MEDIA DO : 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: June 1, 2021

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.

1. Basic Policy on Corporate Governance, Capital Structure, Company Details, and Other Basic Information

1. Basic Policy on Corporate Governance (Updated)

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.

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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.

Information on MEDIA DO's initiatives and initiative policies in relation to the principles of Japan's Corporate Governance Code can be found below.

Reasons for Not Adopting the Principles of Japan's Corporate Governance Code (Updated)

Supplementary Principle 4.1.3

The Company recognizes that the development of succession plans for the president and CEO is an important management task. Based on this recognition, the Nomination and Compensation Committee, which was established on June 1, 2021, is assigned responsibility for matters related to plans for the cultivation of candidates for positions as the president and CEO as well as other executive directors and executive officers. Succession plans are formulated based on MEDIA DO's corporate philosophy and management strategies. Successors are chosen by the Board of Directors after sufficient discussion for determining if candidates have the qualities required of the president and CEO.

Principle 5.2 Establishing and Disclosing Business Strategies and Business Plans MEDIA DO has established a five-year medium-termmanagement plan and defined targets for net sales and operating profit, and the Company explains qualitative and quantitative factors related to the accomplishment of these targets through its financial results briefings and other investor relations activities. Moving forward, the Company will set future targets for net sales, operating profit, return on equity, and other items based on an accurate assessment of cost of capital.

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

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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.

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.

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.

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.

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 (https://ssl4.eir-parts.net/doc/3678/ir_material_for_fiscal_ym2/99339/00.pdf).
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/).

1. 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.
2. 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

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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.

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.

1. 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 and in information on the career history of all candidates and skill matrixes detailing their specialties and experience.

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.

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 4.11.1 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 and other diversity aspects. From the perspectives of objectivity and transparency, candidates for positions as directors are selected by the Board of Directors

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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.

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 on the Company's corporate website.

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 2021, 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 2021. The findings of this review process were as follows.

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