Exhibit 99.5

2006 Annual Business Report

The 2002/2003 financial results restate certain line items of the Company’s previously issued financial statements to take into account:

• the diversion of certain royalty payments otherwise payable to the Company but were diverted by Mr. Jung Ryool Kim, the former Chairman of the Company, and

• a correction of errors of revenue recognition with respect to initial licensing fees, mobile revenue and animation revenue, which were unrelated to the diversion of certain royalty payments by the former Chairman.

The 2002/2003 financial results, however, do not give retroactive effect to the change in the Company’s depreciation policy from the declining balance method to the straight line method beginning in 2005.

Please note that certain corrections to the balance sheets and income statements for the years ended December 31, 2002 and 2003 (Item 4 of this Exhibit 99.5) have been made to make adjustments to certain line items and classifications and certain amounts contained in the 2006 Annual Business Report distributed to the shareholders at the Meeting (the “Original Business Report”). The corrections reflect changes due to the restatement of certain line items made in connection with the audit of the Company’s financial statements as of and for the year ended December 31, 2004 which was prepared in accordance with KGAAP. The following sets forth such corrections to the 2002/2003 financial results:

•	2002 financial results
	The financial results of the Company as of and for the year ended December 31, 2002, as reported in Item 4 of this Exhibit 99.5, differ from the Original Business Report in the following manner:

	•	Capitalized research and development balance and accumulated deficit before adjustment should be decreased by KRW1,529,750,108 to KRW368,056,904.
	•	Cost of revenues before adjustment should be decreased by KRW274,757,309 to KRW1,746,610,452.
	•	Research and development expenses before adjustment should be increased by KRW932, 562,553 to KRW932,562,553.
	•	Operating loss and net loss should be increased by KRW657,805,244 to KRW700,867,355.
•	2003 financial results
	Due to a classification error between tax and dues and income tax expense, KRW1,009,438,710 should have been classified as income tax expense instead of tax and dues under selling, general and administrative expenses.

Gravity Co., Ltd.
FY 2006 Business Report

9 a.m., March 31, 2006

15F Meritz Tower, 825-2 Yeoksam-Dong, Gangnam-Gu, Seoul, Korea

Table of Contents

1.	Business Overview		4
	(1)	Business results and financial conditions of past 3 years	4
2.	Company Overview		4
	(1)	Purpose of the Company	4
	(2)	Crucial business areas	5
	(3)	Business offices and Labs	5
	(4)	Stock conditions	5
	(5)	Debenture conditions	6
	(6)	Largest shareholder status	6
	(7)	Parent company, Subsidiaries, M&A	6
	(8)	Important transactions with related persons	8
	(9)	Important creditors	8
	(10)	Employees conditions	8
	(11)	Trustees and auditors conditions	8
	(12)	Important events occurred after a settlement term	9
	(13)	Important facts related to other business sectors	9
3.	Financial Statements as of and for the year ended December 31, 2004 and 2005		10
	(1)	Balance Sheets	10
	(2)	Income Statements	11
	(3)	Statements of Appropriations of Retained Earnings	12
4.	Results of Restatement of Financial Statements as of and for the years ended December 31, 2002, 2003(unaudited) and 2004		12

3

1.	Business Overview
	(1)	Business results and financial conditions of past three years

[Unit: KRW]

Category	FY 2005			FY 2004			FY 2003
[Current Asset]		99,200,415,135			40,554,502,801			12,971,393,560
• Quick Asset		99,179,458,227			40,497,101,161			12,968,147,580
• Inventories		20,956,908			57,401,640			3,245,980
[Fixed Asset]		44,382,247,932			25,812,843,066			19,569,887,312
• Investment Asset		27,180,534,556			8,627,893,348			13,812,858,051
• Tangible Asset		7,856,326,936			12,749,407,385			3,997,356,586
• Intangible Asset		9,345,386,440			4,435,542,333			1,759,672,675
Total Asset		143,582,663,067			66,367,345,867			32,541,280,872
[Current Liabilities]		18,265,144,524			10,440,456,089			5,072,442,715
[Non-current Liabilities]		3,346,398,983			3,825,693,701			4,423,202,168
Total Liabilities		21,611,543,507			14,266,149,790			9,495,644,883
[Capital Stock]		3,474,450,000			2,774,450,000			2,774,450,000
[Capital Surplus]		73,255,072,627			2,117,830,520			2,117,830,520
• Additional paid-in capital		73,255,072,627			2,117,830,520			2,117,830,520
[Retained earnings]		43,860,442,320			47,311,567,494			18,153,023,688
[Capital Adjustment]		1,381,154,613			(102,651,937	)		331,781
Total Stockholders’ Equity		121,971,119,560			52,101,196,077			23,045,635,989
Revenues		49,259,407,445			58,895,078,004			43,966,480,649
Operating Income(Loss)		(1,881,503,342	)		34,390,941,112			24,308,638,911
Ordinary Income (Loss)		(4,092,700,710	)		34,135,781,793			23,897,964,367
Net Income(Loss)		(3,451,125,174	)		29,158,543,806			19,527,426,962

2. Company Overview

(1) Purpose of the Company

Software Consulting, development, publishing

Software, CD development and selling

Development of telecommunication related software

Making, development, publishing, selling, consulting of digital contents including game software

Online network gaming service

Software development regarding applicator package

Computer program development and selling

Export-Import of software

E-commerce

Character business

Animation business

Leasing business

Restaurant business

Media related business

Printing & publishing business

Record & video making and distribution

All business related to above articles

4

(2)	Main business areas
	The Company is the developer of an MMORPG ‘Ragnarok Online’, which has been commercialized since August 2002 and distributed in 63 countries worldwide including Korea, Japan, Taiwan, Thailand, US, Europe, Russia, Brazil, India, Australia/New Zealand. Currently, it has been commercialized in 21 countries including India, which was added recently.  Since January 2005, we have been commercializing ‘R.O.S.E Online’ which was developed by Triggersoft Co., Ltd. in Korea, Japan, Philippines, and the U.S.
	It is expected that several online games which have been prepared by developing and publishing will be released to the market in 2006. Firstly, we are planning to start the open beta service of ‘Time N Tales’. ‘STYLIA’ will be launched in April, successively. In addition, ‘Ragnarok2’, which has been anticipated, will be released in the second half of this year. Also, ‘Emil Chronicle Online’ will be introduced. At the beginning of 2007, the open beta service of ‘Requiem’ and ‘Pucca Online’ will be started.
	Along with the online games, we have developed about 30 mobile games including 10 games related to Ragnarok Online. We are currently servicing in Korea, Japan, Thailand and Philippines. Additionally, we are preparing for service in the U.S. and Indonesia.
	Regarding the mobile business, we have acquired 96.1% of the equities of NeoCyon, a subsidiary of mobile content service company of LG Electronics in order to successfully launch into the mobile contents business. NeoCyon has directly serviced mobile games in Russia and CIS market which is the next large online gaming market with 0.3 Billion population. We expect this experience will help our Company advance into Russian market in the future.
(3)	Business Offices and Labs

Classification	Location
Head Office	14F Meritz Tower, 825-2 Yeoksam-Dong, Gangnam-Gu, Seoul
Laboratory	14F Meritz Tower, 825-2 Yeoksam-Dong, Gangnam-Gu, Seoul

(4)	Stock conditions
	Total number of shares

		[As of December 31, 2005]
Total number of shares to be issued	Total number of shares issued(*)	Total number of shares unissued
40,000,000 shares	6.948,900 shares	33,051,100 shares

* 1,400,000 shares have been newly issued during Nasdaq listing as of February 8, 2005.

5

Stocks issued

[Par value per share: 500 KRW]		[As of December 31, 2005]
Type	No. of shares	Total face value	Ratio	Remarks
Registered common stock	6,948,900 shares	3,474,450,000 KRW	100%

(5) Debenture

                                        [As of December 31, 2005]

Type	Date of issuance	Issuing Amount	Interest Rate	Balance from issuance	Redemption date	Remarks
-	-	-	-	-	-	-

* Company currently has no debentures and has no plan to have debentures in the future.

(6) Largest shareholder

[As of December 31, 2005]

Shareholder	No. of shares owned	Possession Rate(%)		Transaction with the Company	Remarks
EZER, Inc.(*)	3,640,619	52.39	%	-

* EZER, Inc. became the largest shareholder of the Company by acquiring 52.39% of the equities from former largest shareholder Mr. Jung Ryool Kim and 4 other persons as of August 30, 2005

(7)	Parent company, Subsidiaries, M&A
	Parent Company status: N/A
	Subsidiaries status

Subsidiaries				Relationship with Company
Name	Location	Common Stock	Main business	Shares owned	Possession rate (%)	Transaction relationship
Gravity Interactive LLC (*1)	California, US	USD40,000	Gaming Service	-	100%	Subsidiary
Gravity Entertainment Corp (*2)	Tokyo, Japan	50,000,000	Animation making/service	-	100%	Subsidiary
Triggersoft (*3)	Seoul, Korea	643,500,000	Online game development	113,454	88.15%	Subsidiary
NeoCyon (*4)	Seoul, Korea	964,005,000	Mobile game development	185,301	96.10%	Subsidiary

*1) Established on March 14, 2003, in the U.S., did not issue stocks being a limited Company. Changed its name into Gravity Interactive, Inc. as of January 1, 2006.

*2) Changed its name from RO Production Co., Ltd. into Gravity Entertainment Corp. as of February  5, 2005.

*3) Company acquired 40,908 shares as of April 1, 2005, and 72,546 shares as of May 12, 2005.

*4) Company acquired 149,648 shares as of November 15, 2005, and 35,653 shares as of December 9, 2005.

* Summarized Financial Statement on equity method applied invested company

6

[Unit: 1,000 KRW]

Name	Total Asset		Total Liabilities		Revenue		Net income(Loss)
Gravity Interactive, LLC.		1,000,891		319,612		2,700,715		257,173
Gravity Entertainment Corp.		1,065,899		495,393		559,356		(486,091	)
Triggersoft		450,758		1,395,162		241,743		(1,703,229	)
NeoCyon		2,501,015		1,805,405		3,480,375		20,049

Status on directors holding a concurrent position

Director		Company
Name	Position	Name	Position	Work	Remarks
Il Young Ryu	CEO	Gravity	CEO	Overall management
		EZER Inc.	CEO	Overall management

7

(8) Material transactions with related parties

                              [Unit: 1,000 KRW]

	Revenue				Purchase Amount
Related persons, companies	FY2005		FY2004		FY2005		FY2004
Gravity Interactive, LLC.		7,589		17,741		—		—
RopleNet(*)		—		—		—		53,457
Rhoceo Co., Ltd.(*)						200,000
Jung Ryool Kim (**)		—		—		622,691		792,931
Gravity Entertainment Corp.		33,758		49,414		—		—
Triggersoft Co., Ltd.		34,890		—		144,702		—
Animation production committee		54,953		—		—		—
Total		131,190		67,155		967,393		846,388

*  Rhoceo Co., Ltd. was under the control of Jung Ryool Kim.  RopleNet is a subsidiary of Rhoceo Co., Ltd.  Therefore, the two companies are regarded as related company until Aug. 30, 2005.

** Rent fee was paid to former largest shareholder by the Company according to rent contract. Mr. Kim is regarded as related person until August 30, 2005, the date of the equity transfer.

(9) Significant Creditors

Creditor	Bond Price (thousand KRW)	Shares owned(shares)	Ownership ratio (%)	Remarks
—	—	—	—	—

* No borrowings from financial intermediaries as of the settlement date.

(10) Employees

[As of Dec. 31, 2005]

Category	Directors & Officers		Developers		Marketing		Total
		21		441		43		505

8

(11) Trustees & Auditors

Permanent/Non permanent	Name	Position	Main work	Transaction with the Company	Remarks
Permanent	Il Young Ryu	CEO	CEO	-
Permanent	Eiji Deyama	Outside Director	-	-
Permanent	Yasushi Kotani	Outside Director	Member of audit committee	-
Permanent	Jae Young Lee	Outside Director	Member of audit committee	-
Permanent	Joon Hee Won	Outside Director	Member of audit committee	-

(12)	Important events occurred after a settlement term
	N/A

(13)	Important facts related to other business sectors
	N/A

9

3. Financial statements as of and for the year ended December 31, 2004 and 2005

(1) Balance Sheets

FY 2005: as of December 31, 2005

FY 2004: as of December 31, 2004

[Unit: KRW]

Items	FY 2005			FY 2004
	Amount			Amount
Asset
Current Asset			99,200,415,135			40,554,502,801
(1)Quick Asset			99,179,458,227			40,497,101,161
1.Cash & Cash Equivalents			24,798,762,104			15,821,934,830
2.Short-term financial instruments			59,810,518,813			8,900,000,000
3.Available-for-sale securities			—			496,312,684
4.Accounts receivable			4,284,507,026			5,921,975,818
5.Short-term loans			—			121,599,000
6.Other accounts receivable			4,847,292,599			308,059,765
7.Accrued income			590,427,322			70,341,350
8.Accounts receivable due to management’s diversion			—			7,482,138,742
9.Advanced payments			1,436,450,075			713,177,560
10.Prepaid expenses			439,157,259			161,405,728
11.Prepaid taxes			1,140,848,166			500,155,684
12.Deferred income tax assets			1,831,494,863			—
(2)Inventories			20,956,908			57,401,640
1.Inventory-resale			20,956,908			57,401,640
Fixed assets			44,382,247,932			25,812,843,066
(1)Investment assets			27,180,534,556			8,627,893,348
1.Equity method investments			8,704,825,214			1,654,518,790
2.Long-term loans		1,050,000,000
Lease deposits		(-) 851,571,290	198,428,710			45,666,250
3.Leasehold deposits			2,701,608,000			3,915,510,000
4.Long-term advanced payments			50,070,387			14,962,139
5.Other investments			1,426,033,190			926,033,190
6.Non-current deferred income tax assets			6,000,431,896			2,071,202,979
7.Real estate investments			8,099,137,159			—
(2)Tangible Assets			7,856,326,936			12,749,407,385
1.Land			—			5,953,901,641
2.Buildings		—			2,233,628,699
Accumulated depreciation		—	—		(-) 32,552,477	2,201,076,222
3.Computer and equipment		9,706,512,646			5,086,493,611
Accumulated depreciation		(-) 3,664,153,184	6,042,359,462		(-) 1,638,401,746	3,448,091,865
4.Vehicles		345,983,036			161,321,520
Accumulated depreciation		(-) 93,066,051	252,916,985		(-) 66,815,282	94,506,238
5.Furniture and fixtures		1,252,467,244			517,292,342
Accumulated depreciation		(-) 98,708,422	1,153,758,822		(-) 190,497,060	326,795,282
6.Leasehold improvement		425,000,000			1,042,985,452
Accumulated depreciation		(-) 17,708,333	407,291,667		(-) 317,949,315	725,036,137
(3)Intangible Assets			9,345,386,440			4,435,542,333
1.Capitalized R&D costs, net			796,618,597			1,194,094,070
2.Software			2,374,536,349			3,160,981,904
3.Other intangible assets, net			6,174,231,494			80,466,359
Total Assets			143,582,663,067			66,367,345,867
Liabilities
Current Liabilities			18,265,144,524			10,440,456,089
1.Other accounts payable			11,135,937,762			2,827,136,763
2.Advance received			344,200,145			70,109,275
3.Withholdings			1,156,721,283			28,070,112
4.Leasehold deposits received			65,000,000			2,000,000,000
5.Deferred income			4,859,339,675			4,821,194,280
6.Income tax payable			693,945,659			693,945,659
7.Installment deposit			10,000,000			—
Non-current Liabilities			3,346,398,983			3,825,693,701
1.Deferred income-L/T			3,211,655,783			1,946,112,536
2.Other accounts payable-L/T			134,743,200			1,062,543,268
3.Accrued severance benefits-gross		—			1,039,620,837
Deposit at insurance company		—	—		(-) 222,582,940	817,037,897
Total Liabilities			21,611,543,507			14,266,149,790
Shareholders’ Equity
Capital Stock			3,474,450,000			2,774,450,000
1.Common stock			3,474,450,000			2,774,450,000
Capital surplus			73,255,072,627			2,117,830,520
1.Additional paid-in capital			73,255,072,627			2,117,830,520
Retained earnings			43,860,442,320			47,311,567,494
1.Unappropriated retained earnings carried forward to subsequent year			43,860,442,320			47,311,567,494
(Net Income(Loss) :
FY 2005 : (-)3,451,125,174
FY2004:  29,158,543,806)
Capital Adjustment			1,381,154,613			(-) 102,651,937
1.Unrealized gains & losses on available-for-sale securities			—			(-) 3,687,316
2.Stock-option			1,632,516,284			9,099,549
3.Negative capital adjustment from equity method investments			(-) 251,361,671			(-) 108,064,170
Total Shareholders’ Equity			121,971,119,560			52,101,196,077
Total Liabilities& Shareholders’ Equity			143,582,663,067			66,367,345,867

10

(2) Income Statements

FY 2005: for the year ended December 31, 2005

FY 2004: for the year ended December 31, 2004

[Unit: KRW]

	FY 2005			FY 2004
Items	Amount			Amount
Revenues			49,259,407,445			58,895,078,004
1.Online games-subscription revenue		6,851,262,967			8,810,170,417
2.Online games-royalties and license fees		38,612,792,751			47,221,847,036
3.Mobile games		1,234,551,667			375,687,534
4.Other Revenue		2,560,800,060			2,487,373,017
Cost of Revenues			14,196,825,074			8,427,281,048
1.Cost of revenues – games		14,090,901,438			8,238,515,604
2.Cost of revenues – other		105,923,636			188,765,444
Gross Profit			35,062,582,371			50,467,796,956
Selling, General, and Administrative(SG&A) Expenses			36,944,085,713			16,076,855,844
1.Salaries		5,048,385,382			2,653,864,920
2.Severance benefits		530,378,701			328,295,401
3.Employee benefits		720,629,619			431,502,138
4.Travel expenses		532,882,613			246,346,114
5.Entertainment expenses		170,716,434			60,922,446
6.Communication expenses		33,948,557			19,807,827
7.Taxes and dues		1,387,032,272			127,652,784
8.Depreciation		1,125,237,983			312,048,963
9.Rent expense		624,622,686			440,025,760
10.Insurance premium		251,563,625			6,927,710
11.Vehicles maintenance expenses		52,980,294			16,342,318
12.Freight expenses		23,911,531			16,542,698
13.Repairs expenses		154,609,746			43,304,844
14.Training expenses		19,834,348			2,506,256
15.Publication expenses		59,683,993			30,477,142
16.Supplies expenses		165,624,440			80,453,057
17.Fee expenses		9,889,724,953			5,277,407,204
18.Advertising expenses		5,957,798,643			3,809,512,535
19.Research and development expenses		9,142,947,819			1,918,019,848
20.Amortization		376,437,494			151,339,538
21.Outsourcing expenses		—			82,654,545
22.Expenses for congratulations and condolences		9,870,000			7,920,000
23.Utility expenses		38,870,570			7,978,442
24.Stock option plan compensation expense		626,394,010			3,740,354
25.Miscellaneous expenses		—			1,263,000
Operating Income(Loss)			(-) 1,881,503,342			34,390,941,112
Non-operating income			4,669,809,600			999,725,501
1.Interest income		2,886,499,500			502,813,116
2.Gain on foreign currency translation		62,544,231			97,452,325
3.Gain on foreign currency transaction		464,723,276			324,389,397
4.Gain on disposition of Property, Plant and Equipment(PP&E)		4,405,019			—
5.Gain on disposition of intangible assets		—			9,030,000
6.Earnings from equity method investments		206,431,723			—
7.Gain on foreign currency forward contract transactions		1,032,699,912			—
8.Miscellaneous income		12,505,939			66,040,663
Non-operating Expenses			6,881,006,968			1,254,884,820
1.Interest expense		77,355,631			78,555,926
2.Loss on foreign currency translation		84,489,533			146,784,253
3.Loss on foreign currency transaction		1,044,836,511			896,804,682
4.Loss on disposal of available-for-sale securities		—			1,331,276
5.Loss from equity method investments		3,188,546,582			121,180,994
6.Loss on disposition of Property, Plant and Equipment(PP&E)		277,486,112			551,382
7.Loss on disposal of Property, Plant and Equipment(PP&E)		76,327,417
8.Penalty		227,347,669			—
9.Donations		100,000			3,000,000
10.Loss on foreign currency forward contract transactions		1,885,402,364			—
11.Loss on disposition of intangible assets		1,957,325			—
12.Miscellaneous Losses		17,157,824			6,676,307
Ordinary Income(Loss)			(-) 4,092,700,710			34,135,781,793
Extraordinary Gain			—			—
Extraordinary Losses			—			—
Income(Loss) Before Income Tax Expenses			(-) 4,092,700,710			34,135,781,793
Income Tax Expenses			(-641,575,536			4,977,237,987
Net Income(Loss)			(-) 3,451,125,174			29,158,543,806
Ordinary Income(Loss) per share:
FY2005:  (-)507
FY2004:  5,255
Earning(Loss) per share:
FY2005: (-)507
FY2004:  5,255)

11

(3) Statements of appropriations of Retained Earnings years ended December 31, 2005 and 2004

FY 2005	From January 1, 2005 Until December 31, 2005	FY 2004	From January 1, 2004 Until December 31, 2004
Confirmed appropriation date	March 31, 2006	Confirmed appropriation date	March 29, 2005

[Unit: KRW]

Category	FY 2005 Amount				FY 2004 Amount
Retained earnings before appropriations				43,860,442,320			47,311,567,494
Unappropriated retained earnings carried over from prior period		47,311,567,494				12,523,705,736
Cumulative Effect of an Accounting Change		—				999,748,081
Prior periods error correction		—				4,629,569,871
Net Income (Loss)		(-)3,451,125,174	)			29,158,543,806
Appropriations of retained earnings				—			—
Unappropriated retained earnings carried forwards to subsequent year				43,860,442,320			47,311,567,494

4. Results of Restatement of Financial Statements as of and for the year ended December 31, 2002, 2003 and 2004

(1)     Financial Statements as of and for the year ended December 31, 2002

Balance Sheet

[Unit: KRW]

	Original statement			Adjustments				Restatement
Items	December 31, 2002			Debit		Credit		December 31, 2002
Asset
Current Asset		3,643,885,912							4,233,789,320
(1)Quick Asset		3,643,885,912							4,233,789,320
Cash & Cash Equivalents		559,859,899							559,859,899
Accounts receivable		3,022,649,157			155,979,314				3,178,628,471
Other accounts receivable		44,594,440			101,025,800				145,620,240
Advanced payments		1,000,000							1,000,000
Prepaid expenses		0			332,898,294				332,898,294
Prepaid taxes		15,782,416			75,912,837		75,912,837		15,782,416
(2)Inventories		0							0
Inventory-resale									0
Fixed Assets		3,762,103,163							5,654,912,572
(1)Investment Assets		1,393,620,000							3,286,429,409
Long-term loans					1,254,779,500		1,254,779,500		0
Investment securities		240,100,000							240,100,000
Leasehold deposits		1,095,440,000							1,095,440,000
Other investments		58,080,000							58,080,000
Long-term advanced payments		0			658,029,909				658,029,909
Account receivable due to management’s diversion-L/T		0			1,234,779,500				1,234,779,500
(2)Tangible Assets		1,379,037,069							1,379,037,069
Computer and equipment		1,846,567,995							1,846,567,995
Accumulated depreciation		(650,420,977	)						(650,420,977	)
Vehicles		59,754,494							59,754,494
Accumulated depreciation		(20,834,119	)						(20,834,119	)
Furniture and fixtures		219,076,489							219,076,489
Accumulated depreciation		(75,106,813	)						(75,106,813	)
(3)Intangible Assets		989,446,094							989,446,094
Organization costs		3,504,000							3,504,000
Capitalized R&D costs, net		368,056,904							368,056,904
Other intangible assets, net		617,885,190							617,885,190
Total Assets		7,405,989,075							9,888,701,892
Liabilities
Current Liabilities		7,978,305,502							8,761,606,580
Other accounts payable		1,938,960,102					23,256,212		1,962,216,314
Unearned income		6,027,777,780							6,027,777,780
Withholdings		11,567,620							11,567,620
Deferred revenue					214,227,500		974,272,366		760,044,866
Non-current Liabilities		63,272,741							2,022,359,067
Deferred revenue-L/T							1,253,288,704		1,253,288,704
Other accounts payable-L/T					10,558,627		716,356,249		705,797,622
Accrued severance benefits-gross		63,272,741							63,272,741
Total Liabilities		8,041,578,243							10,783,965,647
Shareholders’ Equity
Capital Stock		1,700,000,000							1,700,000,000
Common stock		1,700,000,000							1,700,000,000
Capital surplus		0							0
Additional paid-in capital									0
Accumulated Deficit		(2,110,972,768	)						(2,370,647,355	)
Undisposed accumulated deficit carried forward to the subsequent year		(2,110,972,768	)		259,674,587				(2,370,647,355	)
Capital Adjustment		(224,616,400	)						(224,616,400	)
Discount on stock issuance		(14,616,400	)						(14,616,400	)
Loss on valuation of investment securities		(210,000,000	)						(210,000,000	)
Total Shareholders’ Equity		(635,589,168	)						(895,263,755	)
Total Liabilities & Shareholders’ Equity		7,405,989,075							9,888,701,892

12

Income Statement

[Unit: KRW]

	Original statement			Adjustments				Restatement
Items	December 31, 2002			Debit		Credit		December 31, 2002
Revenues		7,260,491,656							6,713,829,737
Online game-subscription revenue		3,904,773,915							3,904,773,915
Online games-royalties and license fees		2,974,157,792			804,408,838		257,746,919		2,427,495,873
Mobile games									0
Other revenue		381,559,949							381,559,949
Cost of Revenues		1,746,610,452							1,749,890,806
Cost of revenues – games		1,746,610,452			3,280,354				1,749,890,806
Gross Profit		5,513,881,204							4,963,938,931
Selling, General and Administrative(SG&A) Expenses		6,352,752,946							6,065,422,139
Salaries		790,804,110							790,804,110
Severance benefits		38,960,742							38,960,742
Employee benefits		114,268,400							114,268,400
Travel expenses		56,410,845							56,410,845
Entertainment expenses		39,420,186							39,420,186
Communication expenses		27,547,453							27,547,453
Conference expenses		17,406,613							17,406,613
Taxes and dues		297,240,078			90,579,554		0		387,819,632
Depreciation		79,911,252							79,911,252
Rent expense		138,871,703							138,871,703
Insurance premium		5,632,378							5,632,378
Vehicles maintenance expenses		6,683,496							6,683,496
Freight expenses		12,423,915							12,423,915
Repairs expenses		7,865,154							7,865,154
Training expenses		820,000							820,000
Publication expenses		62,980,696							62,980,696
Supplies expenses		23,255,896							23,255,896
Fee expenses		1,647,783,998			117,327,101		394,211,662		1,370,899,437
Advertising expenses		1,472,591,485					101,025,800		1,371,565,685
Bad debt expenses		26,946,524							26,946,524
Research and development expenses		932,562,553							932,562,553
Amortization		1,752,000							1,752,000
Outsourcing expenses		13,694,290							13,694,290
Expenses for congratulations and condolences		100,000							100,000
Overseas marketing expenses		536,819,179							536,819,179
Operating Loss		(838,871,742	)						(1,101,483,208	)
Non-operating Income		206,170,775							217,922,157
Interest income		84,065,852							84,065,852
Gain on foreign currency translation		60,996,705					11,751,382		72,748,087
Gain on foreign currency transaction		11,921,744							11,921,744
Gain on disposition of Property, Plant and Equipment(PP&E)		48,998,735							48,998,735
Miscellaneous income		187,739							187,739
Non-operating Expenses		68,166,388							76,980,891
Interest expense		25,551,899			8,814,503				34,366,402
Loss on foreign currency translation		630,186							630,186
Loss on foreign currency transaction		10,815,848							10,815,848
Loss on disposition of investment securities		609,050							609,050
Loss on valuation of inventory		3,587,300							3,587,300
Donations		9,990,000							9,990,000
Impairment on capitalized R&D costs		16,540,736							16,540,736
Miscellaneous Losses		441,369							441,369
Ordinary Loss		(700,867,355	)						(960,541,942	)
Loss before Income Tax Expenses		(700,867,355	)						(960,541,942	)
Income Tax Expenses					0				0
XI. Net Loss		(700,867,355	)						(960,541,942	)

13

(2)     Financial Statements as of and for the year ended December 31, 2003

Balance Sheet

[Unit: KRW]

	Original statement			Adjustments				Restatement
Items	December 31, 2003			Debit		Credit		December 31, 2003
Asset
Current Asset		12,294,999,399							12,971,393,560
(1)Quick Asset		12,291,753,419							12,968,147,580
Cash & Cash Equivalents		5,063,399,356							5,063,399,356
Short-term financial instruments		1,600,000,000							1,600,000,000
Available-for-sale securities		600,000,000							600,000,000
Accounts receivable		4,011,788,962			178,756,046		156,253,775		4,034,291,233
Short-term loans		36,000,000							36,000,000
Other accounts receivable		117,938,366			174,732,871		22,198,523		270,472,714
Accrued income		34,456,158							34,456,158
Advanced payments		206,480,920							206,480,920
Prepaid expenses		2,312,564			736,437,661		235,080,119		503,670,106
Prepaid taxes		619,377,093			1,090,171,047		1,090,171,047		619,377,093
(2)Inventories		3,245,980							3,245,980
Inventory-resale		3,245,980							3,245,980
Fixed Assets		10,529,974,562							19,569,887,312
(1)Investment Assets		5,507,204,799							13,812,858,051
Equity method investments		317,501,010							317,501,010
Long-term loans		251,538,000			7,913,110,679		7,913,110,679		251,538,000
Leasehold deposits		3,881,455,000							3,881,455,000
Other investments		950,233,190							950,233,190
Long-term advanced payments					727,912,032		554,412,243		173,499,789
Account receivable due to management’s diversion-L/T		0			7,441,242,679		—		7,441,242,679
Deferred income tax assets		106,477,599			690,910,784				797,388,383
(2)Tangible Assets		3,125,430,421							3,997,356,586
Computer and equipment		2,933,372,018					40,000,000		2,893,372,018
Accumulated depreciation		(1,315,421,384	)		616,947,332		4,183,334		-702,657,386
Vehicles		161,321,520							161,321,520
Accumulated depreciation		(68,516,274	)		33,965,295				-34,550,979
Furniture and fixtures		542,333,577					117,400,000		424,933,577
Accumulated depreciation		(197,706,066	)		112,042,241		12,278,084		-97,941,909
Capital lease assets		603,359,000							603,359,000
Accumulated depreciation		(241,132,750	)		134,200,267				-106,932,483
Leasehold improvement		974,885,452							974,885,452
Accumulated depreciation		(267,064,672	)		148,632,448				-118,432,224
(3)Intangible Assets		1,897,339,342							1,759,672,675
Capitalized R&D costs, net		225,583,264			—				225,583,264
Software		1,595,922,745					137,666,667		1,458,256,078
Other intangible assets, net		75,833,333							75,833,333
Total Assets		22,824,973,961							32,541,280,872
Liabilities									—
Current Liabilities		2,788,580,898							5,072,442,715
Other accounts payable		1,226,515,872					149,008,938		1,375,524,810
Advance received		47,431,682							47,431,682
Withholdings		49,828,480							49,828,480
Capital lease liabilities		103,693,739							103,693,739
Deferred income		1,361,111,125			687,502,934		2,189,508,007		2,863,116,198
Income tax payable							632,847,806		632,847,806
Non-current Liabilities		2,620,075,026							4,423,202,168
Deferred income-L/T		2,333,333,328			494,497,010		1,159,430,579		2,998,266,897
Other accounts payable-L/T					355,724,995		1,493,918,568		1,138,193,573
Accrued severance benefits-gross		358,108,097							358,108,097
Deposits at insurance company		(71,366,399	)						-71,366,399
Total Liabilities		5,408,655,924							9,495,644,883
Shareholders’ Equity									—
Capital Stock		2,774,450,000							2,774,450,000
Common stock		2,774,450,000							2,774,450,000
Capital Surplus		2,117,830,520							2,117,830,520
Additional paid-in capital		2,117,830,520							2,117,830,520
Retained Earnings		12,523,705,736							18,153,023,688
Unappropriated retained earnings carried forward to subsequent year		12,523,705,736			1,031,052,460		6,660,370,412		18,153,023,688
Capital Adjustment		331,781							331,781
Unrealized gains on equity method investments		331,781							331,781
Total Shareholders’ Equity		17,416,318,037							23,045,635,989
Total Liabilities & Shareholders’ Equity		22,824,973,961							32,541,280,872

14

Income Statement

[Unit: KRW]

	Original statement		Adjustments				Restatement
Items	December 31, 2003		Debit		Credit		December 31, 2003
Revenues		37,035,034,268						43,966,480,649
Online game-subscription revenue		10,480,705,730						10,480,705,730
Online games-royalties and license fees		25,493,091,310		436,231,756		7,205,129,976		32,261,989,530
Mobile games		43,109,394						43,109,394
Other revenue		1,018,127,834		71,868,000		234,416,161		1,180,675,995
Cost of Revenues		6,518,561,560						6,611,998,771
Cost of revenues - games		6,458,551,807		95,770,544		2,333,333		6,551,989,018
Cost of revenues - other		60,009,753						60,009,753
Gross Profit		30,516,472,708						37,354,481,878
Selling, General and Administrative(SG&A) Expenses		12,401,191,640						13,045,842,967
Salaries		1,628,894,240						1,628,894,240
Severance benefits		159,061,636						159,061,636
Employee benefits		293,127,868						293,127,868
Travel expenses		16,167,879						16,167,879
Entertainment expenses		72,544,574						72,544,574
Communication expenses		30,673,745						30,673,745
Taxes and dues		55,317,727		71,545,673		0		126,863,400
Depreciation		539,691,531				29,578,084		510,113,447
Rent expense		341,890,425						341,890,425
Insurance premium		3,812,666						3,812,666
Vehicles maintenance expenses		14,168,116						14,168,116
Freight expenses		8,579,224						8,579,224
Repairs expenses		36,689,600						36,689,600
Training expenses		3,923,425						3,923,425
Publication expenses		10,923,050						10,923,050
Supplies expenses		84,031,719						84,031,719
Fee expenses		4,105,731,896		1,000,085,240		345,892,954		4,759,924,182
Advertising expenses		4,092,511,283		22,198,523		73,707,071		4,041,002,735
Research and development expenses		859,753,224				0		859,753,224
Amortization		1,873,772						1,873,772
Outsourcing expenses		38,130,000						38,130,000
Expenses for congratulations and condolences		3,230,000						3,230,000
Utility expenses		464,040						464,040
Operating Income		18,115,281,068						24,308,638,911
Non-operating Income		1,062,886,487						1,061,416,368
Interest income		105,807,341						105,807,341
Gain on foreign currency translation		778,086		0		882,027		1,660,113
Gain on foreign currency transaction		84,344,751		46,045,046				38,299,705
Gain on disposition of Property, Plant and Equipment(PP&E)		183,214,364						183,214,364
Gain on transfer of business rights		20,000,000						20,000,000
Gain on disposition of investment securities		26,900,000						26,900,000
Earnings from equity method investments		592,705,038						592,705,038
Rent income		5,887,110						5,887,110
Miscellaneous income		43,249,797				43,692,900		86,942,697
Non-operating Expenses		1,120,823,378						1,472,090,912
Interest expense		208,714,923		52,745,322		0		261,460,245
Loss on foreign currency translation		6,356,000		1,122,212				7,478,212
Loss on foreign currency transaction		46,949,411						46,949,411
Loss on disposition of investment securities		509,703						509,703
Impairment on investment securities		100,000						100,000
Impairment of Property, Plant and Equipment				157,400,000				157,400,000
Other bad debt expenses				180,000,000		180,000,000		0
Impairment on other investments		776,700,000		200,000,000		200,000,000		776,700,000
Loss on disposition of intangible assets		168,492						168,492
Impairment Losses on Intangible Assets				140,000,000				140,000,000
Penalty		57,000,000						57,000,000
Donations		2,030,000						2,030,000
Miscellaneous Losses		22,294,849						22,294,849
Ordinary Profit		18,057,344,177						23,897,964,367
Earning before Taxes		18,057,344,177						23,897,964,367
Income Tax Expenses		3,419,161,673		951,375,732				4,370,537,405
XI. Net income		14,638,182,504						19,527,426,962

15

(3)     Financial Statements as of and for the year ended December 31, 2004

Balance sheet

[Unit: KRW]

	Original statement			Adjustments				Restatement
Items	December, 31, 2004			Debit		Credit		December 31, 2004
Asset
Current Asset		32,731,880,444							40,554,502,801
(1)Quick Asset		32,674,478,804							40,497,101,161
Cash & Cash Equivalents		15,821,934,830							15,821,934,830
Short-term financial instruments		8,900,000,000							8,900,000,000
Available-for-sale securities		496,312,684							496,312,684
Accounts receivable		5,899,887,842			76,680,221		54,592,245		5,921,975,818
Allowance for S/T loan									0
Short-term loans		121,599,000			8,060,650,402		8,060,650,402		121,599,000
Allowance for S/T loan					180,000,000		180,000,000		0
Other accounts receivable		155,525,417			163,038,647		10,504,299		308,059,765
Allowance for S/T loan									0
Accounts receivable due to management’s diversion-S/T		0			7,482,138,742				7,482,138,742
Accrued income		70,341,350							70,341,350
Advanced payments		713,177,560							713,177,560
Prepaid expenses		16,408,437			571,360,569		426,363,278		161,405,728
Prepaid taxes		479,291,684			1,210,535,547		1,189,671,547		500,155,684
(2)Inventories		57,401,640							57,401,640
Inventory-resale		57,401,640							57,401,640
Fixes assets		25,316,504,761							25,812,843,066
(1)Investment assets		9,522,152,230							8,627,893,348
Equity method investments		1,670,672,230			123,817,257		139,970,697		1,654,518,790
Long-term loans		45,666,250			15,484,866,081		15,484,866,081		45,666,250
Allowance for S/T loan					360,000,000		360,000,000		0
Leasehold deposits		3,915,510,000							3,915,510,000
Long-term advanced payments					174,041,403		159,079,264		14,962,139
Other investments		926,033,190							926,033,190
Accounts receivable due to management’s diversion-L/T		0			7,441,242,679		7,441,242,679		0
Deferred income tax assets		2,964,270,560			690,910,784		1,583,978,365		2,071,202,979
(2)Tangible Assets		11,249,143,531							12,749,407,385
Land		5,953,901,641							5,953,901,641
Buildings		2,233,628,699							2,233,628,699
Accumulated depreciation		(32,552,477	)						(32,552,477	)
Computer and equipment		5,126,493,611					40,000,000		5,086,493,611
Accumulated depreciation		(2,794,228,092	)		1,166,659,663		10,833,317		(1,638,401,746	)
Vehicles		161,321,520							161,321,520
Accumulated depreciation		(110,371,398	)		43,556,116		0		(66,815,282	)
Furniture and fixtures		634,692,342					117,400,000		517,292,342
Accumulated depreciation		(370,198,275	)		211,496,999		31,795,784		(190,497,060	)
Leasehold improvement		1,042,985,452							1,042,985,452
Accumulated depreciation		(596,529,492	)		278,580,177				(317,949,315	)
(3)Intangible Assets		4,545,209,000							4,435,542,333
Capitalized R & D costs, net		1,194,094,070							1,194,094,070
Software		3,270,648,571					109,666,667		3,160,981,904
Other intangible assets, net		80,466,359							80,466,359
Total Assets		58,048,385,205							66,367,345,867
Liabilities
Current Liabilities		8,041,063,131							10,440,456,089
Other accounts payable		2,055,189,473					771,947,290		2,827,136,763
Advance received		70,109,275							70,109,275
Withholdings		28,070,112			0				28,070,112
Leasehold deposits received		2,000,000,000							2,000,000,000
Deferred income		3,887,694,271			1,117,933,380		2,051,433,389		4,821,194,280
Income tax payable							693,945,659		693,945,659
Non-current Liabilities		2,711,132,308							3,825,693,701
Deferred income-L/T		1,894,094,411			492,546,069		544,564,194		1,946,112,536
Other accounts payable-L/T					357,746,724		1,420,289,992		1,062,543,268
Accrued severance benefits-gross		1,039,620,837							1,039,620,837
Deposits at insurance company		(222,582,940	)						(222,582,940	)
Total Liabilities		10,752,195,439							14,266,149,790
Shareholders’ Equity
Capital Stock		2,774,450,000							2,774,450,000
Common stock		2,774,450,000							2,774,450,000
Capital surplus		2,117,830,520							2,117,830,520
Additional paid-in capital		2,117,830,520							2,117,830,520
Retained earnings		42,512,806,067							47,311,567,494
Unappropriated retained earnings forward to subsequent year		42,512,806,067			3,733,429,959		8,532,191,386		47,311,567,494
Capital Adjustment		(108,896,821	)						(102,651,937	)
Unrealized gains & losses on available-for-sale securities		(3,687,316	)						(3,687,316	)
Gains or losses on valuation of equity method investments		(114,309,054	)				6,244,884		(108,064,170	)
Stock-option		9,099,549							9,099,549
Total shareholders’ Equity		47,296,189,766							52,101,196,077
Total Liabilities & Shareholders’ Equity		58,048,385,205							66,367,345,867

16

Income Statements

[Unit: KRW]

	Original Statement		Adjustments				Restatement
Items	December 31, 2004		Debit		Credit		December 31, 2004
Revenues		58,223,489,919						58,895,078,004
Online game-subscription revenue		9,134,909,358		324,738,941				8,810,170,417
Online games-royalties and license fees		45,605,162,034				1,616,685,002		47,221,847,036
Revenue for mobile game service		480,007,534		104,320,000				375,687,534
Other revenue		3,003,410,993		687,871,857		171,833,881		2,487,373,017
Cost of Revenues		8,662,770,308						8,427,281,048
Cost of revenues - games		8,474,004,864		19,074,610		254,563,870		8,238,515,604
Cost of revenues - other		188,765,444						188,765,444
Gross Profit		49,560,719,611						50,467,796,956
Selling, General, and Administrative(SG&A) Expenses		15,996,806,743						16,076,855,844
Salaries		2,653,864,920						2,653,864,920
Severance benefits		328,295,401						328,295,401
Employee benefits		431,502,138						431,502,138
Travel expenses		246,346,114						246,346,114
Entertainment expenses		60,922,446						60,922,446
Communication expenses		19,807,827						19,807,827
Taxes and dues		145,397,396		3,119,388		20,864,000		127,652,784
Depreciation		705,804,039		19,517,700		413,272,776		312,048,963
Rent expense		440,025,760						440,025,760
Insurance premium		6,927,710						6,927,710
Vehicles maintenance expenses		16,342,318						16,342,318
Freight expenses		16,542,698						16,542,698
Repairs expenses		43,304,844						43,304,844
Training expenses		2,506,256						2,506,256
Publication expenses		30,477,142						30,477,142
Supplies expenses		80,453,057						80,453,057
Fee expenses		4,770,601,015		517,336,189		10,530,000		5,277,407,204
Advertising expenses		3,809,512,535						3,809,512,535
Research and development expenses		1,933,277,248				15,257,400		1,918,019,848
Amortization		151,339,538						151,339,538
Outsourcing expenses		82,654,545						82,654,545
Expenses of congratulations and condolences		7,920,000						7,920,000
Utility expenses		7,978,442						7,978,442
Stock option plan compensation expense		3,740,354						3,740,354
Miscellaneous expenses		1,263,000						1,263,000
Operating Income		33,563,912,868						34,390,941,112
Non-operating Income		905,000,445						999,725,501
Interest income		502,813,116						502,813,116
Gain on Foreign currency translation		2,689,977				94,762,348		97,452,325
Gain on Foreign currency transaction		324,389,397						324,389,397
Gain on disposition of Property, Plant and Equipment(PP&E)		37,292		37,292				0
Gain on disposition of intangible assets		9,030,000						9,030,000
Miscellaneous income		66,040,663						66,040,663
Non-operating Expenses		1,151,509,926						1,254,884,820
Interest expense		1,213,261		77,342,665				78,555,926
Loss on foreign currency translation		143,701,730		3,503,170		420,647		146,784,253
Loss on foreign currency transaction		896,804,682						896,804,682
Loss on disposal of available-for-sale securities		1,331,276						1,331,276
Loss from equity method investments		98,782,670		146,215,581		123,817,257		121,180,994
Loss on disposition of Property, Plant and Equipment(PP&E)				551,382				551,382
Donations		3,000,000						3,000,000
Miscellaneous Losses		6,676,307						6,676,307
Ordinary Income		33,317,403,387						34,135,781,793
Income Before Income Tax Expenses		33,317,403,387						34,135,781,793
Income Tax Expenses		3,328,303,056		1,753,254,931		104,320,000		4,977,237,987
XI. Net Income		29,989,100,331						29,158,543,806

17