Report from Our Nomination and Compensation Committee to the Board of Directors Regarding Partial Revision of the Directors’ Compensation System and Introduction of a Performance-Linked Stock Compensation Plan

Background and Purpose of Revising the Directors' Compensation System

GungHo Online Entertainment, Inc. plans to partially revise the directors' compensation system based on recommendations from the Nomination and Compensation Committee to promote business growth and enhance corporate value. Specifically, this includes a significant review of basic remuneration, changing the KPI for performance-linked remuneration from consolidated operating income to net income attributable to owners of the parent, raising the cap to JPY 400 million annually, abolishing the stock option plan, and introducing a new performance-linked stock compensation plan. These changes aim to encourage management to focus on stock price performance and enhance medium- to long-term corporate value.

Overview of the Revised Compensation System and Future Schedule

The revised compensation system will consist of basic remuneration (cash), performance-linked remuneration (cash), and performance-linked stock compensation (non-cash), featuring enhanced performance linkage. The remuneration ratio for the chairman and president will also be reviewed to strengthen incentives. The performance-linked stock compensation will be granted as restricted stock after a three-year evaluation period comparing dividend-included TOPIX growth rate and GungHo’s TSR growth rate. These revisions will be submitted for approval at the 29th Ordinary General Meeting of Shareholders in March 2026 and, upon approval, will be implemented.