Supplementary Explanatory Materials Regarding the Opinion of the Company’s Board of Directors on Shareholder Proposals at the Annual General Meeting of Shareholders

GungHo Online Entertainment issued this formal response to shareholder proposals submitted by Strategic Capital and LIM Japan Event Master Fund for the Annual General Meeting of Shareholders scheduled for March 2026. The primary purpose of the communication is to detail the Board of Directors' opposition to all shareholder-led initiatives, arguing that the proposals do not contribute to the enhancement of corporate value.

The opposition centers on two major themes: shareholder returns and corporate governance. Regarding returns, the board rejected a proposal for a 311-yen-per-share dividend and a 21.3-billion-yen share buyback, asserting that such a massive outflow—representing 57% of the company's cash and deposits—would jeopardize financial stability. Instead, the board introduced a new policy featuring a 4% Dividend on Equity (DOE) metric and a consolidated payout ratio of at least 50%. For the fiscal year ending December 2025, the company announced a 90-yen ordinary dividend and a 5.0-billion-yen share buyback, alongside the cancellation of 16 million treasury shares (23.1% of issued shares).

On governance, the board rejected mandates to appoint an outside director as chair, maintaining that the Representative Director and President is best suited for the role due to deep operational knowledge. However, the company is voluntarily increasing its ratio of independent outside directors from 40% to 50% and doubling female board representation to 20%. Other rejected proposals included individual disclosure of director remuneration, the establishment of a third-party investigation committee, and the mandatory disclosure of sales by game title, which the board argued would cause a competitive disadvantage. The company maintains that its existing internal controls and revised remuneration systems already ensure sufficient transparency and alignment with shareholder interests.