メディアドゥ（3678） – [Delayed]Corporate Governance Report

Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. Corporate Governance Report Date of Latest Update: May 27, 2022 MEDIA DO Co., Ltd. Yasushi Fujita, President and CEO Contact: Corporate Planning Office Securities Code: 3678 https://mediado.jp/english/ The status of corporate governance at MEDIA DO Co., Ltd., is as follows. I. Basic Policy on Corporate Governance, Capital Structure, Company Details, and Other Basic Information 1. Basic Policy on Corporate Governance MEDIA DO pursues its vision of “More Content for More People!” through operations based on the concept of digital distribution of written works. Through this approach, the Company aims to fulfill its mission of “unleashing a virtuous cycle of literary creation” in which creators are appropriately compensated when their works are used in digitized formats. To accomplish this mission, MEDIA DO has put forth the basic management policy of improving corporate value and thereby maximizing shareholder value over the medium to long term based on an accurate understanding of the importance of its various stakeholders. MEDIA DO recognizes the following as important management issues to be addressed as its management grows increasingly more global: The expedition and streamlining of management decisions to facilitate the further broadening of its business and the heightening of corporate value, and the improvement of management health and transparency through enhanced corporate governance. Entrenching corporate ethics and awareness of these principles throughout the Company will be imperative to improving the health of management. By fostering such awareness, MEDIA DO aims to develop a corporate culture in which all internal institutions, officers, and employees make fair and accurate decisions. Meanwhile, improving management transparency, and thereby building long-term, trusting relationships with stakeholders, will require prompt and proactive disclosure of information. Systems for information disclosure, both legally mandated and voluntary, are therefore being enhanced toward this end. To ensure impartial and highly effective management, MEDIA DO will continue to strengthen its corporate governance systems through such means as more effectively allocating resources, expediting decisions, and entrenching compliance awareness under the guidance of the Board of Directors. Information on MEDIA DO’s initiatives and initiative policies in relation to the principles of Japan’s Corporate Governance Code can be found below. 1 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. Reasons for Not Adopting the Principles of Japan’s Corporate Governance Code (Updated) This document has been prepared based on the latest version of Japan’s Corporate Governance Code following the June 2021 revision. In addition, all of the requirements of the Tokyo Stock Exchange Prime Market implemented on April 4, 2022, have been met. The Company has adopted all of the principles of Japan’s Corporate Governance Code. Disclosure Based on the Principles of Japan’s Corporate Governance Code (Updated) Principle 1.4 Cross-Shareholdings MEDIA DO engages in cross-shareholdings only when deemed necessary for enhancing business activities or corporate value and when the number of shares required to be held is judged to be rational. Examples of cases in which the Company will engage in cross-shareholdings includes when business alliances or information sharing conducted in association with cross-shareholdings have the potential to generate new synergies in the core eBook distribution business. Moreover, cross-shareholdings are assessed based on Groupwide equity costs by looking at the quarterly financial, earnings, and funding information of cross-shareholding counterparties as well as whether the intended qualitative synergies are being generated to determine, among other factors, if a given holding should be maintained over the medium to long term when considering the projected risks and returns. Assessments and evaluations based on these factors are carried out by the Company’s Investment Committee and by the Board of Directors. Voting rights associated with cross-shareholdings are exercised based on comprehensive evaluation of the degree to which each individual proposal will contribute to improved corporate value for the Company and to higher medium- to long-term corporate value for the cross-shareholding counterparty as well as how the proposal will impact the Company. Should a company holding shares of the Company’s stock express an intention to sell said shares, the Company shall not attempt to impede such sales. Principle 1.7 Related Party Transactions Related party transactions are only conducted after receiving approval based on discussions by the Board of Directors that incorporate the opinions of outside directors and Audit & Supervisory Board members. The related officers are excluded from the vote due to their conflicts of interest. Furthermore, annual surveys are administered to MEDIA DO officers to determine whether or not related party transactions are taking place. Supplementary Principle 2.4.1 Empowerment of Female Employees and Promotion of Internal Diversity MEDIA DO’s corporate creed contains statements such as “All people have limitless potential and can grow with time.” and “MEDIA DO will continue to grow so long as its people grow.” As expressed in these statements, human resources are the most important asset to the business activities advanced in pursuit of the ongoing growth of the MEDIA DO Group. Empowerment of diverse human resources has been defined among the Company’s environmental, social, and governance (ESG) priorities, and we are working to promote diversity, develop a workplace environment that is conducive to the contributions of individual employees, utilize various employment schemes, and identify and recruit diverse human resources. 2 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. Currently, mid-career recruits represent more than 60% of the employees at the Company, making for an employee base featuring a diverse range of specialized backgrounds among management and general employees. Moreover, non-Japanese individuals represented 3% of all employees on February 28, 2022, higher than the approximately 1% of net sales generated by overseas operations. Going forward, MEDIA DO will continue to practice inclusive management while seeking to recruit employees, without giving undue weight to attributes like age, gender, or nationality, in line with the growth curves of its businesses and global expansion. Meanwhile, although women account for roughly half of MEDIA DO’s employee base, only around 23% of management positions were filled by women on February 28, 2022. MEDIA DO recognizes that the empowerment of female employees is an important responsibility, and the Company has therefore set a target of raising the ratio of female managers to 30% by the fiscal year ending February 28, 2024. Various initiatives for accomplishing this target are underway. Furthermore, MEDIA DO has defined its Basic Human Resource Policy, which contains human resource recruitment policies, human resource management policies, human resource development policies, and diversity promotion policies. This policy is available on the Company’s corporate website (https://mediado.jp/english/ir/sustainability/). Principle 2.6 Roles of Corporate Pension Funds as Asset Owners The Company employs a defined contribution pension plan. It is not involved in the management of this fund, including in efforts to grow the fund, as an asset owner. However, it does provide employee education programs related to asset formation through defined contribution pension plans and the employee shareholding association. Principle 3.1 Full Disclosure (1) Company Objectives (e.g., Business Principles), Management Strategies, and Business Plans Information on the Company’s business philosophy, management strategies, and medium-term management plan can be found on the Company’s corporate website (https://mediado.jp/english/about/philosophy/) and in its financial results briefing materials and integrated reports (https://mediado.jp/english/ir/library/annualreport/). (2) Basic Corporate Governance Stance and Policies Information on the Company’s basic corporate governance stance and policies can be found on the Company’s corporate website and in its corporate governance reports and annual securities reports. In addition, the Company has formulated the MEDIA DO Basic Corporate Governance Policy, which is available on its corporate website (https://mediado.jp/english/ir/sustainability/governance/policy/). (3) Board of Directors’ Policies and Procedures for Determining the Compensation of Senior Management and Directors Internal regulations have been established regarding the policies and procedures for deciding director compensation and information on these regulations can be found in the Company’s corporate governance reports. For details, please refer to “Director Compensation” in “1. Organizational Structures and Operation” under “II. System of Business Management Organization for Management Decision-Making, Operational Execution, and Auditing and Other Corporate Governance Systems” below. 3 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. (4) Board of Directors’ Policies and Procedures for the Appointment and Dismissal of Senior Management and the Nomination of Director and Audit & Supervisory Board Member Candidates Decisions regarding the nomination of director candidates; the appointment of executive officers, who act as senior management; and the dismissal of directors and executive officers are made based on whether the individual in question is capable of contributing to sustainable growth and the improvement of the corporate value of the Company, with consideration paid to gender and other diversity factors and to skills. To ensure the objectivity and transparency of decisions, the Board of Directors consults with the Nomination and Compensation Committee, and this committee reports on the consulted matter after its own discussions and examinations. Decisions are made by the Board of Directors after this process. Candidates for positions as Audit & Supervisory Board members are selected with a focus on their ability to improve the soundness of management and to help the Company earn greater trust from society, and their capacity to conduct neutral and objective audits. Candidates for these positions are selected by the Board of Directors after discussions and consensus by the Audit & Supervisory Board. (5) Explanations with Regard to Decisions by the Board of Directors Pertaining to the Appointment and Dismissal of Senior Management and the Nomination of Director and Audit & Supervisory Board Member Candidates The reason for the selection of candidates for positions as directors and Audit & Supervisory Board candidates can be found on the Company’s corporate website (https://mediado.jp/english/ir/sustainability/governance/); in information on the career history of all candidates and the skill matrix detailing their specialties and experience; and in the Company’s notices of convocation for the General Meeting of Shareholders (https://ssl4.eir-parts.net/doc/3678/ir_material_for_fiscal_ym2/116739/00.pdf). Supplementary Principle 3.1.3 Sustainability Initiatives The MEDIA DO Group’s mission is “unleashing a virtuous cycle of literary creation” and its vision is “More Content for More People!” These principles exemplify our commitment to building a social ecosystem founded on co-creation among the creators and publishers who produce written works, the users of these works, the eBook stores that serve as points of contacts between these two, and the Group, which functions as an intermediary between these parties. Accordingly, sustainability for the MEDIA DO Group entails a concerted effort by all officers and employees to carry out their business activities based on a sense of responsibility and pride toward the contributions made by the Group’s businesses and services. These contributions support the development of a healthy economy and the cultural advances stimulated by written works. Based on this belief, we seek to address social and environmental issues, such as those identified by the United Nations (UN) Sustainable Development Goals (SDGs), through management practices and strategies founded on our mission and vision. In addition, we view business opportunities and risks through the lens of ESG issues as we pursue increased corporate value by helping to resolve social issues while achieving steady growth. MEDIA DO realizes that environmental and social issues have the potential to impact its business and corporate value creation activities, and these issues are being addressed through internal action. Going forward, this action will be guided by the Sustainability Committee, the new committee to be established by reorganizing the Risk Management Committee based on a resolution by the Board of Directors made on May 19, 2022. The Sustainability Committee will be chaired by the director who serves as CSO and CFO and who is responsible for corporate divisions, with executive officers responsible for human resource and accounting divisions serving as vice chairs. Other members will include officers designated by the 4 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. chairperson and by representatives from other divisions. In principle, meetings of the Sustainability Committee will be held four times a year (once every quarter). The Sustainability Committee will also submit reports to the Board of Directors at the appropriate times after meetings in order to facilitate the identification and investigation of climate change and other risks and opportunities with the potential to affect the sustainability of the Company, the assessment of sustainability strategies and measures, and the enhancement of oversight and monitoring functions. Moreover, the committee with coordinate with the Corporate Planning Office and the General Affairs Department, which will function as its secretariat, to maintain an understanding of social trends and shareholder expectations to be reflected in the medium- to long-term mission, vision, and strategies of the Company. This information will also be utilized when identifying and revising material issues. Based on the opportunities and risks identified in the process of defining material issues, concrete sustainability strategies and targets will be set for divisions and Group companies. The progress of such initiatives will be monitored regularly by the Sustainability Committee. For more information on the MEDIA DO Group’s sustainability initiatives, please refer to the Company’s corporate website (https://mediado.jp/english/ir/sustainability/). Investments in Human Resources and Intellectual Property Developing a sustainable business requires the effective allocation of management resources from a financial perspective as well as from a non-financial perspective looking at factors such as investments in human capital and research and development. MEDIA DO is taking a medium- to long-term perspective toward accelerating measures for recruiting human resources and developing the skills of existing employees in order to enhance its human capital. Meanwhile, the recruitment and development of new graduate hires has been practiced for more than a decade in order to foster candidates for core positions endowed with the DNA of MEDIA DO and thereby cultivate a robust pipeline of human resources for filling manager and other important positions. Year-round recruitment is conducted to acquire highly talented individuals with skills pertaining to technology, corporate planning, and other specialized areas that will contribute to business growth and to the development of new businesses. By securing access to a wide-range of labor markets and utilizing sophisticated recruitment methodologies, the Company aims to secure the necessary talent. Human resource development initiatives, meanwhile, include ongoing training programs as well as assessment training required when undergoing promotions. Through such initiatives, we aim to ensure that employees with the necessary skills are present at all levels of the organization and to place all employees in the ideal position in order to allow them to exercise their skills. Moreover, MEDIA DO provides a diverse range of opportunities, earning it consistently high scores related to individual ambition to grow on employee surveys. As a company that deals with copyrights, MEDIA DO is taking steps to foster a publishing ecosystem that facilitates the protection and appropriate use of intellectual assets. The digitization trend is driving quantitative and qualitative changes to the structure of the content market along with the diversification of this market. To respond to these changes, investments are being conducted to reform foundational systems and otherwise enhance existing assets. In addition, investments and business alliances are being advanced for the purpose of acquiring intellectual properties and works that can be used to produce content. Based on this situation, business portfolio strategies are discussed by the Executive Committee and incorporated into medium-term management plans. 5 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. Impact of Climate Change-Related Risks and Opportunities on Business Activities and Earnings The MEDIA DO Group itself has a relatively low dependency on natural capital, given the characteristics of its business. Accordingly, the risk of climate change having a direct impact on business activities or financial targets over the short to medium term has been deemed to be low. The publishing industry as a whole, however, impacts the environment through the consumption of paper, the use of energy for distribution, and the return and disposal of written works. Given this situation, the Group’s efforts to increase use of eBooks and to promote the digital transformation of the overall publishing industry, while not contributing directly to improvements in the Group’s corporate value, has the potential to contribute to reduced distribution energy use for publications and the publishing industry. These reductions in energy use would also help combat climate change by lowering energy consumption and greenhouse gas emissions. Going forward, the Sustainability Committee will examine the possibility of enhancing information disclosure through scenario analyses, targets, and management processes incorporating long-term climate change risk and opportunities based on the recommendations of the Task Force on Climate-related Financial Disclosures. For information on the MEDIA DO Group’s CO2 emissions (Scope 1 and Scope 2), please refer to the ESG highlights section of the Company’s sustainability website (https://mediado.jp/english/sustainability/). Supplementary Principle 4.1.1 Scope of Delegation of Authority to Senior Management from the Board of Directors The Board of Directors is responsible for decisions on matters defined in laws and regulations and in the articles of incorporation as well as for decisions on important matters described in the internal regulations for the Board of Directors. In addition, the scope of authority for discussion and approval regarding other decisions residing with the Board of Directors, the Executive Committee, the president and CEO, directors, executive officers, general managers, and other individuals is clearly defined in regulations for divisions of authority and approval procedures. Supplementary Principle 4.1.3 Succession Plan for CEO and Other Top Executives Candidates for director and other management positions are selected by the Board of Directors after consulting with and receiving input from the Nomination and Compensation Committee in relation to matters such as the skills required to implement the Company’s management strategies. In addition, the Board of Directors makes decisions regarding the nomination of director candidates, the appointment and dismissal of directors and executive officers with additional titles, and the appointment and dismissal of executive officers as well as the delegation of authority to these officers. These decisions are made based on input from the Nomination and Compensation Committee. Audit & Supervisory Board member candidates are nominated by the Board of Directors after receiving consent from the Audit & Supervisory Board. Succession plans for the president and CEO are formulated through ongoing discussion by the Nomination and Compensation Committee to ensure that these plans account for factors such as the Company’s medium-term management policies, the progress of its strategies, and changes to its operating environment. Candidates for the position of president and CEO may be chosen from within management or from outside of the Company and should be individuals judged to possess a strong track record combined with superior management decision-making capabilities. These capabilities are to be assessed based on consideration of factors such as the strength of their leadership, the level of passion they devote to exercising MEDIA DO’s corporate philosophy, their reputation inside and outside of the Company, their pursuit of innovation, and their personality and popularity. The final decision regarding the successor to the president and CEO will be made by the Board of Directors, 6 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. selecting the most suited individual from among the candidates and with due consideration paid to input from the Nomination and Compensation Committee. Principle 4.9 Independence Standards and Qualification for Independent Directors Candidates for positions as outside directors to be designated as independent directors are selected after assessing their risks of representing conflicts of interest with general shareholders based on the conditions surrounding the Company. The standards defined by the Companies Act of Japan and the Tokyo Stock Exchange form the basis for these decisions. When appointing outside directors to be designated as independent directors, the Company selects candidates that understand its business philosophy and that are expected to be able to offer objective input on its management policies and corporate strategies based on their specialized insight and experience. Supplementary Principle 4.10.1 Nomination and Compensation Committee The Nomination and Compensation Committee, which is comprised of a majority of outside directors designated as independent directors, has been established as a body independent from the Board of Directors that is responsible for examining important matters related to the nomination and compensation of directors and members of management. For details, please refer to “Has committees equivalent to nominating committee or compensation committee” under “Board of Directors” in “1. Organizational Structures and Operation” under “II. System of Business Management Organization for Management Decision-Making, Operational Execution, and Auditing and Other Corporate Governance Systems” below. Supplementary Principle 4.11.1 Policy Regarding Balance of Business Knowledge, Experience, and Skills; Diversity; and Size of the Board of Directors The articles of incorporation stipulate that the Board of Directors should comprise eight or less directors and that the Company should have four or less Audit & Supervisory Board members. Within this scope, the Company’s basic policy is to choose the membership of the Board of Directors that is deemed ideal while considering the balance of business knowledge, experience, and skills of members as well as their gender, nationality, age, and other diversity aspects. From the perspectives of objectivity and transparency, candidates for positions as directors are selected by the Board of Directors after consulting with the Nomination and Compensation Committee and receiving reports on the discussions and evaluations of this committee. Evaluations and decisions regarding director candidates are carried out with comprehensive consideration paid to their experience, insight, and specialties based on MEDIA DO’s business philosophy and management strategies. In selecting candidates for positions as outside directors and outside Audit & Supervisory Board members, the Company seeks individuals that fulfill the requirements for outside directors and outside auditors stipulated by the Companies Act of Japan and for independent directors and independent auditors put forth by the Tokyo Stock Exchange. Moreover, these individuals must not present the risk of conflicts of interest with general shareholders. A skill matrix has been prepared detailing the business knowledge, experience, and skills required of directors and Audit & Supervisory Board members based on the Company’s management strategies. This matrix can be found in the notice of convocation for the General Meeting of Shareholders (https://ssl4.eir-parts.net/doc/3678/ir_material_for_fiscal_ym2/116739/00.pdf) on the Company’s corporate website (https://mediado.jp/english/ir/sustainability/governance/). 7 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. Supplementary Principle 4.11.2 Concurrent Positions Held by Directors and Audit & Supervisory Board Members Some outside directors and outside Audit & Supervisory Board members hold concurrent positions at other companies. However, it has been judged that these officers are still able to devote the necessary time and effort to performing their roles and duties as outside directors and outside Audit & Supervisory Board members of the Company despite these concurrent responsibilities. Internal directors and standing Audit & Supervisory Board members do not hold concurrent positions at other listed companies and are therefore able to dedicate their attention fully to their positions at the Company. Information on major concurrent positions at other companies held by outside directors and outside Audit & Supervisory Board members can be found in the Company’s notices of convocation for the General Meeting of Shareholders and in its annual securities reports. Supplementary Principle 4.11.3 Evaluation and Analysis of the Effectiveness of the Board of Directors Self-evaluations and analyses of the effectiveness of the Board of Directors are performed for the purpose of improving the functionality of the Board of Directors and subsequently the corporate value of the Company. Advice from third-party institutions has been received in performing the self-evaluations and analyses, which were performed through the following procedures. In March 2022, questionnaires were issued to all directors and Audit & Supervisory Board members on the Board of Directors. Responses were submitted directly to the contracted third-party institution to maintain anonymity, and the institution submitted a report aggregating these responses. This report was analyzed, discussed, and evaluated at the regular meeting of the Board of Directors held in May 2022. The findings of this review process were as follows. The responses to the questionnaires indicated that the involvement of the voluntarily established committees in the processes of formulating management compensation plans and succession plans and of implementing these plans is appropriate and that the Company is effectively managing conflicts of interest with management, majority shareholders, and other parties related to the Company. In addition, it was determined that open, frank, and constructive discussions were being held at meetings of the Board of Directors and that outside directors were fulfilling their oversight function. These findings represented improvements in comparison to the previous evaluation of the effectiveness of the Board of Directors, and the overall evaluation was generally positive. Based on this general positive evaluation, it has been determined that the Board of Directors is effective overall. Conversely, issues identified once again included the difficulty in securing sufficient time for discussing medium- to long-term corporate and management strategies and responses to potential risks due to the measures implemented for preventing the spread of COVID-19. Other issues included the insufficient level of resources devoted to cultivating successors to the president. Information on such issues was shared to facilitate the improvement of the functionality and sustainability of the Board of Directors and to enhance discussions at meetings. Based on this evaluation of the effectiveness of the Board of Directors, swift action will be taken after sufficient discussion of the identified issues to continuously heighten the functionality of the Board of Directors. 8 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. Supplementary Principle 4.14.2 Director and Audit & Supervisory Board Member Training Policies Newly appointed directors are provided with explanations on MEDIA DO’s mission, vision, operating environment, businesses, and other basic and external matters pertaining to the Company. In addition, new directors are encouraged to proactively take part in external seminars and join external organizations in order to acquire the knowledge necessary for carrying out their duties and to update their understanding with the latest insight and to thereby improve their overall knowledge and skills. Audit & Supervisory Board members are encouraged to participate in seminars arranged by the Japan Audit & Supervisory Board Members Association and in other venues to receive the training necessary for performing their duties. Outside directors and outside Audit & Supervisory Board members participate in Companywide training sessions held twice a year and are provided with other opportunities to acquire the necessary knowledge pertaining to the Company’s business, organization, and finances. Principle 5.1 Policy for Constructive Dialogue with Shareholders MEDIA DO seeks to foster trusting relationships with shareholders and to increase the transparency of its activities through information disclosure and engagement in pursuit of ongoing growth and medium- to long-term improvements in corporate value. The Company promotes constructive dialogue with shareholders through the following frameworks and initiatives. 1. Constructive dialogue with shareholders and other investors is spearheaded by the representative director and the relevant executive officers. 2. Corporate management divisions under the direct jurisdiction of the representative director are assigned responsibility for investor relations activities to serve as an internal venue for facilitating engagement. These divisions work closely with other relevant divisions to advance dialogues and build relationships with shareholders and other investors. 3. The representative director and divisions responsible for investor relations activities proactively create opportunities for direct engagement with shareholders. Examples of these opportunities include quarterly financial results briefings, individual meetings with shareholders, small meetings, and teleconferences with overseas investors. In addition, the representative director and divisions responsible for investor relations activities conduct regular domestic and overseas financial roadshows and participate in conferences organized by securities companies. 4. For private investors, ongoing enhancements are made to MEDIA DO’s corporate website to offer a better understanding of the Company’s business activities and initiatives. Proactive information disclosure is also practiced through MEDIA DO’s integrated reports, shareholder newsletters, and other publications. 5. Reports are submitted to the Board of Directors with regard to the findings of surveys by external firms on the status of the Company’s shareholder base and on other matters. The Board of Directors is also informed about the opinions and concerns of shareholders gathered during engagement activities. 9 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. 6. Insider information is managed rigorously based on the Company’s insider trading management regulations, and regular workshops are held to inform officers and employees about this subject. Materials and videos from financial results briefings are made available on the Company’s corporate website and English-language versions of these materials, financial results summaries, integrated reports, and shareholder newsletters are provided. 2. Capital Structure (Updated) More than 10%, less than 20% Ratio of shares held by foreign institutions and individuals Major Shareholders (Updated) Name Yasushi Fujita FIBC Co., Ltd. Custody Bank of Japan, Ltd. (Trust Account) GOLDMAN SACHS & CO. REG The Master Trust Bank of Japan, Ltd. (Trust Account) SHOGAKUKAN Inc. J.P. MORGAN CHASE BANK 385632 KODANSHA LTD. TOHAN CORPORATION Kazuyoshi Ohwada Has controlling shareholders (excluding parent company) Has parent company Supplementary Information No No 10 Number of shares Percentage of total shares issued (%) 2,439,816 2,114,700 1,371,100 1,099,302 1,059,900 564,800 547,832 544,000 489,649 457,400 15.37 13.33 8.64 6.93 6.68 3.56 3.45 3.43 3.09 2.88 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. ――― 3. Company Details (Updated) Stock exchange, section Tokyo Stock Exchange, First Section Fiscal year-end February 28/29 Industry Information & Communication Number of employees at end of previous fiscal year (consolidated) Net sales in previous fiscal year (consolidated) Number of consolidated subsidiaries at end of previous fiscal year More than 500, less than 1,000 More than ¥100 billion, less than ¥1,000 billion More than 10, less than 50 4. Guidelines for Measures to Protect Minority Shareholders in the Event of Transactions with Controlling Shareholders ――― 5. Other Conditions That May Materially Affect Corporate Governance N/A II. System of Business Management Organization for Management Decision-Making, Operational Execution, and Auditing and Other Corporate Governance Systems 1. Organizational Structures and Operation (Updated) Organizational structure Company with Company Auditor(s) Board of Directors Number of directors pursuant to articles of incorporation 8 Term of directors pursuant to articles of incorporation 1 year Chairman of Board of Directors President and CEO 11 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. Number of directors Has outside directors Yes Number of outside directors Number of outside directors who are also independent directors 6 2 2 Relationship between Outside Directors and the Company (1) Name Association Relationship with the Company* a b c d e f g h i j k Ayako Kanamaru Lawyer Haruo Miyagi Other △ * Multiple choice items regarding relationship with the Company * 〇 indicates that the individual is now or was recently applicable under the item. △ indicates that the individual was applicable under the item in the past. * ● indicates that a close relative of the individual is now or was recently applicable under the item. ▲ indicates that a close relative of the individual was applicable under the item in the past. a. A person involved in operation of the Company, its subsidiaries, or its affiliates b. A person involved in operation or a non-executive director of the parent company of the Company c. A person involved in operation of a subsidiary of the parent company of the Company d. An entity or a person involved in operation of an entity that has a significant business relationship with the Company e. An entity or a person involved in operation of an entity with which the Company has a significant business relationship f. A consultant, an accounting specialist, or a legal specialist receiving large amounts of monetary payments or other financial assets from the Company, its subsidiaries, or its affiliates that are separate from the compensation paid for services as a director or an Audit & Supervisory Board member g. A major shareholder of the Company or a person involved in operation of an entity that is a major shareholder of the Company h. A person involved in operation of an entity with which the Company has a significant business relationship who does not qualify under d., e., or f. above (only applies to individual in question) i. A person involved in operation of an entity at which a person involved in operation of the Company, its subsidiaries, or its affiliates serves as an outside director or an Audit & Supervisory Board member (only applies to individual in question) j. A person involved in operation of an entity that receives large amounts of donations from the Company, its subsidiaries, or its affiliates (only applies to individual in question) k. Other 12 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. Relationship between Outside Directors and the Company (2) Name Independent director Reason for appointment Supplementary information regarding status of independence Ayako Kanamaru is a partner lawyer at OH-EBASHI LPC & PARTNERS, with which the Company concluded a legal consultant contract over the period from January 2003 to February 2017. Currently, there is no transactional relation between the Company and OH-EBASHI LPC & PARTNERS. Accordingly, it has been judged that this past association will not have an impact on decision-making at the Company and that she does not present the risk of conflicts of interest with general shareholders. As an attorney at law, Ayako Kanamaru has extensive experience and expert knowledge related to general corporate legal affairs encompassing international transactions, internal controls, and corporate governance. The Company anticipates that her knowledge and experience will be an asset in fields centered on risk management and governance domains. Furthermore, notification has been submitted to the Tokyo Stock Exchange designating her as an independent director. This decision was made based on the judgment that she fulfilled the criteria for designation as an independent director stipulated by the Tokyo Stock Exchange and that she does not present the risk of conflicts of interest with general shareholders. Ayako Kanamaru ○ 13 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. As the representative director of an NPO tasked with cultivating future entrepreneurial leaders, Haruo Miyagi has extensive experience and insight related to supporting businesses and organizational management in a wide range of fields. The Company anticipates that his experience and insight will be an asset in bolstering its business development and organizational management functions. Furthermore, notification has been submitted to the Tokyo Stock Exchange designating him as an independent director. This decision was made based on the judgment that he fulfilled the criteria for designation as an independent director stipulated by the Tokyo Stock Exchange and that he does not present the risk of conflicts of interest with general shareholders. Haruo Miyagi ○ Voluntary Nominaticommittee on and equivalent to Compensnominating committee ation Committee Voluntary committee equivalent to Nomination and CompensHas committees equivalent to nominating committee or compensation committee Yes Voluntary Committees, Membership, and Chairperson Total Internal Internal Outside External Other ChairpersName members officers directors directors experts members on 3 0 1 2 0 0 3 0 1 2 0 0 14 Outside director Outside director Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. compensation ation Cocommittee mmittee Supplementary Information On June 1, 2021, the Company established the Nomination and Compensation Committee as a voluntary advisory body to the Board of Directors for the purpose of reinforcing its corporate governance system by heightening the transparency and objectivity of decisions regarding the nomination and compensation of directors. The committee is to be comprised of three or more directors, including the representative director, appointed via resolution of the Board of Directors, a majority of which should be outside directors designated as independent directors. The chairperson of this committee shall be selected from among the members who are outside directors designated as independent directors based on a majority vote by members. As an advisory body to the Board of Directors, the Nomination and Compensation Committee reports to the Board of Directors on its examinations and deliberations pertaining to matters such as the nomination of director candidates, the appointment and dismissal of directors and executive officers, policies and procedures related to the compensation of directors and executive officers, and succession plans for the president and CEO. The committee is currently membered by three directors: Ayako Kanamaru, outside director designated as independent director and chairperson (tentative); Haruo Miyagi, outside director designated as independent director; and Yasushi Fujita, representative director. Audit & Supervisory Board Has Audit & Supervisory Board Number of Audit & Supervisory Board members pursuant to articles of incorporation Number of Audit & Supervisory Board members Yes 4 3 Coordination between Audit & Supervisory Board Members, Accounting Auditor, and Internal Auditing Organizations At the Company, the Audit & Supervisory Board, Internal Audit Office, and accounting auditor maintain independence from one another while also coordinating to improve the effectiveness and overall quality of audits. Audit & Supervisory Board members and the accounting auditor share information regarding the results of on-site accounting audits by the accounting auditor and of business audits to increase the effectiveness and efficiency of audits. Audit & Supervisory Board members meet with members of the Internal Audit Office when necessary to ensure effective audits. 15 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. Meetings are held between the accounting auditor and members of the Internal Audit Office as necessary to share information and opinions for the purpose of improving the overall quality of audits. Has outside Audit & Supervisory Board members Yes Number of outside Audit & Supervisory Board members Number of outside Audit & Supervisory Board members who are also independent auditors 2 2 Relationship between Outside Audit & Supervisory Board Members and the Company (1) Name Association Toshiaki Morifuji Certified public accountant Relationship with the Company* j k c d g h e f i a b l m △ Lawyer Tsuyoshi Shiina * Multiple choice items regarding relationship with the Company *〇 indicates that the individual is now or was recently applicable under the item. △ indicates that the individual was applicable under the item in the past. * ● indicates that a close relative of the individual is now or was recently applicable under the item. ▲ indicates that a close relative of the individual was applicable under the item in the past. a. A person involved in operation of the Company, its subsidiaries, or its affiliates b. A non-executive director or an accounting advisor of the Company, its subsidiaries, or its affiliates c. A person involved in operation or a non-executive director of the parent company of the Company d. An Audit & Supervisory Board member of the parent company of the Company e. A person involved in operation of a subsidiary of the parent company of the Company f. An entity or a person involved in operation of an entity that has a significant business relationship with the Company g. An entity or a person involved in operation of an entity with which the Company has a significant business relationship h. A consultant, an accounting specialist, or a legal specialist receiving large amounts of monetary payments or other financial assets from the Company, its subsidiaries, or its affiliates that are separate from the compensation paid for services as a director or an Audit & Supervisory Board member i. A major shareholder of the Company or a person involved in operation of an entity that is a major shareholder of the Company j. A person involved in operation of an entity with which the Company has a significant business relationship who does not qualify under f., g., or h. above (only applies to individual in question) 16 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. k. A person involved in operation of an entity at which a person involved in operation of the Company, its subsidiaries, or its affiliates serves as an outside director or an Audit & Supervisory Board member (only applies to individual in question) l. A person involved in operation of an entity that receives large amounts of donations from the Company, its subsidiaries, or its affiliates (only applies to individual in question) m. Other Relationship between Outside Audit & Supervisory Board Members and the Company (2) Name Independent auditor Supplementary information regarding status of independence Reason for appointment Toshiaki Morifuji 〇 Toshiaki Morifuji was previously employed by KPMG AZSA LLC, the Company’s accounting auditor, but he resigned from this position in June 2009. Accordingly, it has been judged that this past association will not have an impact on decision-making at the Company and that he does not present the risk of conflicts of interest with general shareholders. Toshiaki Morifuji possesses specialized insight as a certified public accountant. He was therefore judged capable of appropriately performing the duties of an outside Audit & Supervisory Board member. He was appointed to the position of outside Audit & Supervisory Board member so that his specialized insight can be utilized in strengthening the auditing system of the Company. Furthermore, notification has been submitted to the Tokyo Stock Exchange designating him as an independent auditor. This decision was made based on the judgment that he fulfilled the criteria for designation as an independent auditor stipulated by the Tokyo Stock Exchange and that he does not present the risk of conflicts of interest with general shareholders. 17 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. Tsuyoshi Shiina possesses experience as a lawyer and a tax accountant, as a member of the National Diet of Japan Fukushima Nuclear Accident Independent Investigation Commission, and as a member of the House of Representatives of Japan. He therefore has a wealth of specialized insight pertaining to corporate governance and crisis management, and he was thus judged capable of appropriately performing the duties of an outside Audit & Supervisory Board member. He was appointed to the position of outside Audit & Supervisory Board member so that his specialized insight can be utilized in strengthening the auditing system of the Company. Furthermore, notification has been submitted to the Tokyo Stock Exchange designating him as an independent auditor. This decision was made based on the judgment that he fulfilled the criteria for designation as an independent auditor stipulated by the Tokyo Stock Exchange and that he does not present the risk of conflicts of interest with general shareholders. Tsuyoshi Shiina 〇 ――― Independent Directors and Auditors Number of independent directors and auditors 4 Other Matters Regarding Independent Directors and Auditors ――― Incentive Systems Incentives provided to directors Stock option system, etc. Supplementary Information Based on a resolution approved at the 19th Annual General Meeting of Shareholders held on May 30, 2018, a restricted stock compensation system was introduced to provide incentive for achieving medium- to long-term improvements in corporate value and shareholder value and to better encourage directors to share the value of shareholders. 18 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. In conjunction with the introduction of the restricted stock compensation system, the free and paid stock option systems previously introduced to heighten motivation for accomplishing performance targets were abolished. Individuals able to receive stock options Internal directors, outside Audit & Supervisory Board members, and employees of the Company; directors and employees of subsidiaries; etc. Supplementary Information The Company’s stock option systems were abolished in May 2018, but some applicable officers still hold unexercised stock options that have already been issued. Director Compensation (Updated) Disclosure of compensation of individual directors Compensation of individual directors not disclosed Supplementary Information In the fiscal year ended February 28, 2021, no one individual received total compensation exceeding ¥100 million. Accordingly, individual compensation amounts are not disclosed. Compensation amounts are disclosed in the form of totals for compensation paid to directors and to Audit & Supervisory Board members. Has policies for deciding compensation amounts and calculation methods Yes Disclosed Policies for Deciding Compensation Amounts and Calculation Methods Individual amounts of compensation paid to directors are decided based on the following policies: 1. Basic Policies ・Compensation systems for directors should be designed to generate strong motivation to pursue ongoing improvements in corporate value. ・Compensation systems should also incorporate objective and transparent procedures founded on principles of accountability toward shareholders and other stakeholders. ・Compensation amounts should be set appropriately based on the roles and responsibility of each individual director. 2. Types of Compensation ・Compensation for directors is comprised of fixed compensation and of compensation linked to the performance of the Company (performance-linked compensation). 19 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. ・For executive directors, fixed compensation is comprised of monetary compensation and stock compensation while performance-linked compensation is paid in the form of monetary compensation. ・Compensation for outside directors consists of only fixed monetary compensation out of consideration for the oversight functions and independence of outside directors. 3. Policies for Determining Individual Amounts of Fixed Compensation (including policies regarding payment timings and conditions) ・Fixed monetary compensation shall be determined based on the roles and responsibilities of individuals (with consideration paid to the salaries of employees who are not directors). Fixed compensation for executive directors will also be influenced by comprehensive evaluations of individual performance in the preceding fiscal year as well as individual performance targets (commitments) set for the given fiscal year. ・The issuance of stock compensation as part of fixed compensation shall be conducted in accordance with 5. below. ・Fixed monetary compensation will be paid each month of an individual’s tenure as a director and fixed stock compensation will be paid at a predetermined timing each year. 4. Policies for Determining Performance Indicators and Amounts for Performance-Linked Compensation (including policies regarding payment timings and conditions) ・The indicators used for calculating performance-linked compensation shall be consolidated net sales and operating profit in order to emphasize profitability and growth potential. ・Amounts of performance-linked compensation paid to individuals are to be determined with due consideration paid to the degree of each individual’s contributions to the accomplishment of targets for the defined indicators in the given fiscal year. Performance-linked payment amounts may be subject to downward adjustments in fiscal years in which performance fails to reach the defined targets. ・Performance-linked compensation shall be paid each month of an individual’s tenure as a director. 5. Types of Non-Monetary Compensation and Polices for Determining Amounts and Calculation Methods of Non-Monetary Compensation ・Stock compensation shall be allocated to individuals in amounts determined based on a comprehensive evaluation of each individual’s contribution to the accomplishment of ESG and other qualitative goals set from the perspectives of ongoing growth and medium- to long-term improvements in corporate value. ・Stock compensation shall be issued through a restricted stock compensation system in which shares of common stock of the Company are allocated to applicable directors entirely in the form of in-kind contributions of monetary compensation claims. The allocated shares of stock will be subject to transfer restrictions imposed over a period of two to five years set by the Board of Directors. 6. Policies for Determining Ratios of Compensation by Type ・The ratios of compensation by type for executive directors shall be set as follows. Fixed compensation Monetary: Approx. 70% 20 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. Stock: Approx. 20% Performance-linked compensation Monetary: Approx. 10% ・Compensation for outside directors shall be comprised entirely of fixed monetary compensation. 7. Policies for Determining Individual Director Compensation ・The Board of Directors shall consult and receive reports from the Nomination and Compensation Committee with regard to the amounts of compensation to be paid to individual directors. ・Via resolution of the Board of Directors, the authority for determining the amounts of compensation (excluding stock compensation) to be paid to individual directors shall be delegated to the representative director. The representative director is to make decisions with due consideration paid to the advice of the Nomination and Compensation Committee. ・Amounts of stock compensation issued to individual directors are to be determined via resolution by the Board of Directors with due consideration paid to the advice of the Nomination and Compensation Committee. 8. Nomination and Compensation Committee ・The Nomination and Compensation Committee shall be comprised of three or more directors, including the representative director, appointed via resolution of the Board of Directors, a majority of which should be outside directors designated as independent directors. The chairperson of this committee shall be selected from among the members who are outside directors designated as independent directors based on a majority vote by members. ・Resolutions by the Nomination and Compensation Committee shall be made based on a majority vote by members present at committee meetings attended by at least half of the members eligible to vote on the given proposal. Support Systems for Outside Directors and Audit & Supervisory Board Members The Corporate Planning Office serves as the venue through which outside directors and outside Audit & Supervisory Board members can receive support, and this office is thus responsible for informing these officers of meetings of the Board of Directors and providing pre-meeting briefings on items to be put to resolution. Outside directors and outside Audit & Supervisory Board members attend meetings of the Board of Directors at which documents on agenda items and other related materials are distributed. At MEDIA DO, all important matters are raised to or reported to the Board of Directors, and all outside directors and outside Audit & Supervisory Board members are informed about these items accordingly. In addition, meetings are held among these outside directors and outside Audit & Supervisory Board members as necessary to facilitate coordination with independent directors and independent auditors to promote exchanges of information and shared recognition building based on their independent and objective perspectives. Through these support systems for outside directors and outside Audit & Supervisory Board members, frameworks are prepared for communication and coordination between senior management and outside directors designated as independent directors and coordination with Audit & Supervisory Board members and the Audit & Supervisory Board. 21 Note: This document has been translated from the Japanese-language original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese-language original, the original shall prevail. 2. Matters Concerning Operational Execution, Audits, Supervision, Nomination, Compensation, and Other Functions (Overview of Current Corporate Governance System) (Updated) The following systems are in place to facilitate operational execution, audits, and supervision. 1. Board of Directors The Board of Directors, which comprises six directors, two of which are outside directors, is the Company’s highest management decision-making body. Based on the internal regulations for the Board of Directors, the Board of Directors makes decisions on important matters (management policies, business plans, acquisition and disposal of important assets, etc.) and supervises the status of operational execution. Regular meetings of the Board of Directors are held once a month, in principle, and special meetings are convened as necessary. 2. Audit & Supervisory Board The Audit & Supervisory Board comprises one standing Audit & Supervisory Board member and two Audit & Supervisory Board members. These Audit & Supervisory Board members attend meetings of the Board of Directors to maintain an understanding of conditions within the Company and perform audits of operations along with accounting audits by interviewing directors and reviewing relevant documents. The standing Audit & Supervisory Board member also attends important meetings other than those of the Board of Directors to provide for sufficient oversight of the status of operational execution by directors. The Audit & Supervisory Board meets once a month. At meetings, the three Audit & Supervisory Board members establish audit plans and review the status of audit implementation and audit results and perform other tasks to ensure effective and efficient audits. Moreover, information is shared between Audit & Supervisory Board members, the Internal Audit Office, and the accounting auditor to ensure efficient and synergetic audit 3. Nomination and Compensation Committee The Nomination and Compensation Committee shall be comprised of three or more directors, including the representative director, appointed via resolution of the Board of Directors, a majority of which should be outside directors designated as independent directors. The chairperson of this committee shall be selected from among the members who are outside directors designated as independent directors based on a majority vote by members. These measures will be taken in order to ensure high levels of independence and transparency. As an advisory body to the Board of Directors, the Nomination and Compensation Committee reports to the Board of Directors on its examinations and deliberations pertaining to matters such as the nomination of director candidates, the appointment and dismissal of directors and executive officers, policies and procedures related to the compensation of directors and executive officers, and succession plans for the president and CEO. 4. Internal Audit Office The Internal Audit Office is an organization under the direct jurisdiction of the representative director, president and CEO. This organization reports directly to the Board of Directors and performs inter