short term sales securities are recognized as profit and loss of the
given term, and valuation profit and loss of sellable shares as other overall
profit and loss totals and reflected in the profit and loss of the given term
when the sellable shares are disposed of or when write-offs are
recognized.
(5)
Valuation of Securities under Equity Method
Securities under
Equity Method which can have great influence on the company being invested in
are processed by adjusting for the actual value changes that occur after
acquisition. The changes are processed as profit and loss for the term (profit
and loss under equity method) when changes are caused by the net profit and loss
of the company being invested in, changes in undivided surplus of the previous
term when caused by changes in the undivided surplus of the previous term due to
serious errors or changes in accounting policies, and changes in the other
overall profit and loss total (capital change under equity method) when caused
by changes in capital other than the aforementioned cases.
Also, when the
company invested in is a subsidiary, accounting is conducted so that the net
profit and loss for the term and net capital of the individual financial
statements of the mother company coincide with the same shares of the mother
company in the same items of consolidated financial statements, except when the
equity method is no longer applied because the balance of the investment account
becomes zero.
(6)
Valuation of Tangible Assets and Depreciation
Acquisition costs
of tangible assets are comprised of purchasing costs or production costs and
costs directly related to preparing the assets for usage. When costs expected to
be spent on returning the assets to their original state by removing or
disassembling said asset or restoring a site after the fiscal usage of a
tangible asset is terminated satisfy the conditions for recognition as
appropriation liabilities, the current value of such costs are also included in
acquisition costs.
This company
displays tangible asset values as acquisition costs minus the accumulated amount
of depreciation calculated using the estimated depreciable life and depreciation
methods specified below.
|
Item
|
Estimated
Depreciable life
|
Depreciation
Method
|
|
Machinery
|
5
yrs
|
Straight Line
Method
|
|
Equipment
|
4
yrs
|
Straight Line
Method
|
|
Facilities
|
5
yrs
|
Straight Line
Method
|
When the costs of
acquisition or after completion costs of tangible assets are in excess of the
most recently evaluated function levels and enhance future financial
profitability, those costs are regarded as capital costs, and, if not they are
regarded as costs for the term they are accrued in.
Also, if the future
financial values of tangible assets may become significantly lower than the book
amount due to their becoming obsolete or drastic drops in market value, they are
reviewed for write-offs to adjust the book values to fit the returnable value
and the difference is written off. However, when the returnable value of the
assets after considering write-offs exceeds the book value in the following
terms, the book value after depreciation of the asset before considering
write-offs is set as the limit and the amounts exceeding said limit are
considered write-off refunds.
(7)
Valuation and Depreciation of Intangible Assets
Acquisition costs
of intangible assets are comprised of purchasing costs and costs directly
related to preparing the assets for usage. This company displays intangible
asset values as acquisition costs minus the amount of depreciation calculated
using the estimated depreciable life and depreciation methods specified
below.
|
Item
|
Estimated
Depreciable life
|
Depreciation
Method
|
|
Industrial
Property
|
5
yrs
|
Straight Line
Method
|
|
Software
|
5
yrs
|
Straight Line
Method
|
(8)
Write-Off of Assets
Also, if the future
financial values of tangible assets may become significantly lower than the book
amount due to their becoming obsolete or drastic drops in market value, they are
reviewed for write-offs to adjust the book values to fit the returnable value
and the difference is written off. However, when the returnable value of the
assets after considering write-offs exceeds the book value in the following
terms, the book value after depreciation of the asset before considering write
offs is set as the limit and the amounts exceeding said limit are considered
write-off refunds.
(9)
Derivatives
This company
evaluates rights and liabilities accrued according to derivative contracts at
fair value and appropriates them as assets and debt, and the profit and loss
occurring from said contracts are recognized as profits and losses of the term
upon occurrence. However, when hedging is the purpose, assets
‧
debts caused by certain
risks and valuation profit and loss occurring from contracts to hedge risks from
fair value changes are treated as profits and losses for that term, and
valuation losses and profits occurring from contracts to hedge cash flow change
risks of future transactions are treated as other overall profit and loss
totals.
(10)
Corporate Tax Costs and Deferred Corporate Tax
Corporate tax costs
are appropriated by adjusting the corporate tax burden as per the Corporate Tax
Act and other laws for deferred corporate tax changes. Of the temporary
differences which are the differences between tax values and book values of
assets
‧
debts, corporate
tax effects on temporary differences that will increase the future taxable
income are all considered deferred corporate tax debt, unless they fall under
the exceptions. Corporate tax effects on temporary differences that reduce
future taxable income and should be deducted and deficits etc., are considered
deferred corporate tax assets when the occurrence of taxable income in the
future is nearly certain and corporate tax deductions are expected to happen.
Also, corporate tax and deferred corporate tax related to items directly
adjusted in the capital accounts are directly added or subtracted from said
capital accounts.
(11)
Retirement Appropriation Debts
This company
implemented the retirement pension system in 2008. The retirement pension system
of this company is a defined benefit retirement pension system in which
employees who meet the pension requirements receive defined pensions upon
retirement. Before employees retire, the retirement funds that need to be paid
at once if the employee were to retire at the end of the reported term are
appropriated as retirement appropriation debts. When retiring employees whom
satisfy the term requirement choose to receive retirement pension, the expected
amount of the retirement pension to be paid to said employee after the date of
reporting is calculated using actuarial assumptions and the current value
discounted based on current market interest rate of similar public bonds at the
date of reporting is appropriated as unpaid retirement pensions funds. Also,
when actuarial assumptions such as mortality rates change or the passing of time
leads to increased current values, such changes are treated as retirement
benefits.
The assets operated
by the retirement pension system are put under the item of retirement pension
operation assets and written in the form of deducting from retirement related
debts, i.e., retirement appropriation and unpaid retirement pension funds.
However, when the retirement pension operation funds exceed the total of
retirement allowance related debts, said amount is processed as investment
funds.
(12)
Convertible Bonds and Conversion Prices
This company
appropriates the conversion prices calculated by deducting the current value
with the effective interest rate of normal bonds applied from the issuing value
of convertible bonds as capital surplus. Conversion rights adjustments are
deducted from the face value of convertible bonds and redemption premiums are
added to the value of convertible bonds.
(13)
Conversion of Foreign Currency Assets and Debts
This company
converts the currency like foreign currency assets and debts using the
appropriate exchange rates as of the end of the reporting term and the foreign
currency exchange profits and losses are processed as profits and loss for the
period in question.
(14)
Stock Options
This company offers
shares or stock options to executives, employees, and other transaction
partners, and in the case of share based payment transactions, the fair values
of the materials or services being provided are treated as compensation costs
and capital(capital adjustment) for accounting purposes. However, if the fair
value of the materials or services being provided cannot be reliably evaluated,
the fair values of materials or services are indirectly evaluated based on the
given fair value of equity products and then treated as compensation costs and
capital(capital adjustment). When the fair value as of the date of evaluation
cannot be reliably evaluated because the conditions of the given equity product
are too complicated, intrinsic values are calculated and estimated values are
changed to meet the ultimately acquired number of equity products. In the case
of cash based payment transactions, compensation costs and debts are recognized
by evaluating the materials or services being provided and the debts incurred
with regards thereto, and the fair value of the debts are reevaluated at the end
of each reporting term and final payment date to conduct accounting of the
changes in fair values as compensation costs. In cases of selective payment
transactions in which this company or other parties can choose between cash
payment or stock payment transactions, accounting is done in accordance with the
actual facts of the transactions.
5.
When Rewriting Financial Statements, the Reason for Rewriting, Contents and
Impacts on Financial Statements
- Not applicable as
of the date of submission of the stock report.
IV
.
Audit Opinion of the Auditor Etc.
1.
Items on the Auditor
The auditing of
this company was conducted by Samil PWC for terms 4 and 5 and by KPMG for term
6.
2.
Audit Opinion
|
Fiscal
year
|
Auditor
|
Audit(or
review) Opinion
|
|
2007
|
Samil
PWC
|
Appropriate
|
|
2008
|
Samil
PWC
|
Appropriate
|
|
2009
|
KPMG
|
Appropriate
|
3.
Status of Audit Service Contracts of Auditor
(unit: 1,000
KRW)
|
Fiscal
year
|
Auditor
|
Contents
|
Payment
|
Total Hours
Spent
|
|
2007
|
Samil
PWC
|
Audit of
financial statements etc.
|
13,000
|
|
|
2008
|
Samil
PWC
|
Audit of
financial statements etc.
|
15,000
|
|
|
2009
|
KPMG
|
Audit of
financial statements etc.
|
15,000
|
|
4.
Non Audit Service Contracts with External Auditors
[Not
applicable]
Ⅴ
. Items Regarding
Institutions of the Company Such as Board of Directors and
Subsidiaries
1.
Items of the Board of Directors
A.
Outline of Board of Directors Composition
As of the date of
submission of the stock report, the board of directors is made up of 3
directors.
B.
Important Resolutions Etc.
|
Session
|
Date
|
Contents of
Resolution
|
Resolved
(Y/N)
|
Note
|
|
2009 first
meeting
|
2009.03.11
|
Partial
amendment to articles of incorporation (alterations due to the enactment
of the Financial Investment Services and Capital Markets
Act)
|
Resolved
|
-
|
|
2009 fifth
meeting
|
2009.12.21
|
Transfer of
HQ
|
Resolved
|
-
|
C.
Independence of Directors
The board of
directors consists of representative director Kim, Byung Gwan and 2 other
directors. Important decisions and operational processes regarding corporate
management are conducted through the deliberation and decision by the board of
directors.
|
Name
|
Title
|
Recommended
by
|
Field
|
Transactions
with Company
|
Relationship
with Largest shareholder
|
|
Kim, Byung
Gwan
|
Representative
Director
|
Board of
Directors
|
Representative
Director
|
None
|
|
|
Hwang, In
Jun
|
Director
|
Board of
Directors
|
Finance
|
None
|
Executive
|
|
Jung,
Wook
|
Director
|
Board of
Directors
|
Game
|
None
|
Executive
|
2.
Items on Audit Policy
A.
Personal Data on Auditor
|
Name
|
Date of
Birth
|
Experience
|
Date of
Appointment
/
Termination
|
|
Kim, Hyun
Sung
|
1971.12.07
|
- Masters in
law from Seoul University
- NHN
managing director
|
2008.11.28
/
2011.11.27
|
B.
Independence of Auditor
The auditor audits
the operations and accounting of the company and conducts his duties from a
position independent from the board of directors and other departments. The
auditor may request the relevant departments to submit the relevant books and
documents needed to conduct his job. Also, the auditor can receive reports on
the operations of the company when needed and can access corporate information
through appropriate channels.
C.
Important Activities of the Auditor
[Not
applicable]
3.
Items on the Exercising of Voting Rights of Shareholders
A.
Items on the Exercising of Voting Rights of Shareholders
The implementation
of the concentrated, written, and electronic voting systems in the articles of
incorporation do not apply to this company.
B.
Exercising of Small Shareholders
The rights of small
shareholders were not exercised during the term subject to report. This company
has no competition for management rights during the term subject to
report.
4.
Status of Subsidiaries Etc.
A.
Items on the Exercising of Voting Rights of Shareholders
The implementation
of the concentrated, written, and electronic voting systems in the articles of
incorporation do not apply to this company.
B.
Exercising of Small Shareholders
The rights of small
shareholders were not exercised during the term subject to report. This company
has no competition for management rights during the term subject to
report.
C.
Status of Holding Concurrent Offices in Company and Subsidiaries
|
Name
|
Title in this
Company
|
Concurrent
Office
|
|
Company
Name
|
Title
|
|
Kim, Byung
Gwan
|
Representative
Director
|
Webzen
Inc.
|
Registered
Director
|
|
Hwang, In
Jun
|
Director
|
NHN
Corporation
|
CFO
|
|
Jung,
Wook
|
Director
|
NHN
Corporation
|
Acting
Hangame Representative
|
C.
Investment in other Corporations
(1) Securities
under Equity Method
|
Company
Name
|
Purpose of
Investment
|
Base
Balance
|
Increase(Decrease)
|
End of Term
Balance
|
Financial
Status for Recent Fiscal year
|
|
Acquisition
(disposal)
|
Valuation
Profit and
Loss
|
|
No. of
Shares
|
Share
Percentage
|
Book
Value
|
No. of
Shares
|
Amount
|
Number of
Shares
|
Share
Percentage
|
Book
Value
|
Total
Assets
|
Net Profit for
Term
|
|
Webzen
Inc.
|
Game
development and service
|
3,080,565
|
23.74
|
53,044
|
389,219
|
6,811
|
-
|
3,469,784
|
26.74
|
51,994
|
132,248
|
318
|
|
Total
|
3,080,565
|
23.74
|
53,044
|
389,219
|
6,811
|
-
|
3,469,784
|
26.74
|
51,994
|
132,248
|
318
|
The company
acquired an additional 389,219 shares from the previous largest shareholder of
Webzen and 2 others on June 19
th
,
2009.
(Refer to the
related announcements of the 2009.06.19 large share situation report of stocks
and report on the ownership of certain stocks by executives and important
shareholders.)
VI.
Items on
Shareholders
1.
Share Ownership of Largest shareholder and Special Interest Holders
A.
Name and relationship to largest shareholder of special interest
holders
As of the date of
submission of this report, the largest shareholder of this company, NHN
Corporation, holds a total of 46.88% of our shares. Also, the largest
shareholder etc., a term to include one special interest holder of the largest
shareholder, owns 93.59% of this company’s shares.
B.
Number and types of shares, share percentage, changes, and cause of changes of
shares owned by largest shareholder and special interest holder
(unit: share,
%)
|
Name
|
Relationship
|
Type of
Share
|
No. of owned
shares and percentage at end of term
|
Cause of
Change
|
|
No. of
shares
|
Percentage
|
|
NHN
Corporation
|
Self
|
Common
Share
|
6,000,000
|
46.88%
|
|
|
Kim, Byung
Gwan
|
Special
Interest
|
Common
Share
|
5,978,450
|
46.71%
|
|
|
Total
|
Common
Share
|
|
11,978,450
|
93.59%
|
|
C.
Career of Largest shareholder, or Company History in Case Largest shareholder is
a Coroporation
All content related
to NHN Corporation was based on the data the company disclosed for the 4
th
quarter
of 2009.
- Important changes
to the company over the past 5 fiscal years are as follows.
|
Year
|
Contents
|
|
APR
2005
|
Change of
representative director(Independent representation by Kim, Bum Soo, Choi,
Hwee Young)
|
|
AUG
2005
|
Incorporation
of NHN USA Inc., to enter the US online game market (capital of 2 million
USD)
|
|
JAN
2007
|
Change of
representative director(Individual representation by Choi, Hwee
Young)
|
|
MAY
2007
|
Commencement
of official service by US game portal site(
www.ijji.com
)
|
|
JUN
2007
|
Transfer of
service of the game ‘Skidrush’ to Npluto Co., Ltd.
|
|
NOV
2007
|
Incorporation
of NAVER Japan Corp., for search engine service in Japan(capital of 0.1
billion JPY)
|
|
MAR
2008
|
Incorporation
of NHN Taiwan Corp., for market analysis and business project searching in
the China region (capital of 527,000 USD)
|
|
NOV
2008
|
Transfer of
listing to securities market (KOSDAQ listing nullified)
|
|
MAR
2009
|
Change of
representative director (Kim, Sang Hun)
|
|
MAY
2009
|
Split
incorporation of NHN Business Platform Co., Ltd., for efficient management
of the online advertising and infrastructure area (capital of 5 billion
KRW)
|
(1)
Location of Company HQ and Changes Thereto
The location of the
HQ of this company has been ’25-1, Bundang Venture Tower Jeongja-dong, Seongnam
Si Bundang-gu, Gyeonggi-Do’ since March 2006, till the present.
(2)
Important Changes in Management
The current
representative director of NHN is Kim, Sang Hun, who took office as per the
resolution of the board of directors after the previous representative director
Choi, Hween Young took office as representative director of NHN Business
Platform on March 30
th
,
2009.
(3)
Merger by the Company
(1)
Split
|
Item
|
Splitting
Company (Remaining Company)
|
New
Company
|
|
Name
|
NHN
Corporation
|
NHN Business
Platform Co., Ltd.
|
|
Date and
Purpose of Split
|
Date: May
1
st
,
2009
Purpose of
Split: Enhancement of online advertisement products, cost control, and
efficient management of assets
|
|
Method of
Split
|
Material
split
|
|
Area of
Business
|
All areas of
business save those transferred to new company
|
Sales/business
platform area, infrastructure area
|
|
Size of
Split
|
Approximately
2,800 persons
|
Approximately
600 persons
|
|
Listing(maintenance)
|
Listing
maintained
|
Unlisted
|
Note: Refer to
merger etc., completion report dated June 1
st
,
2009
(4) Director and
Auditor Status
(as of December
31
st
,
2009)
|
Class
|
Name
|
Title
|
Duty
|
Transaction
w/ Company
|
Note
|
|
Full-time
|
Lee, Hae
Jin
|
Chairperson,
Board of Directors
|
CSO
|
Owner of
2,235,283 Common Shares
|
-
|
|
Full-time
|
Kim, Sang
Hun
|
Representative
Director
|
CEO
|
Owner of
1,500 Common Shares
|
-
|
|
Full-time
|
Lee, Jun
Ho
|
Director
|
COO
|
Owner of
2,000,000 Common Shares
|
-
|
|
Full-time
|
Hwang, In
Jun
|
Director
|
CFO
|
Owner of 700
Common Shares
|
-
|
|
Full-time
|
Kim, Jung
Ho
|
Director
|
Game
Department Head
|
Owner of
200,000 Common Shares
|
-
|
|
Full-time
|
Choi, Hwee
Young
|
Director
|
CEO of NHN
Business Platform Co., Ltd.
|
Owner of
73,900 Common Shares
|
-
|
|
Outside
|
Boo, Gyung
Hoon
|
Outside
Director
|
Member of
Audit Committee
|
Owner of
3,320 Common Shares
|
-
|
|
Outside
|
Yoon, Jae
Seung
|
Outside
Director
|
Member of
Audit Committee
|
-
|
-
|
|
Outside
|
Kim, Gi
Sup
|
Outside
Director
|
Member of
Audit Committee
|
Owner of
4,000 Common Shares
|
Resigned
|
Note: Former
outside director and audit committee member Kim, Gi Sup resigned his office on
January 26
th
, 2010,
for personal reasons and Do, Hyun Soon, nominee for outside director and audit
committee member is expected to be appointed at the 11
th
general
assembly of shareholders.
(5) Large
Shareholder Status
As of: December
31
st
,
2009
|
Shareholder
Name
|
No. of Shares
Owned (shares)
|
Percentage(%)
|
Transactions
with Company
|
Note
|
|
Largest
shareholder Etc. (Lee, Hae Jin and others)
|
5,616,306
|
11.67
|
Owns 30,000
shares of stock options
|
-
|
|
NORGES BANK
KOREA etc.
|
3,473,794
|
7.22
|
-
|
-
|
|
Mirae Asset
Financial Group Co., Ltd.
|
3,190,300
|
6.63
|
-
|
-
|
|
National
Pension Funds
|
2,605,238
|
5.41
|
-
|
-
|
|
Lazard Asset
Management LLC etc.
|
2,549,259
|
5.30
|
-
|
-
|
|
NXC Co.,
Ltd.
|
2,038,222
|
4.24
|
-
|
-
|
(6) Operation
Results and Financial Status of Past 3 Years
1) Operation
Results
Condensed Income
Statement
Term 11: January 1,
2009 ~ December 31, 2009
Term 10: January 1,
2008 ~ December 31, 2008
Term 09: January 1,
2007 ~ December 31, 2007
(unit: million
KRW)
|
Item
|
Term
11
|
Term
10
|
Term
9
|
|
Ⅰ
.
Sales
|
1,237,111
|
1,208,127
|
920,209
|
|
Ⅱ
. Sales
Cost
|
525,151
|
520,142
|
333,667
|
|
Ⅲ
. Gross
margin
|
711,960
|
687,985
|
586,542
|
|
Ⅳ
. Selling and
Administrative Expenses
|
180,142
|
196,810
|
197,050
|
|
Ⅴ
. Operating
Profit
|
531,819
|
491,175
|
389,492
|
|
Ⅵ
. Non-operating
Income
|
52,374
|
95,803
|
37,641
|
|
Ⅶ
. Non-operating
Costs
|
39,149
|
72,228
|
32,816
|
|
Ⅷ
. Net Profits Before
Corporate Tax
|
545,044
|
514,700
|
394,317
|
|
Ⅸ
. Corporate Tax
Costs
|
123,350
|
151,604
|
114,209
|
|
Ⅹ
. Net Profit for
Term
|
421,694
|
363,096
|
280,108
|
2) Property
Status
Condensed Financial
Chart
Term 11: As of
December 31
st
,
2009
Term 10: As of
December 31
st
,
2008
Term 09: As of
December 31
st
,
2007
(unit: million
KRW)
|
Item
|
Term
11
|
Term
10
|
Term
09
|
|
1. Liquid
Assets
|
676,423
|
551,239
|
477,950
|
|
(1) Quick
Assets
|
676,423
|
551,239
|
477,950
|
|
2. Non-liquid
Assets
|
628,462
|
451,120
|
333,102
|
|
(1) Invested
Assets
|
377,511
|
206,078
|
161,691
|
|
(2) Tangible
Assets
|
191,844
|
188,315
|
128,239
|
|
(3)
Intangible Assets
|
21,247
|
21,232
|
20,125
|
|
(4) Other
Non-liquid Assets
|
37,859
|
35,495
|
23,047
|
|
Total
Assets
|
1,304,885
|
1,002,359
|
811,052
|
|
1. Liquid
Debts
|
290,734
|
250,418
|
231,756
|
|
2. Non-liquid
Debts
|
30,666
|
133,154
|
110,361
|
|
Total
Debts
|
321,400
|
383,572
|
342,117
|
|
1.
Capital
|
24,064
|
24,064
|
23,924
|
|
2. Capital
Surplus
|
194,073
|
194,073
|
158,045
|
|
3. Capital
Adjustment
|
(-)567,187
|
(-)516,855
|
(-)266,406
|
|
4. Other
overall profit and loss totals
|
24,593
|
30,787
|
(-)3,536
|
|
5. Profit
Surplus
|
1,307,943
|
886,718
|
556,908
|
|
Capital
Total
|
983,486
|
618,787
|
468,935
|
|
Total Debt
and Capital
|
1,304,885
|
1,002,359
|
811,052
|
2.
Change of Largest shareholder over Past 3 Years
(unit: share,
%)
|
Name
|
Date of
change of largest shareholder / shares
|
Shares
Owned
|
Share
Percentage
|
Note
|
|
NHN
Corporation
|
2004.10.26
|
400,000
|
100.00
|
-
|
|
NHN
Corporation
|
2005.04.13
|
600,000
|
100.00
|
Paid-in
capital increase
|
|
NHN
Corporation
|
2006.02.21
|
600,000
|
68.42
|
Paid-in
capital increase
|
|
NHN
Corporation
|
2006.07.21
|
600,000
|
65.00
|
Paid-in
capital increase
|
|
NHN
Corporation
|
2007.06.05
|
600,000
|
46.88
|
Paid-in
capital increase
|
|
NHN
Corporation
|
2009.01.14
|
6,000,000
|
46.88
|
Stock
Split
|
3.
Distribution of Shares
A.
Share Ownership Status of Shareholders with 5% or More
[As of the date of
submission of
report] (unit:
share, %)
|
Name
|
Type of
Share
|
No. of Shares
Owned(percentage)
|
Note
|
|
No. of
Shares
|
Percentage
|
|
NHN
Corporation
|
Common
Shares
|
6,000,000
|
46.88
|
|
|
Kim, Byung
Gwan
|
Common
Shares
|
5,978,450
|
46.71
|
|
|
Total
|
Common
Shares
|
11,978,450
|
93.59
|
|
B.
Stock Ownership of Employee Stock Ownership Association
[As of the date of
submission of
report] (unit:
share, %)
|
Name
|
Type of
Share
|
No. of Shares
Owned(percentage)
|
Note
|
|
No. of
Shares
|
Percentage
|
|
Employee
Stock Ownership Association
|
Common
Shares
|
461,550
|
3.61%
|
|
C.
Minority Shareholder Status
[As of the date of
submission of
report] (unit:
share, %)
|
Name
|
Shareholder
|
Owned
Shares
|
Note
|
|
No. of
Shareholders
|
Percentage
|
No. of
Shares
|
Percentage
|
|
Small
Shareholder
|
4
|
57.14
|
360,000
|
2.81%
|
|
|
Total
|
7
|
100%
|
360,000
|
100%
|
|
4.
Share Work
|
New Share
Acquisition Rights as per the Articles of Incorporation
|
①
When issuing new
shares, the shareholders of this company have the right to receive new
shares proportional to the shares they own, and all matters on issuance of
new shares is decided by resolution of the board of
directors.
②
Despite paragraph 1,
the board of directors can designate the allotment of or persons to
receive new shares by resolution in the following cases.
1. When new
shares are issued through the general capital increase by public offering
method by resolution of the board.
2. When new
shares are given by priority to members of the employee stock ownership
association.
3. When new
shares are issued following the exercise of stock options.
4. When new
shares are issued by the overseas issuance of Depository
Receipts(DR)
5. When the
company gives foreign investors priority of new shares as per the Foreign
Investment Promotion Act due to operational needs.
6. When
issuing new shares to Korean nationals or domestic corporations within the
limit of 50% of total issued shares by operational needs such as strategic
affiliation or emergency procurement of funds.
7. When
allotting shares within the limit of up to 50% of total issued shares to
new technology finance companies and new technology investment syndicates
as per the Support for New Technology Finance Act, small and medium
business establishment investment companies and small and medium business
establishment investment syndicates as per the Support for Small and
Medium Business Establishment Act, or institutional investors as per the
Corporate Tax Act.
8. Allotting
up to 50% of total issued shares to affiliates for the purpose of
introducing technologies.
③
Treatment of
situations in which shareholders forfeit or lose the right to receive new
shares fractional shares appear when allotting new shares is to be decided
by resolution of the board of directors.
|
|
Date of
Settlement
|
December
31st
|
General
Assembly of Shareholders
|
Within 3
months of termination of each fiscal year
|
|
Time for
Closing the List of Shareholders
|
①
This company suspends
altering shareholder’s list entries related to rights from January 1st to
January 31st of each year.
②
This company regards
the shareholders listed in the shareholder’s list as of December 31st of
each year as those with rights at the general assembly of shareholders for
that settlement period.
③
When needed for the
gathering of an extraordinary assembly of shareholders etc., the board of
directors can, by resolution, suspend alterations to shareholder’s list
entries regarding rights for a designated period of time which cannot
exceed 3 months or designated shareholders listed as of a date designated
by resolution of the board of directors as those with rights. When the
board of directors deems it necessary, both measures can be taken
simultaneously. The company must announce such measures at least 2 weeks
prior.
|
|
Type of Share
Certificate
|
Share
certificates are comprised of the 8 types of one shares, 5 shares, 10
shares, 50 shares, 100 shares, 500 shares,1000 shares, and 10,000
shares.
|
|
Transfer
Agent
|
Before
listing or registration of this company, stock related affairs are handled
by the HQ management department.
|
|
Benefits of
Shareholders
|
-
|
|
Paper of
Announcement
|
Hankyung
Newspaper
|
5.
Share Value and Share Transaction Results
[Not
applicable]
VII.
Items
on Executives and Employees Etc.
1.
Employee
and Executive Status
A.
Executive Status
(unit:
share)
|
Title
|
Registration
(Y/N)
|
Name
|
DOB
|
Career
|
Area of
Operation
|
Term/Length
of Employment
|
Shares
Owned
|
|
Common
Shares
|
Preferred
Shares
|
|
Representative
Director
|
Registered
Executive
|
Kim, Byung
Gwan
|
73.01.15
|
-NHN Game
Production Team Leader
- NHN Hangame
Department Head
- NHN Game
Department Head
|
General
Management
|
2008.03.28
~2011.03.27
|
5,978,450
|
-
|
|
Director
|
Registered
Executive
|
Hwang, In
Jun
|
65.06.16
|
- Bachelor’s
in Economy from Seoul University
- Masters
from New York University
- Woori
Financial Group Co., Ltd.
- Executive
Director of Woori Investment and Securities Co., Ltd., IB
Dept.
- NHN
CFO
|
Finance
|
2008.11.28~
2011.11.27
|
-
|
-
|
|
Director
|
Registered
Executive
|
Jung,
Wook
|
72.12.15
|
- Bachelor in
Inorganic Material Engineering from Seoul Univ.
-
Accenture
-
Freeechal
NHN Director
(Acting Hangame Representative)
|
Game
|
2010.3.26 ~
2013.3.25
|
-
|
-
|
|
Auditor
|
Registered
Executive
|
Kim, Hyun
Sung
|
71.12.07
|
- Master’s in
Law from Seoul Univ.
- NHN
Managing Director
|
Audit
|
2008.11.28 ~
2011.11.27
|
-
|
-
|
|
B.
|
Executive
Compensation Insurance Status
|
|
C.
|
The company
does not have executive compensation
insurance.
|
C. Employee
Status
(1)
Employee Status
[As of: December
31
st
,
2009] (unit:
person, 1,000 KRW)
|
Item
|
No. of
Employees
|
Average Term
of Employment
|
Total Yearly
Wage
|
Average Wage
per Person
|
Note
|
|
Development
|
Development
Support
|
Management
Support
|
Total
|
|
Male
|
137
|
14
|
5
|
156
|
2.2
yrs
|
5,609,638,640
|
35,959,222
|
|
|
Female
|
22
|
3
|
2
|
27
|
1.8
yrs
|
996,969,020
|
36,924,779
|
|
|
Total
|
159
|
17
|
7
|
183
|
2.1
yrs
|
6,606,607,660
|
36,101,681
|
|
- Executives are
excluded from the number of employees.
- The figures for
average wage per person were acquired by dividing the total wage paid for the
year 2009 by the number of employees as of the end of 2009, and may be different
with actual average wage.
(2)
Status of Labor Unions Etc.
This company does
not have a labor union.
2.
Wages of Executives Etc.
A.
Wages of Executives Etc.
[Term: January 1,
2009 ~ December 31,
2009] (unit:
KRW)
|
Wage Payment
Standard
|
Wage limit
approved by 9
th
general assembly of shareholders
|
Paid funds
for 2009
|
Average wage
per person
|
Total amount
of fair value of stock options
|
|
Director
|
500,000,000
|
149,643,840
|
49,881,280
|
-
|
|
Total
|
500,000,000
|
149,643,840
|
49,881,280
|
-
|
- The average wage
per person was attained by dividing by the number of registered directors(3) as
of December 31, 2009.
[As of: April
21
st
,
2010] (unit:
shares, KRW)
|
Receiving
Party
|
Relationship
|
Date
|
Method
|
Type
|
Changed
No.
|
Unexercised
No.
|
Term
|
Price
|
|
Granted
|
Exercised
|
Cancelled
|
|
No, Dong Hwan
and 35 others
|
Employee
|
2007-12-01
|
Issuance of
New Shares
|
Common
Shares
|
178,200
|
-
|
168,800
|
9,400
|
2009.12.01
2012.11.30
|
700
|
|
Lee, In Gyu
and 54 others
|
Employee
|
2008-12-01
|
Issuance of
New Shares
|
Common
Shares
|
225,650
|
-
|
115,900
|
109,750
|
2009.12.01
2013.11.30
|
8,906
|
|
Park, Jung
Suk and 7 others
|
Employee
|
2010-03-08
|
Issuance of
New Shares
|
Common
Shares
|
39,000
|
-
|
3,000
|
36,000
|
2012.03.08
2015.03.07
|
8,906
|
|
Total
|
|
|
|
|
442,850
|
|
287,700
|
155,150
|
|
|
VIII
. Other Items Required to
Protect Investors
1.
Progress
‧
Alterations to
Announced Items and General Assembly of Shareholders Status
A.
Progress
‧
Alterations to
Announced Items
[Not
applicable]
B.
Summary of Minutes of General Assembly of Shareholders
|
Date
|
Item
|
Resolution
|
Note
|
|
6
th
General Assembly of Shareholders (2010.03.26)
|
-
Authorization of balance sheet, income statement, and profit surplus
disposition statement
- Appointment
of director
-
Authorization of limit for wage of directors
-
Authorization of limit for wage of auditors
-
Authorization of stock options
|
Resolved
|
-
|
2.
Unforeseen Debts Etc.
A.
Important Legal Trials Etc.
[Not
applicable]
B.
Status of Bonds
‧
Checks
for Pledge or Security
[Not
applicable]
43