Financial · August 1, 2014

Summary of Financial Results for First Half of Fiscal Year Ending December 2014 (Consolidated)

Published by KLab

Summary

KLab Inc. reported a significant financial turnaround for the first half of the fiscal year ending December 2014, covering the period from January 1 to June 30, 2014. Following a change in the fiscal year-end in 2013, the company transitioned from a net loss to profitability. Consolidated revenue reached 9.58 billion yen, a 34.6% increase compared to the first half of the previous year. Operating income was recorded at 696 million yen, and net income reached 541 million yen, representing a sharp recovery from the 597 million yen net loss reported in the same period of 2013. The primary driver of this growth was the sustained success of the mobile game "Love Live! School Idol Festival," which achieved record monthly sales in Japan and saw a favorable international launch. Other titles, including "Celestial Craft Fleet" and "Tales of Asteria," also contributed steady revenue. Simultaneously, the company aggressively reduced fixed costs through structural reforms. These measures included a reduction in personnel expenses by 82.8 million yen following employee adjustments, the dissolution of the KLab America development team, and the reduction of office space at the corporate headquarters. The company’s financial position strengthened during this period, with total assets rising to 9.25 billion yen and the equity ratio improving from 45.5% to 66.5%. This was bolstered by a significant increase in capital stock and surplus following the exercise of stock subscription rights by Deutsche Bank. Looking ahead to the first three quarters of FY2014, KLab forecasts continued growth with projected revenue of 15.58 billion yen and net income of 1.03 billion yen. However, management noted that full-year forecasts remain difficult to predict due to the volatile nature of the mobile gaming industry and the high dependency on hit products.

From the report

Summary of Financial Results for First Half of Fiscal Year Ending December 2014 (Consolidated) (English translation from the original Japanese-language document) August 12, 2014 Name of Listed company KLab Inc. TSE 1<sup>st</sup> Section Tokyo Code Number 3656 URL http://www.klab.com/jp/ Representative Title President & CEO Name Tetsuya Sanada Contact Person Title Executive Vice President Name Kazuyoshi Takata (TEL) +81-3 -4500-9077 Investor Relation Office Scheduled filing date for August 12, 2014 Scheduled date for － securities report dividends payment Supplementary information for quarterly results :Yes Information meeting for quarterly financial report :Yes *Institutional investors and analysts only (Amounts of less than one million yen are rounded off) 1. Consolidated Business Performance for First Half of FY2014 (January 1, 2014 – June 30, 2014) (1) Consolidated Operating Results (year-to-date) (% represents rate of increase or decrease over same period in previous fiscal year) Revenue Operating income Ordinary income Net income Million yen % Million yen % Million yen % Million yen % First half of FY2014 9,585 34.6 696 ― 700 ― 541 ― First half of FY2013 7,119 ― (880) ― (727) ― (597) ― Note: Comprehensive income First half of FY2014: 546 million yen [―%] First half of FY2013 (633 million yen) [―%] Net income per share Diluted net income per share

% Million yen % Million yen % First half of FY2014 9,585 34.6 696 ― 700 ― 541 ― First half of FY2013 7,119 ― (880) ― (727) ― (597) ― Note: Comprehensive income First half of FY2014: 546 million yen [―%] First half of FY2013 (633 million yen) [―%] Net income per share Diluted net income per share Yen Yen First half of FY2014 16.40 15.83 First half of FY2013 (23.80) ― Note: 1. KLab Inc. (“the Company”) started reporting consolidated financial statements from the first quarter of FY2013, thus the year-on-year % changes for the first half of FY2013 are not stated in the columns. 2. Net income per share, fully diluted for the first half of FY2013 is not stated because the Company Group accounted a net loss. (2) Consolidated Financial Status Total assets Net assets Equity ratio Million yen Million yen % First half of FY2014 9,258 6,211 66.5 FY2013 8,697 4,007 45.5 Reference:Shareholders’ equity First half of FY2014: 6,153 million yen FY2013: 3,953 million yen 2. Dividends Annual Dividends End of Q1 End of Q2 End of Q3 Year End Total Yen Yen Yen Yen Yen FY2013 ― 0.00 ― 0.00 0.00 FY2014 ― 0.00 FY2014 (Forecast) ― 0.00 0.00 Note: Revisions to the most recently announced dividend forecast : None

3. Consolidated Business Performance Forecasts for First 3 Quarters of FY2014 (January 1, 2014 – September 30, 2014) (% represents rate of increase or decrease over same period in previous fiscal year) Revenue Operating income Ordinary income Net income Net income per share Million yen ％ Million yen ％ Million yen ％ Million yen ％ Yen First 3 quarters 15,585 43.1 1,296 － 1,293 － 1,032 － 30.22 of FY2014 Note: Revisions to the most recently disclosed business performance forecast : None ※Explanatory Notes (1) Changes to major subsidiary companies during first half of FY2014 : Yes (Changes to specified subsidiary companies accompanying changes in scope of consolidation) Subsidiaries ― (Company name) ― Number of removed 1 (Company name) ― subsidiaries Mediaincruise Co., Ltd. (2) Changes to accounting principles or treatment : Yes Note: Refer to “(2 ) Adoption of special accounting treatment” in section “2. Summary Information (Notes)” on page 4 of Supporting Information. (3) Changes to accounting policies, estimates, and restatements ① Changes to accounting revision of accounting standards : None ② Changes other than ① : None ③ Changes to accounting estimates : None ④ Restatements : None (4) Number of outstanding shares (common stock) ① Period end # of outstanding First half 35,250,600 Shares FY2013 33,058,600 Shares shares of FY2014 (including treasury stock) ② Period end # of treasury stock First half 1,180,600 Shares FY2013 1,189,600 Shares of FY2014 ③ Average # of outstanding shares First half 33,028,012 Shares First half 25,112,676 Shares during the period of FY2014 of FY2013 ※ Current Status of Quarterly Review Procedures

ncluding treasury stock) ② Period end # of treasury stock First half 1,180,600 Shares FY2013 1,189,600 Shares of FY2014 ③ Average # of outstanding shares First half 33,028,012 Shares First half 25,112,676 Shares during the period of FY2014 of FY2013 ※ Current Status of Quarterly Review Procedures Although the “Consolidated Quarterly Financial Results” are not subject to quarterly review procedures in accordance with the Financial Instruments and Exchange Act of Japan, the quarterly review procedures have been completed at the time of disclosure of the “Consolidated Quarterly Financial Results.” ※ Explanation Note Regarding the Appropriate Usage of the Forecasts and Other Special Instructions The forecasts in this report are based on the current data available to the Company and certain reasonable assumptions and may vary according to various factors in the future. For forecasts, refer to “(3) Forecasts and various factors in the future” in section “1. Qualitative Information on Management Performance” on page 34 of Supporting Information.

Supporting Information INDEX 1. Qualitative Information on Management Performance ……………………………………………….… 2 (1) Business operation ……………………………………………………………………….…. 2 (2) Analysis of financial status ………………………………………………………………..... 2 (3) Forecasts and various factors in the future …………………………………………….…. 3 2. Summary Information (Notes) …………………………………………………………………………….. 4 (1) Changes to major subsidiary companies during first half of FY2014 ………………….. 4 (2) Adoption of special accounting treatment ……………………………………………..….. 4 3. Consolidated Financial Statements ………………………………………………………………………. 5 (1) Consolidated balance sheets ………………………………………………………………. 5 (2) Consolidated statements of income ……………………………………………………….. 6 (3) Notes related to consolidated financial statements ……………………………. ………... 8 (Notes related to going concern assumptions) ……………….…………………. ………... 8 (Notes in case of significant change in shareholders’ equity) ……………….… ……. ….. 8 (Segment information) ……………………………………………………………………….. 8

Qualitative Information on Management Performance (1) Business operation The Company Group changed the end of its fiscal year from August 31 to December 31 in the previous consolidated fiscal year. Therefore, as the corresponding periods differ between the first half of FY2014 (January 1, 2014 to July 30, 2014) and the corresponding period for comparison, which is the first half of FY2013 (September 1, 2012 to February 28, 2013), the change from the same period in the previous fiscal year is not indicated. ■ For the second quarter of FY2014, consolidated revenue was 5,160,104 thousand yen, an increase of 16.6% from the first quarter of the fiscal year. ■ Increase in revenue: ・Sales of ”Love Live! School Idol Festival” continuously grew in Japan. Revenue marked record high every month partly due to the effect from the second season of the animation being broadcasted (April to June). ・Overseas version of ”Love Live! School Idol Festival” recorded a favorable start. ・Sales of ”Celestial Craft Fleet” and ”Tales of Asteria,” which was newly released in fiscal 2014, also performed steadily. ■ Pertaining to expenditures, the Company Group continuously reduced fixed costs. ・As a result of employee adjustment implemented in the first quarter, personnel expenses were reduced by 82,832 thousand yen from the first quarter. ・Reduced engineers, etc.

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