Legal · February 1, 2026

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

Published by GungHo Online Entertainment

Summary

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.

From the report

GungHo Supplementary Explanator y Materials Regarding the Opinion of the Company ’s Board of Directors on Shareholder Proposals at the Annual General Meeting of Shareholders GungHoOnline Entertainment, Inc. GungHo February 13, 2026 February 13 2026 Securities code: 3765 Securities code: 3765

on Shareholder Proposals Ime Compamy s views on une P roposals The Company’s Views on the Proposals from Strategic Capital and LIM Japan Event Master Fund 1 Shareholder shareholderreturns Shareholder proposals regarding shareholder returns The Company will implement shareholder returns of an appropriate scale to enhance P2~ corporate value, taking into account the Company's operating environment. 2 Shareholder proposals regarding governance The Company has continued to strengthen its corporate governance in line with its P4~ circumstances and selected one additional independent outside director this year. 3 Other shareholder proposals P7~ None of those proposals would contribute to enhancing the Company's corporate value. The Board of Directors OPPOSES all of the Shareholder Proposals.

Regarding Shareholder Returns Proposals Summary of the reasons for opposition 1 Strategic Capital – Proposal No. 2 Appropriation of surplus ⚫ Given the characteristics of the Company’s core business, it is necessary to (Dividend of 311 yen maintain a stable financial base. per share) ⚫ If both proposals are approved, approximately 57% of the Company’s cash and deposits would flow out in the short time, which would be excessive as shareholder returns and would impede the enhancement of the Company’s 2 LIM Japan Event Master Fund – corporate value over the medium to long term. Proposal No. 4 ⚫ The Company has refined its approach to cash and deposits on hand and Acquisition of treasury shares revised its shareholder return policy and is implementing balanced and appropriate shareholder return measures (for details, please refer to the (Acquisition of treasury shares next page). in the amount of next page). 21.3 billion yen) 21.3 billion yen)

The Company’s Policy and Details on Shareholder Returns Policy on shareholder returns Dividends To balance management that emphasizes capital efficiency with stable and sustainable shareholder returns, the Company will introduce the DOE (dividend on equity) metric in addition to the dividend payout ratio. DOE indicator: 4% （Consolidated dividend payout ratio: 50% or more) Acquisition of treasury shares While comprehensively considering the market price of the Company’s shares and its financial condition, the Company positions acquisition of treasury shares as a flexible capital policy to improve return on capital and will implement them on an ongoing basis based on resolutions of the Board of Directors. Details of shareholder returns Year-end dividend for the fiscal year ending Dec 2025 An ordinary dividend of 90.00 yen per share（DOE: 4.0％） To be resolved at the Board of Directors meeting to be held on March 30, 2026 ※ Year-end dividend for the fiscal year ending Dec 2024: 60.00 yen per share Acquisition of Cancellation of treasury shares treasury shares Implementation of acquisition of treasury shares up to

Cancellation of treasury shares treasury shares Implementation of acquisition of treasury shares up to Cancellation of 5.0 billion yen or 2.1 million shares 16 million treasury shares (approximately 3.9% of the total issued shares, excluding (approximately 23.1% of the total issued shares prior to treasury shares) cancellation) 3

Regarding Governance （1/2） Proposals Summary of the reasons for opposition 1 Strategic Capital – Proposal No. 4 Proposal to amend the Articles of Proposal to amend the Articles of Incorporation with respect to the appointment of the presiding chair of the Board of Directors (requiring the presiding chair of the Board of Directors to be an outside director in principle) ⚫ The Company has established a sufficient framework for checks and supervision of management, with highly independent outside directors constituting at least one-third of the Board of Directors, and, following the Annual General Meeting of Shareholders in March, the ratio of outside directors will be increased to 50%, thereby further strengthening the governance structure. ⚫ In light of the Company’s current circumstances, the presiding chair of the Board of Directors should be the Representative Director and President, who has a thorough understanding of the Company’s business operations and can exercise leadership. 2 Strategic Capital – Proposal No. 5 Proposal No. 3 Proposal to amend the Articles of Incorporation with respect to the appointment of the chairman of the Board of Directors (requiring the chairman of the Board of Directors to be an outside director)

Pages: 9
Words: 1,658
Format: PDF
Type: Legal

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