The Best e-Learning Service Company

Investor Relations 2011www.megastudy.net

www.megastudy.net

2

1. What We Do 3

2. Business Domain 4

3. Educational System 5

4. Business Structure 6

5. Service Process 7

6. Membership & Sales in On-line 8

7. Market Growth 9

8. Market Expansion & Entry Barrier 10

9. Offline Education 11

10. Market Size & Growth 12

11. Business Road Map 13

12. Performance & Projection 14

13. Profit Summary 15

14. Balance Sheet Summary 16

Contents

www.megastudy.net

3

• First mover in e-learning

• Dominant market leader

Technology Side Contents Side

Megastudy

Digital streaming tech.

Image recording & processing tech.

Learning & grade management tech.

Pool of the best lecturers

Customer-oriented high quality contents

Well-balanced On/Off network

Leading IT based e-Learning Service Company

GPAKorean

SAT

Essay

&

Interview

Middle

School

Current Major Business

High School Market

OverseasKindergarten

& Elementary

School

Mbest, Pure On-line

(23% of sales)

College/Adult

Education

What We do

High-density,

Dynamic Society

High broadband

Internet penetration

High zeal

for education

Huge private

Education market

On-line (50% of sales)

Off-line (27% of sales)

www.megastudy.net

4

Subsidiary

megastudy.net

mbest.co.kr

8 locations

in Seoul

On-line Off-line Academic Institutes

junior.mbest.co.kr

Business Domain

High School

Middle School

Elementary School

Mega MD MegaUT

• Equity Holdings : 64.1%

• Performance in „10

Sales : 21.7 bn won

Net Profit : 1.8 bn won

- Special graduate School

(Medical, Dental, Pharma

ceutical and Law) entrance

exam prep. courses

- Started from 2008 by

acquisition of the existing

company “Pareto”

- Extend the market by utilizing

the Megastudy‟s experienced

customer base

MegaNEXT

• Equity Holdings : 66.8%

- Contents

for University Transfer

- Invested 4.3 bn in 2010

- English language, job related

education for university

students & adults

- Start an active operation and

marketing activity from the

beginning of 2010

• Equity Holdings : 36.8%

• Performance in „10

Sales : 2.6 bn won

Net Loss : 2.7 bn won

Hyungsul

Edu- Acquired the school managed

by star teacher in Megastudy

• Equity Holdings : 100%

• Performance in „10

Sales : 4.2 bn won

Net Loss : 0.3 bn won

megamd.co.kr/ megals.co.kr

MegaBooks

- Publishing supplementary

books in High School

- In 2001 started the business

which covered close-purpose

publishing only related with

online lectures > converted

and enlarged it to open-

purpose publishing and 100%

owned subsidiary in 2009.

• Equity Holdings : 100%

• Performance in „10

Sales : 10.3 bn won

Net Loss : 0.4 bn won

megabooks.co.kr

Mega F&S

• Equity Holdings : 60.0%

- Providing food for students

in off-line schools and

employee in Megastudy

- Invested 0.6 bn in 2010

KimYoung

UT

• Equity Holdings : 77.5%

Megastudy:45.6%,

MD:12%, MD mgt.:20%

- Contents

for University Transfer

- Invested 18.7 bn in 2011

www.megastudy.net

5

Primary

Education

Secondary

Education

Higher

Education

K-6

Undergraduate &

Graduate School

Middle School

1-3 (7-9)

High School

1-3 (10-12)

Early Application

Regular Application

UniversityGPA

University-specific exams

KSAT

Educational System

GPA

Extra curricular activity

University-specific exams

KSAT (minimum requirement

for early application II)

Middle School

• Preparing for G.P.A

• Preceding Study

for High School

G P A- Academic performance records in high school

times

K S A T- National Standardized Exam. once a year

- 3rd week of Nov.

University

-Specific

Exam

- Essay writing style

- Interview test

- Knowledge based test

Re-takers

< Education System > < University Entrance Exam >

www.megastudy.net

6

Business Structure

Providing Online Lectures/Materials

Synergy through combination of online & offline

Off-line

On-line

■ Online Biz : Provide lectures to students via video streaming over the internet

■ Offline Biz : Develop contents to maximize synergy effect for online business and provide a basis for contact

with customers

Synergy through combination of online & offline lectures

Offline Educational Institutes

(8 Institutes )

Contents Providing Base

Offline Lecture

FILMING/EDITINGUPLOAD

STREAMING

Online Lecture VOD Service

KSAT GPAUniversity

-specific exams

Find Out What Customers need

Search For New Lecturers

Complements the weakness

of only online business

www.megastudy.net

7

Service Process

SubjectOff

line

On

Line

K

S

A

T

Mandatory

Korean 80 16

English 79 15

Mathematics 98 17

Optional

Social Studies(11 subjects)

99 20

Sciences(8 subjects)

89 20

Essay & Interview 48 18

2nd Foreign Language 17 4

Megastudy 510 110

Single Subject Class

1,000 Minutes

60 ~ 90 Days

10 ~ 15 Chapters

VOD Type Service

Off

-lin

e Single Subject Class

2 Months (8 Weeks)

2~3 hours / week

16 ~ 20 Hours

\ 190,000

Lecture \ 65,000Material \ 10,000

On

-lin

e

1/3

Term-Based Course

Cover all Subjects

Close care by in-house tutors

6 Months (\760,000)

12 Months (\1,280,000)

■ Middle School

Mbest - 81

Megastudy & Mbest 510 191

■ The number of teachers in Megastudy & Mbest

Mb

es

t

www.megastudy.net

8

Membership & Sales in Online

■ Penetration

Registered

Members

Paid

Subscribers

Numbers Numbers % Numbers %

1st grade 662 98 15% 44 7%

2nd grade 650 172 26% 74 11%

3rd grade 648 275 42% 130 20%

Re-takers 200 160 80% 127 63%

Total 2,160 705 33% 375 17%

<unit : thousand>

Elementary (59) (17)

1st grade 644 72 11.2% 32 5.0%

2nd grade 654 99 15.1% 38 5.8%

3rd grade 672 113 16.8% 32 4.8%

Others (610) (30)

Middle School

Total1,970 284 14.4% 132 6.7%

Current Registered Members

( 2,094) Graduated Students■ Middle School Online Sales Trend

’07 ’08 ’09 ’10 ’11(E)

Online sales (billion won) 23.8 34.6 44.6 52.9 60.0

Subscribers (thousand) 354 582 766 954 1,119

Paid Subscribers(thousand)

77 102 132 149 160

Sales per paid subscribers (thousand won)

310 338 338 356 375

Weight of Number of

Term-Based Course28% 33% 33% 35% 37%

Weight of Sales of

Term-Based Course62% 68% 69% 72% 74%

■ High School Online Sales Trend

’07 ’08 ’09 ’10 ’11(E)

Online Sales (billion won) 73.8 91.2 109.2 103.5 114.0

Subscribers (thousand) 1,799 2,123 2,498 2,799 3,132

Paid Subscribers (thousand) 310 351 396 375 403

Number of bought

Lectures (thousand)1,242 1,414 1,631 1,466 1,578

Sales per paid subscriber(thousand won)

238 260 276 276 283

Hig

h S

ch

oo

lM

idd

le S

ch

oo

l

www.megastudy.net

7.3%

11.9%

20.3%

23.2%

20.2%

16.6%

18.3%17.4%

7.9%

7.0%6.4%

4.4%3.6%

2.9%2.2%

0.5%

12.0%11.8%

10.2%

7.2%7.1%5.9%

4.6%

2.1%

18.9%17.7%

16.0%14.6%

6.8%

14.3%15.2%

12.9%

11.3%

9.8%8.6%

4.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

'2002 '2003 '2004 '2005 '2006 '2007 '2008 '2009 '2010

HS 1st HS 2nd HS 3rd Megastudy

9

Online Market

Paid Service

Megastudy

ETOOS

VitaEdu

Free Service

EBSi

TeachMe

KangNamGu

Offline Market

Jungil

Cheongsol

：

Daesung

Jongro

Megastudy

Market Growth

■ Paid Member Penetration in High School Market

■ Paid Member Penetration in Middle School Market

Industrial Growth Curve

Offline Market

Potential Market

For Megastudy

Online Market

Paid Service

Mbest

1318 Class

EduClub

Soobakc.com

:

Free Service

EBSi

:

High School

Middle School

Total

3.9%

5.0%4.9%

5.8%

4.6%4.8%

0.2%

0.6%0.8%

1.3%

2.4%

2.8%

0.2%

0.8%1.1%

1.6%

3.0%

4.0%

0.8%

0.3%

1.0%

1.6%

2.7%

3.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

'2003 '2004 '2005 '2006 '2007 '2008 '2009 '2010

MS 1st MS 2nd MS 3rd

www.megastudy.net

10

CommunityCommunication

CustomizedInformation

LearningSupportingService

■ One stop learning place & high loyalty of customers

Off-lineEvent

Market Expansion & Entry Barrier

Suggest a customized learning road map

Provide advice on selecting lectures

Provide best information about college

entrance at the most optimum time (scoring

service, college application assistance service,

etc.)

M-Zone : Entertainment & information

T-Zone : communication with lecturers

Cheer on students during examination

5~6 times per year

Popular off-line events

■ Steadfast Infrastructure & High Entry Barrier

■ Virtuous Cycle

Contents

(Lecture)

Offline

Institute

Membership

High daily

website Hits

Popular website,

attract quality

lecturers

Quality lecturers

reinforce the cutting

edge of the website

and increase traffic

www.megastudy.net

11

Offline Education

Single subject classCombined class

Re-takers general class

7,000

(1,050)

High School students

Re-takers2003. 07

Launch Product Customer Capacity/mo.

Kangnam

Single subject classCombined class

Re-takers general class

12,000

(900)

High School students

Re-takers2004. 11Kangbuk

Single subject classCombined class

Re-takers general class

4,000

(1,000)

High School students

Re-takers2004. 11Seocho

Single subject class

Combined class

14,000

(700)

High School students

Re-takers2005. 12Noryangjin

Re-takers general class

(Boarding School)200Re-takers2006. 12Namyangju

Single subject classCombined class

Re-takers general class

1,000

(700)

High School students

Re-takers2008. 11Shinchon

500Re-takers2008. 11KwangjuRe-takers general class

(Boarding School)

Monthly Capacity for Single subject class

Monthly Capacity for

Re-takers general class

Single subject class – specialize in one subject course

Combined class – general course of all subjects for high school students after regular school

Re-takers general class – general course of all subject run all day like a regular school graduates

750Re-takers2010. 11YangjiRe-takers general class

(Boarding School)

www.megastudy.net

12

Market Size & Growth

2.92.4

1.7 1.6

0.5 0.9

4.55.0

4.84.1

3.3

4.2

5.04.9

1.31.7

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Ko r ea Un i t ed

St a t es

Can ada Aust r a l i a Japan Spa in N ew

Zea la n d

OECD

aver age

Public Education Expenditure % of GDP

Private Education Expenditure % of GDP

0

100

200

300

'04 '05 '06 '07 '08 '09 '10 '11 '12

1.0%

2.0%

3.0%

4.0%Online Market Size Online % of Market

Elementary School W 10.8 tHigh School W 5.2 t

Middle School W 6.1 t

■ Education Expenditure of OECD Countries <% of GDP> ■ Expenditure on Education per households

■ Private Education Market in 2009

* Spending by households on total education and private education

rose by 7.1% and 12.0% p.a respectively for past 10 years.

< The National Statistical Office >

■ Online-Lectures Market Size in High School & Re-takers

• We estimate total private education market to be W23t in 2009, and

college entrance prep market to be W5.9t.

< Ministry of Edu in 2009 / Megastudy >

■ Online-Lectures Market Size in Middle School

bn \

0

50

100

150

200

'04 '05 '06 '07 '08 '09 '10 '11 '12

0.0%

1.0%

2.0%

3.0%Online Market Size Online % of Marketbn \

Re-takers W 0.7 t

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

6

7

8

9

10

11

12

13

Public Education Private Education % of Education

(%)(million won)

www.megastudy.net

13

Business Road Map

•No Business

•Potential M&A

•EnglishXX2.8 tril. won700 thou.Kindergarten

•Pure Online

•Offline entry and expansion

•Publishing

•English

X6.1 tril. Won2.0 mil.Middle School

(13~15)

•State exam

•Qualifying exam

•MEET/DEET/PEET

•English/LEET

2.5 tril. wonAdult & College

•Online & Offline

•Offline expansion

•Publishing

5.9 tril. Won2.2 mil.

(Including Re-takers)

High School

(16~18)

•Online penetration

•Potential M&A

•EnglishX10.8 tril. Won3.5 mil.

Elementary

School (7~12)

Online

Overseas

Business

Current status and

New BusinessOffline

Private market

size

The number of

students

ChinaVietnam

www.megastudy.net

14

Performance & Projection

2008 2009 2010 2011(E)

Revenue 202.3 238.3 245.8 283.0

Gross Profit 127.0 151.4 153.2 180.3

GP margin 63% 64% 62% 64%

Operating Profit 67.6 84.7 81.4 96.3

OP margin 33% 36% 33% 34%

Net Profit 51.5 68.6 60.7 76.0

Net margin 25% 29% 25% 27%

<unit : billion won>

AmountOP

marginGrowth Amount

OP

marginGrowth Amount

OP

marginGrowth Amount

OP

marginGrowth

HighOn-Line 108.5 51% 23% 129.9 51% 20% 123.4 46% -5% 138.0 48% 12%

Off-Line 50.4 15% 13% 56.7 12% 12% 62.2 15% 10% 77.0 15% 24%

Middle 37.8 20% 43% 48.0 24% 27% 56.8 26% 18% 64.0 26% 13%

etc 5.6 -6% 35% 3.7 -10% -34% 3.3 16% -11% 4.0 21% 21%

R O E 31.4% 34.1% 23.5% 24.0%

On : 74% Hi : 81% On : 75% Hi : 80% On : 74% Hi : 77% On : 72% Hi : 77%

Off : 26% Mi : 19% Off : 25% Mi : 20% Off : 26% Mi : 23% Off : 28% Mi : 23%

※ 2008~2011(E) : K-GAAP

www.megastudy.net

15

Profit Summary – 2Q

<unit : billion won>

2010 2011Accumulative

2010 2011

2Q 2Q YoY 2Q 2Q YoY

Revenue 55.0 64.7 +18% 118.2 136.1 +15%

Online Lectures 32.0 33.5 +5% 70.0 75.9 +8%

Materials 3.6 4.2 +17% 9.1 10.3 +13%

Offline 16.8 24.3 +45% 33.9 44.4 +31%

Others 2.5 2.7 +8% 5.2 5.6 +8%

COGS 20.9 25.4 +22% 44.8 51.8 +16%

S&A expense 14.9 18.1 +21% 32.0 39.2 +23%

Other Income 0.8 1 +25% 2 3 +50%

Other Expense 10 15 +50% 15 22 +47%

Operating Profit 18.3 19.8 +8% 40.1 43.2 +9%

OP margin(%) 33% 31% 34% 32%

Net Profit 15.5 16.5 +6% 33.6 36.5 +9%

Net margin(%) 28.2% 25.5% 28.4% 26.8%

※ 2010 2Q & 2011 2Q : K-IFRS

www.megastudy.net

16

Balance Sheet Summary<unit : billion won>

2009 2010 2011 2Q

Total Assets 285 350 367

Current assets 166 179 193

Non-Current assets 120 171 173

Investment Assets 36 50 50

Tangible Assets 49 80 83

Intangible Assets 4 3 5

Other Non Current Asset 31 38 36

Total Liabilities 50 68 58

Current Liabilities 48 66 54

Non-Current Liabilities 2 2 3

Total Shareholder’s Equity 235 282 309

Paid-in Capital 3 3 3

Capital Surplus 28 28 28

Retained Earnings 223 270 297

Capital adjustment 0.6 1 0.7

Treasury Stock (-)20 (-)20 (-)20

※ 2011 2Q : K-IFRS ( ~ 2010 : K-GAAP)