Financial

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

Published by KLab

Summary

KLab Inc. reported a strong first‑half performance for fiscal year 2014, with consolidated revenue rising to ¥9.59 billion from ¥7.12 billion in the same period of FY2013, a 34.6 % increase driven by continued growth of the “Love Live! School Idol Festival” franchise and new titles such as “Celestial Craft Fleet.” Operating income improved to ¥696 million, up from a loss of ¥881 million in FY2013, and net income reached ¥542 million versus a loss of ¥598 million previously. Net assets expanded to ¥6.21 billion, reflecting a 66.5 % equity ratio and significant capital stock increases following a new subscription by Deutsche Bank London. Total assets grew to ¥9.26 billion, largely due to higher accounts receivable, while liabilities fell sharply as short‑term loans were reduced. The company’s cash and deposits declined modestly, but overall liquidity remained robust. No dividends were declared in FY2013 or FY2014, and the forecast for the first three quarters of FY2014 projects revenue of ¥15.59 billion and net income of ¥1.03 billion, assuming continued success of key mobile titles. The report notes a change in fiscal year end from August 31 to December 31, affecting comparative periods. A subsidiary, Mediaincruise Co., Ltd., was removed from consolidation following a merger. Accounting practices remained consistent, with no restatements or significant policy changes. The company’s focus on cost control—reducing personnel and office expenses—supported the turnaround in profitability.

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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