メルカリ（4385） – Corporate Governance 2022.06.07

コーポレートガバナンス CORPORATE GOVERNANCE Inquiries: June 7, 2022 Mercari, Inc. Chief Executive Officer: Shintaro Yamada Corporate Division 03-6804-6907 Securities Code: 4385 https://about.mercari.com/ The Company’s corporate governance situation is as follows. I. Our Basic Policy on Corporate Governance, Capital Structure, Company Attributes, and Other Basic Information 1. Our Principle Under the mission “Create value in a global marketplace where anyone can buy & sell,” Mercari, Inc. aims to build a society where finite resources are used sparingly and everyone can create new value. The Company has set forth the mission of improving enterprise value through working to enhance its monitoring management function and its internal control function while practicing strict compliance management as its basic policy of corporate governance. In order to meet the trust of all stakeholders, the Group upholds a policy of working to improve the efficiency and transparency of management, maximize enterprise value, and achieve sustainable growth and development under the aforementioned basic policy. Rationale for Not Implementing Certain Principles of the Corporate Governance Code The Company implements the Fundamental Principles of the Corporate Governance Code. Principle 2.6 The Company has not adopted a corporate pension plan. Therefore, there is no phase in which the Company functions as an asset owner of a corporate pension plan. Supplementary Principle 4.1.2 The Company is in the internet industry, where the environment and technologies change rapidly. Therefore, the Company believes that a detailed and concrete mid- to long-term business plan is not suitable. Instead, the Company explains its mid- to long-term management strategies through efforts such as IR activities to promote shareholder understanding. Disclosure Based on the Principles of the Corporate Governance Code Please refer to the “Basic Corporate Governance Policy” at the end of this report for disclosure under this item. Foreign Stock Ownership Ratio More than 30% 2. Capital Structure   Major Shareholders Name or Title Number of Shares Owned Ratio (%) Shintaro Yamada Hiroshi Tomishima MSIP CLIENT SECURITIES suadd K.K. UNITED, Inc. GOLDMAN, SACHS & CO. REG Morgan Stanley & Co. LLC MSCO CUSTOMER SECURITIES MLI CLIENT COLLATERAL NON TREATY-PB Japan Trustee Services Bank, Ltd. (trust acct.) GENERAL FOR OMNI Controlling Shareholder Name Parent Company Name Stock Exchange on which Parent Company is Listed NON ー ー ー 1 37,612,530 8,975,000 8,540,859 6,567,000 5.250,000 4,360,148 4,128,704 3,400,504 2,843,178 2,479,500 24.09 5.75 5.47 4.21 3.36 2.79 2.64 2.18 1.82 1.59 コーポレートガバナンス CORPORATE GOVERNANCE Supplementary Explanation ー 3. Company Attributes Stock Exchange Section End of Accounting Period Prime June Sector Information and Communication Technology Consolidated Number of Employees as of Preceding Year-end 1000 or more employees Consolidated Revenue as of Preceding Year-end 10–100 billion JPY Consolidated Number of Subsidiary Companies as of Preceding Year-end Less than 10 companies 4. Guidelines for Protection of Minority Shareholders in Transactions with Controlling Shareholders － － 5. Other Special Circumstances Significantly Affecting Corporate Governance II. Business Management Organization and Other Corporate Governance Systems Regarding Decision Making, Execution of Business, and Supervision in Management 1. Organizational Composition and Operation Organizational Form Company with a Supervisory Board Executive Directors  Maximum Number of Executive Directors Stipulated in Articles of Incorporation No maximum number of Term Incorporation Office Stipulated in Articles of 1 year Chairperson of the Board President Number of Executive Directors Appointment of Outside Directors Appointed Number of Outside Directors Number of Independent Officers Designated from among Outside Directors   Outside Directors’ Relationship with the Company (1) Name Attribute Ken Takayama Masashi Namatame From another company From another company 5 3 3 2 Relationship with the Company (*1) j f b g d h c i a k e △ コーポレートガバナンス CORPORATE GOVERNANCE Makiko Shinoda From another company *1 Categories for “Relationship with the Company” *A hollow circle (◯) signifies the individual currently or recently having that relationship with the Company, whereas a hollow triangle (△) signifies the individual having that relationship with the Company in the past. *A filled circle (●) signifies an immediate family member currently having that relationship with the Company, whereas a filled triangle (▲) signifies an immediate family member having that relationship with the Company in the past. a. b. c. d. e. f. g. h. i. j. k. Executive of the Company or its subsidiary Non-executive director or executive of a parent company of the Company Executive of a fellow subsidiary of the Company Party whose major business partner is the Company or an executive thereof Major business partner of the Company or an executive thereof Consultant, accounting professional, or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a corporation) Executive of a business partner of the Company (which does not correspond to any of d., e., or f.) (the Director themself only) Executive of a corporation to which outside officers are mutually appointed (the Director themself only) Executive of a corporation that receives donations from the Company (the Director themself only) Other Outside Directors’ Relationship with the Company (2) Name Supplementary Explanation of the Relationship Reasons for Appointment Design ation as Indepe ndent Office r ○ Ken Takayama at the Mr. Takayama was an executor of Mizuho Bank, Ltd. operations Although Company does not have any capital relationship with Mizuho Bank, the Company does have loans with that bank, and that bank is a major business partner of the Company. As Mr. Takayama left Mizuho Bank more than 10 years ago in 1999, there is no particular conflict of interest in the relationship between Mr. Takayama and Mizuho Bank, the this independence criteria set forth by Tokyo Stock Exchange, Inc. meets and Mr. Takayama possesses expert knowledge and extensive experience in the management of finance- and Internet-related businesses. The Company has appointed him as an Outside Director for his advice and opinions on management and finances from a neutral standpoint. Furthermore, the Company has appointed Mr Takayama as an independent officer, having determined that his appointment meets the requirements for independent officers set forth by Tokyo Stock Exchange, Inc., and there is no likelihood of any conflicts of interest arising with general shareholders. Mr. Namatame possesses specialized knowledge and extensive experience in the banking, securities, and investment industries. The Company has appointed him as an Outside Director for his advice and opinions on management- and finance-related matters from a neutral standpoint. Furthermore, the Company 3 Masashi Namatame ○ − コーポレートガバナンス CORPORATE GOVERNANCE Makiko Shinoda ○ has appointed Mr. Namatame as an independent officer, having determined that his appointment meets the requirements for independent officers set forth by Tokyo Stock Exchange, Inc., and there is no likelihood of any conflicts of interest arising with general shareholders. Ms. Shinoda possesses extensive experience working in financial institutions and as a CFO, as well as specialized knowledge of governance, stocks, and finance. The Company has appointed her as an Outside Director for the advice and opinions on business management she can provide from a neutral standpoint. Furthermore, the Company has appointed Ms. Shinoda as an independent officer, having determined that her appointment meets the requirements for independent officers set forth by Tokyo Stock Exchange, Inc., and there is no likelihood of any conflicts of interest arising with general shareholders. Voluntary Committee  Establishment Voluntary Corresponding Remuneration Committee of Nomination to Committee(s) or Committee Established Committee’s Name, Composition, and Attributes of Chairperson Voluntary Establishment of Nomination Committee Committee’s Name Nomination and Remuneration Advisory Committee All Committee Members Full-time Members Inside Directors Outside Directors Inside Experts Other Chairperson 3 1 1 2 － － Inside Director Voluntary Establishment of Remuneration Committee Committee’s Name Nomination and Remuneration Advisory Committee 4 コーポレートガバナンス CORPORATE GOVERNANCE All Committee Members Full-time Members Inside Directors Outside Directors Inside Experts Other Chairperson 3 1 1 2 － － Inside Director Supplementary Explanation As an advisory body to the Board of Directors, the Nomination and Remuneration Advisory Committee deliberates the following matters to create proposals for the Board. (1) (2) (3) (4) (5) (6) (7) Matters related to the appointment or dismissal of Directors and Senior Vice Presidents (matter requiring resolution at the General Meeting of Shareholders) Matters related to the selection or removal of the Board’s Representative Director Matters related to the selection or removal of titled Directors Matters related to remuneration systems/policies and individual remuneration for Directors and Senior Vice Presidents Matters related to Directors’ remuneration amounts (matter requiring resolution at the General Meeting of Shareholders) Matters related to succession plans (including development) Other important business matters which the Board recognizes as requiring the Nomination and Remuneration Advisory Committee’s advice Supervisory Board  Establishment of Supervisory Board Established Maximum Number of Supervisory Board Members No maximum number Number of Supervisory Board Members 4 Cooperation among the Supervisory Board, Accounting Auditors, and Internal Audit Department The Internal Audit Office and Supervisory Board aim to mutually cooperate by holding meetings regularly and as necessary, and exchanging information and opinions regarding the audit structure, audit planning, audit status, etc. Additionally, the Internal Audit Office and Supervisory Board aim to mutually cooperate with the Company’s Accounting Auditor, Ernst & Young ShinNihon LLC, by holding meetings regularly (quarterly) and as necessary, and exchanging information and opinions regarding the audit structure, audit planning, audit status, etc. Furthermore, the Internal Audit Office and Supervisory Board aim to organically cooperate with the divisions in charge of establishing and maintaining internal controls by regularly exchanging information, requesting investigations as necessary, etc. Appointment of Outside Supervisory Board Appointed Number of Outside Supervisory Board Members Number of Outside Supervisory Board Members Designated Independent Officers 3 3   Outside Supervisory Board Members’ Relationships with the Company (1) Name Attribute Relationship with the Company (*1) a b c d e f g h i j k l m Fumiyuki Fukushima CPA Toshihiro Igi Attorney Takahiro Shinozaki From another company  *1 Categories for “Relationship with the Company” 5 コーポレートガバナンス CORPORATE GOVERNANCE *A hollow circle (◯) signifies the individual currently or recently having that relationship with the Company, whereas a hollow triangle (△) signifies the individual having that relationship with the Company in the past. *A filled circle (●) signifies an immediate family member currently having that relationship with the Company, whereas a filled triangle (▲) signifies an immediate family member having that relationship with the Company in the past. a. b. c. d. e. f. g. h. i. j. k. l. m. Executor of operations Non-executive director or accounting advisor of the Company or its subsidiary Non-executive director or executive of a parent company of the Company Auditor of a parent company of the Company Executive of a fellow subsidiary of the Company Party whose major business partner is the Company or an executive thereof Major business partner of the Company or an executive thereof Consultant, accounting professional, or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a corporation) Executive of a business partner of the Company (which does not correspond to any of f., g., or h.) (the Supervisory Board member themself only) Executive of a corporation to which outside officers are mutually appointed (the Supervisory Board member themself only) Executive of a corporation that receives donations from the Company (the Supervisory Board member themself only) Other Outside Supervisory Board Members’ Relationships with the Company (2) Name Designation as Independent Officer Supplementary Explanation of the Relationship Reasons for Appointment Fumiyuki Fukushima ○ － As a certified public accountant, Mr. Fukushima has experience auditing large and small companies, and extensive knowledge concerning finance and accounting. The Company has appointed him as an Outside Supervisory Board Member to seek advice and opinions with regards to implementing appropriate internal process controls. Furthermore, the Company has appointed Mr. Fukushima as an independent officer, having determined that his appointment meets the requirements for independent officers set forth by Tokyo Stock Exchange, Inc., and there is no any conflicts of interest of arising with general shareholders. likelihood Mr. Igi has extensive knowledge in corporate legal affairs and compliance as an attorney. The Company has appointed him for his advice and opinions with regards to auditing from a legal perspective. Furthermore, the Company has appointed Mr. Igi having determined that his appointment meets the requirements for independent officers set forth by Tokyo Stock Exchange, Inc., and there is no any conflicts of interest of arising with general shareholders. independent likelihood officer, an as The Company has appointed Mr. Shinozaki for his advice and opinions as an individual with management experience, to overcome issues related to the organization and governance at each stage of our company growth. Furthermore, the Company has appointed Mr. Shinozaki as an independent officer, having Toshihiro Igi ○ － Takahiro Shinozaki ○ － 6 コーポレートガバナンス CORPORATE GOVERNANCE determined that his appointment meets the requirements for independent officers set forth by Tokyo Stock Exchange, Inc., and there is no any conflicts of interest of arising with general shareholders. likelihood Independent Officers Number of Independent Officers 6 Other Matters Relating to Independent Officers － Incentives Incentive Directors Supplementary Explanation Policies Implemented for Executive Implemented a performance-linked incentive remuneration option share as a form of In realizing growth of the Company’s enterprise value in the mid/long term, starting from FY2020, the Company has introduced a share option as a form of incentive remuneration for Directors (excluding Outside Directors), linking remuneration to shareholder value and investing in “people” to maximize directors’ performance and motivate them to contribute to the Company. In this way, it aims to enable more appropriate risk taking. The Company consults with the Nomination and Remuneration Advisory Committee, of which a majority is Outside Directors, in order to ensure the appropriateness of the remuneration plan and levels for Directors, as well as ensure the independence, objectivity, and transparency of the process for determining remunerations. Recipients of Share Options Supplementary Explanation Inside Directors The Company introduced a share option as a new form of incentive remuneration starting from FY2020. This share option is granted to Directors in charge of business execution and aims to increase shareholder value and enable more appropriate risk taking. Remuneration for Executive Directors Disclosure of Individual Directors’ Remuneration Undisclosed Supplementary Explanation The total remuneration, etc. for each Director and Company Auditor and the total remuneration, etc. by type are disclosed in the Annual Securities Report. Officer Classification Directors (Excluding Directors) Outside Company Auditors (Excluding Outside Company Auditors) Outside Officers Total remuneration, etc. (millions of JPY) Total amount of remuneration, etc. by type (millions of JPY) Fixed remuneration Performan ce-linked remunerati on Retirem ent bonus Number of applicable officers 150 150 ー ー 26 62 26 62 ー ー ー ー 6 1 6 Policy on Determining Remuneration Amounts and Calculation Methods Established 7 コーポレートガバナンス CORPORATE GOVERNANCE Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods Remuneration for Directors of the Company (excluding Outside Directors) consists of a fixed compensation as well as a performance-linked share option as a form of mid- to long-term incentive remuneration. Remuneration for Outside Directors consists of a fixed compensation. A representative director, who has the confidence of the Board of Directors, determines the remuneration amounts taking into account the duties, abilities, and results of each Director as well as the performance and financial situation of the Company, after consultation with the Nomination and Remuneration Advisory Committee, of which a majority is Outside Directors, in order to ensure the appropriateness of the remuneration plan and levels for Directors, as well as ensure the independence, objectivity, and transparency of the process for determining remunerations. Supporting System for Outside Directors (and Outside Supervisory Board Members) Outside Directors and Supervisory Board members are called to meet as appropriate to report and discuss various matters. Furthermore, business information sessions are held for Outside Directors and Supervisory Board members to deepen their understanding of the Company’s business matters. 2. Matters Regarding Management of Corporate Affairs, Audits/Supervision, Nominations, and Remuneration Decisions (Outline of the Current Corporate Governance System) As an institution as defined in the Companies Act, the Company holds shareholders meetings and has a Board of Directors, a Board of Company Auditors, and a Financial Auditor. The Company has determined that a system in which the Board of Directors, made up primarily of Directors who have thorough knowledge of the Company’s business, makes decisions regarding basic management policies and execution of material business operations and where Financial Auditors with strong legal authority audit the Directors’ execution of duties from an independent perspective is effective in ensuring management productivity and soundness of management, and thus, the Company has adopted a Company with Board of Company Auditors structure. Furthermore, the Company operates in accordance with relevant laws and regulations by establishing an Internal Audit Group and engaging in timely collaboration. The Company also works with legal advisors on compliance and important legal decisions. (a) Board of Directors The Board of Directors is composed of five Executive Directors (including three Outside Directors). The Board determines important matters related to management, such as management objectives, as well as matters defined in laws and ordinances or articles of incorporation. The Board also supervises the management of corporate affairs. A Board of Directors meeting is held once per month, where Director(s) give a report on the state of business execution. The Board of Directors also holds additional meetings as necessary. During the 8th period (July 1, 2019–June 30, 2020), there were a total of 14 meetings of the Board of Directors. The attendance of the Directors and Auditors was as follows. – Director Shintaro Yamada: 14/14 – Director Fumiaki Koizumi: 14/14 – Director Yuki Hamada: 14/14 – Director John Lagerling: 14/14 – Director Naoki Aoyagi: 14/14 – Director Hirohisa Tamonoki: 10/10 – Director Ken Takayama: 14/14 – Director Masashi Namatame: 14/14 – Auditor Mayumi Tochinoki: 10/10 – Auditor Fumiyuki Fukushima: 14/14 – Auditor Toshihiro Igi: 14/14 – Auditor Takahiro Shinozaki: 13/14 (b) Supervisory Board The Company’s Supervisory Board is composed of two full-time members and two part-time members, for a total of four members. Three Supervisory Board members are Outside Auditors. The Supervisory Board members, including Outside Auditors, attend Board of Directors meetings and scrutinize the decision-making status of the Board of Directors, as well as the performance of the supervision duties of each individual Director. Additionally, the Supervisory Board audits the Directors’ performance of duties through interviews with executives and staff, examination of important approval documents, periodic hearings with directors and auditors of major subsidiaries of the Company, etc. Each member individually carries out appropriate supervision of business management and shares information at the Supervisory Board meetings. The Supervisory Board strives to perform their duties as efficiently as possible. During the 8th period (July 1, 2019–June 30, 2020), there were a total of 14 meetings of the Board of Company Auditors. The attendance of the Auditors was as follows. 8 コーポレートガバナンス CORPORATE GOVERNANCE – Auditor Mayumi Tochinoki: 10/10 – Auditor Fumiyuki Fukushima: 14/14 – Auditor Toshihiro Igi: 14/14 – Auditor Takahiro Shinozaki: 13/14 (c) Internal Audit Department The Company has established an Internal Audit Office under the direct control of the Representative Director with four members. The Internal Audit Office performs internal audits of each department’s work in accordance with the internal audit regulations as well as the internal audit schedule determined every quarter. The results of these internal audits are reported to the Representative Director. The Representative Director uses these results to instruct the departments audited regarding how to make improvements, and the progress and results of the improvements are reported in written documents, thus ensuring the Internal Audit Department’s efficiency. (d) Accounting Auditors The Company has entered into an audit contract with Ernst & Young ShinNihon LLC, and in addition to undergoing periodic audits, the Company receives guidance from time to time on accounting issues and strives to implement appropriate accounting processes. 3. Rationale for Our Current Corporate Governance System The Company adopts the Company with Board of Company Auditors structure. The Company aims to enrich its corporate governance and contribute to enhancing its corporate value in the mid-to-long term with a system in which the Board of Directors, made up primarily of Directors who have thorough knowledge of the Company’s business and Outside Directors who provide objective perspectives, make decisions regarding basic management policies and execution of essential business operations, while separating supervision and execution and promoting the transfer of business execution authority to the executive division centered around Senior Vice Presidents. The Company has also determined that a system where Financial Auditors audit the Directors’ execution of duties from an independent perspective is effective in ensuring management productivity and transparency, maximizing corporate value, and ensuring continued growth, and thus, the Company has adopted its current structure. Furthermore, the Company ensures fairness, transparency, and objectivity in procedures regarding decisions of nomination, remuneration, etc. of executives by establishing a voluntary advisory committee with independent Outside Directors as main members. With respect to the structure of the Company’s Board of Directors, the Company ensures transparency and fairness of management by appointing three Outside Directors for the two Internal Directors, and three Outside Auditors along with one Internal Auditor. The Company appoints those experienced in business administration and specialists such as lawyers and certified accountants to these positions for a specialized and objective point of view, thus ensuring thoroughness in the supervision of the Executive Directors’ execution of their duties. III. Policies for Shareholders and Other Stakeholders 1. Initiatives to Facilitate the Annual Shareholder Meeting and Exercising of Voting Rights Supplementary Explanation The Company strives to disclose notices for shareholders meetings early so that shareholders are able to have sufficient time to consider proposals. For the 8th Annual General Meeting of Shareholders, both the Japanese and English language versions of the notice were disclosed on the Company’s website one day before the legal deadline. The Company avoids peak times when scheduling shareholder meetings. The 8th Annual General Meeting of Shareholders was held on Friday, September 25, 2020. The Company implemented the exercising of voting rights over the internet for the 8th Annual General Meeting of Shareholders. The Company implemented an Electronic Voting Platform for shareholders to exercise their voting rights for the 8th Annual General Meeting of Shareholders. Early Notification of Annual Shareholders Meeting Scheduling Annual Shareholder Meeting to Avoid Peak Time Voting Exercising Rights Electronically Electronic Voting Platforms and Other to Initiatives Facilitate the Exercising of Voting Rights by Institutional Investors of Provision Notifications Company of The shareholders’ meetings on the Company’s website on the same day as the Japanese notifications language versions English posts text) (full of 9 コーポレートガバナンス CORPORATE GOVERNANCE (Summarized) English Other in versions. Notification The Company prints the notification for annual shareholders meeting in color, with figures, photographs, and other visuals, in order to make all necessary information as easy to understand as possible for those who have made the decision to invest. Furthermore, the Company posts notifications of annual general shareholders’ meetings on the Company’s website and strives to facilitate these meetings and the exercising of voting rights. Explanation from the Representative Themself 2. Current IR Activities Creation and Publication of Disclosure Policies Regular Information Sessions for Individual Investors Regular Information Sessions for Analysts and Institutional Investors Regular Information Sessions for Overseas Investors Publishing Documents on our IR Website Establishment of Department in Charge of IR Other Supplementary Explanation The Company has created an IR Policy, consisting of Basic Disclosure Policy, Information Disclosure Methods, Quiet Period, Our Future Outlook, and Dealing With The Spreading of Rumors to Influence Stock Prices. This IR Policy is posted on the Company’s website. https://about.mercari.com/en/ir/strategy/policy/ The Company provides business descriptions during annual general shareholders meetings, providing an opportunity for dialogue between the Company and individual investors. The Company has also established an inquiry form on the IR section of its website, through which it answers questions from individual investors. The Company holds regular information sessions for analysts and institutional investors alongside the announcement of the financial results. At these information sessions, the Company explains its management situation, strategies, initiatives, and forecast. Following information sessions, the Company promptly publishes video recordings of the session and summaries of the question and answer session. To assure fair disclosure, the Company hosts live broadcasts of information sessions with simultaneous interpreting. Following information sessions, the Company promptly publishes video recordings of the session and summaries of the question and answer session.Furthermore, the Company runs IR activities overseas utilizing online meetings and overseas conferences organized by securities companies. The Company strives for fair disclosure on the Company’s website in both Japanese and English. https://about.mercari.com/en/ir/ The Company employs people to be exclusively responsible for IR. The Company actively posts information regarding its culture, services, and initiatives on company media such as Mercan, Merpoli, and the Mercari R4D YouTube channel. Yes Yes Yes 3. Initiatives Regarding Our Respect for Stakeholders a. Respect for the position of stakeholders is stipulated in internal rules and regulations Supplementary Explanation Under the mission “Create value in a global marketplace where anyone can buy & sell,” the Company aims to build a society where finite resources are used sparingly and everyone can create new value. The Company has set forth the mission of improving enterprise value through working to enhance its monitoring management function and its internal control function while practicing strict compliance management as its basic policy of corporate governance. In order to meet the trust of all stakeholders, the Company upholds a policy of working to 10 コーポレートガバナンス CORPORATE GOVERNANCE improve the efficiency and transparency of management, maximize enterprise value, and achieve sustainable growth and development under the aforementioned basic policy. Considering changes in the external and internal environment as well as specific internal measures, the Company has updated the five topics defined as the Group’s materialities (topics that the Company must take on in order to realize the company’s long-term vision) in 2021 that the Company established in 2019. 1. Creating Circular Economy / Mitigating Climate Change The Company works to contribute to resolving environmental issues by not only minimizing the Company’s impact on the environment, but also making consumer activities more sustainable through its business. 2. Diversity & Inclusion The Company tackles structural discrimination and inequality issues by building a workplace where people of all backgrounds can achieve their maximum potential. The Company also strives to realize a service accessible to all. 3. Local Empowerment By finding solutions to issues unique to local communities, the Company aims to contribute to local economies and empower individuals and businesses. 4. Safe, Secure, and Fair Transactions The Company strives to provide a platform for secure and fair transactions so its users, merchants, and business partners feel at ease using its service. 5. Corporate Governance/Compliance The Company aims to establish a sound and transparent internal management system to earn the trust of not only its users and business partners, but from society as a whole. ESG Promotion and Implementation Structure In order to better incorporate ESG perspectives into management decisions and execution processes, and to strengthen coordination within the Group regarding these material topics, the Company has established an ESG committee in meetings of the Senior Executive Committee. With Mercari CEO Shintaro Yamada as chairperson, this committee is composed of the CEOs of each Mercari Group company, as well as ESG officers and other members nominated by the chairperson. They will meet four times per year to formulate ESG-related implementation plans and monitor progress on each of the material topics.） To achieve the Company’s initiatives for “Creating Circular Economy / Mitigating Climate Change” and “Local Empowerment” among the Company’s five material topics, the Company works on developing the reusable packaging material “Mercari Eco Pack,” holding events to make reuse more familiar such as “Green Friday,” “No-Waste Cleanup,” and “Happy Earth Day,” and developing and deploying educational programs for elementary through high school students to build an environment in which they can learn about sustainable behavior. In addition, the Company contributes to solving social and environmental issues by collaborating with various stakeholders. For example, the Company has selected 59 organizations that promote circular economy as recipients of its “Mercari Donation” function, and the sales of “donation-type packing materials,” which the Company started with the Nippon Foundation in September 2021, exceeded 15,000 pieces in the first two months. Furthermore, Kashima Antlers has partnered with Kaneka Corporation to replace plastic tableware with plant-derived materials, with the aim of contributing to the realization of a decarbonized society. The Company strives to appropriately disclose information in accordance with its IR Policy, which consists of Basic Disclosure Policy, Information Disclosure Methods, Quiet Period, Our Future Outlook and Dealing With The Spreading of Rumors to Influence Stock Prices. In addition, from the viewpoint of fair disclosure, the Company discloses important information in both Japanese and English simultaneously. The Company has set “Diversity & Inclusion” as one of five material topics. In September 2021, the Company launched a new work style policy called “Mercari’s New Normal Work Style ‘Your Choice,’” with the aim of creating an environment where people with diverse backgrounds can work to their fullest potential. With this policy, each employee can choose the work style that maximizes performance and values for 11 b. Implementation of environmental preservation activities, CSR activities, etc. c. Establishment of policies, etc. for providing information to stakeholders d. Others コーポレートガバナンス CORPORATE GOVERNANCE both themselves and their organization, such as whether to work remotely or in the office and what kind of environment to work in. In December 2021, the company started accepting applications for the “Mercari Restart Program,” a support program for those who have left the workforce due to childcare, nursing care, and etc., but wish to return and restart their careers. The Company also develops and implements training programs to improve the understanding of D&I within the Company. IV. Regarding Our Internal Control System 1. Our Internal Control System – Basic Stance and Status The Company maintains an internal control and risk management system as stipulated by our Basic Policy for the Establishment of an Internal Control System determined by the Board of Directors. (a) A system to Ensure that Executive Directors and Employees Comply with Laws, Ordinances, and Articles of Incorporation in Performing Their Duties ⅰ. The Company ensures that Executive Directors and employees have a sufficient awareness of compliance and abide by laws, ordinances, articles of incorporation, and internal regulations in performing their duties. ⅱ. The Company, in cooperation with attorneys, the police, and other professionals, takes a resolute stance against anti-social forces that threaten the order and safety of civil society. ⅲ. Business decisions and the duties of Executive Directors are audited to ensure that the Board of Directors acts in accordance with laws, ordinances, and other regulations, and makes decisions with an adequate level of business judgment. ⅳ. Auditors exercise their authority as stipulated by laws and regulations to audit Executive Directors’ performance. ⅴ. The Company provides an internal reporting system for consultation and internal compliance reporting (hereafter referred to as a whistleblowing system). ⅵ. Executive Directors and employees who violate laws or regulations are subject to punishment in accordance with the company’s Rules of Employment. (b) Items Related to the Storage and Management of Information Related to the Performance of Executive Directors’ Duties ⅰ. The Company has established Document Management Regulations and appropriately retains and manages minutes of important meetings and other important documents containing information relating to the performance of duties by Executive Directors (including electromagnetic records) in accordance with the provisions of said regulations. ⅱ. The Company has established Information Management Regulations and protects and manages information assets. (c) Regulations and Other Systems Concerning Management of the Risk of Losses ⅰ. The Executive Directors recognize the importance of identifying various risks associated with the Company’s business, and as such, practice comprehensive risk management and endeavor to identify, assess, and manage various risks. ⅱ. The Company establishes a risk management system to prepare against disasters, accidents, systems failure, and other unforeseen circumstances. (d) Systems for Ensuring the Efficient Performance of Duties by Executive Directors ⅰ. The Board of Directors operates in accordance with the articles of incorporation and Board of Directors Regulations and holds ordinary meetings monthly and additional meetings as necessary. ⅱ. The Executive Directors efficiently, flexibly, and swiftly perform business duties by working together closely, exchanging opinions, and sharing information. ⅲ. To ensure the efficient performance of duties by Executive Directors, the Company has established Organization Regulations, Division of Duties Regulations, and Approval Regulations. (e) Systems Ensuring Employees’ Compliance with Laws, Ordinances, and Articles of Incorporation in Performing Their Duties i. The Company stipulates official authority, clearly defines responsibilities and authority, and establishes a system for the performance of duties in each department. ⅱ. The Company prepares, disseminates, and operates the necessary approval systems, internal regulations, and manuals. ⅲ. The Company designates a personal information protection manager who plays a central role in the development and operation of personal information protection systems. Furthermore, the Company institutes an office under the direction of the manager and endeavors to appropriately protect personal information and continuously improve personal information protection. (f) Systems for Ensuring the Propriety of the Business Activities of the Corporate Group Consisting of the Company and its Subsidiaries 12 コーポレートガバナンス CORPORATE GOVERNANCE The Company and the group made up of its subsidiaries (hereafter known as the Company Group) share the same missions and values, and endeavor to make the most of business resources throughout the Company Group to maximize the value of the Company Group’s business as a whole. ⅰ. In order to ensure the propriety of management throughout the Company Group, the Company stipulates Regulations on the Management of Related Companies that respect the autonomy of subsidiaries while ensuring they abide by the same regulations on important matters. Subsidiaries will share their operations with the Company in advance to ensure appropriate business operations as part of the Company Group. ⅱ. The aforementioned regulations and other systems concerning management of the risk of losses (c) apply to all companies within the Company Group, allowing the Company to manage the risk of the Company Group as a whole in an all-encompassing, comprehensive manner. ⅲ. The authority and liabilities of subsidiaries in performing their duties are clearly stipulated in the Regulations on the Division of Duties, Regulations on Administrative Authority, and other internal regulations in order to allow for the efficient performance of duties. ⅳ. The Company’s Internal Audit Group carries out an internal audit of the Company Group’s business activities to ensure they are appropriate and in compliance with laws, regulations, and the articles of incorporation. The audit results are reported to the Chief Executive Officer and shared with the Auditor and Accounting Auditor. (g) Matters Related to Employees who are Requested by Auditors to Assist with Their Duties and Matters Related to the Independence from Directors of Employees Assisting with the Duties of Auditors ⅰ. The Auditor can request that the Board of Directors station employees to assist with their audit (hereafter referred to as employees assisting the Auditor). ⅱ. Employees assisting the Auditor shall exclusively work under the Auditor and shall not concurrently perform duties for other divisions and departments. Employees assisting the Auditor will comply with the Auditor to collect all necessary information. ⅲ. Reassignment, performance evaluation, and disciplinary action related to employees assisting the Auditor require the prior consent of the Auditor. ⅳ. Employees assisting audit can accompany the Auditor to Board of Directors Meeting and other important meetings, as well as take part in regular meetings held with the Chief Executive Officer and Accounting Auditor to exchange opinions. Furthermore, if necessary, they may receive advice on performing auditing tasks from legal professionals, certified public accountants, and other professionals. (h) Structures for Executive Directors and Employees to Report to Auditors ⅰ. Executive Directors and employees will, in addition to matters required by law, also report the following matters to Auditors without delay: matters that could have a significant impact on the Company, matters decided at important meetings, the status of the whistleblowing system and internal auditing system, etc. ⅱ. Executive Directors and employees will promptly report information related to the performance of their duties when demanded by the Auditor. (i) System for Executive Directors of Subsidiaries, Subsidiary Employees, and Those who Have Received Reports from Them to Report to the Auditor of the Company ⅰ. Executive Directors and employees of subsidiaries will promptly report items related to the performance of their duties when demanded by the Auditor. ⅱ. Executive Directors and employees of subsidiaries will report violations of laws and regulations as well as matters that could have a significant impact on the Company or the Company’s subsidiaries without delay. ⅲ. Employee evaluations and disciplinary action taken against those who have made reports must not take into account the fact that they filed a report. The individual who filed the report may request the Auditor to investigate into the reasons behind their employee evaluation and/or disciplinary action. (j) Matters Related to the Policy Surrounding Liability for Expenses Incurred by the Auditor in Performing Their Duties The Company will promptly process expenses claimed by the Auditor through regular auditing practices. Other auditing expenses such as emergency audit expenses and expenses incurred through hiring professionals for new investigations must be notified by the Auditor to the relevant Director in advance. (k) Other Systems to Ensure that Audits by Auditors are Performed Effectively ⅰ. The Auditor will periodically exchange opinions with the Chief Executive Officer. Furthermore, they will hold interviews with Executive Directors and employees in key positions as necessary. ⅱ. The Company Auditor will exchange opinions with Financial Auditors as necessary. ⅲ. The Auditor can independently seek the advice of legal professionals, certified public accountants, and other professionals as necessary. ⅳ. The Auditor will periodically exchange opinions and work on improving cooperation with the Internal Audit Group. (l) Systems to Ensure the Reliability of Financial Reporting The Company stipulates a basic policy regarding maintaining the Company’s internal control system, and establishes and puts into practice internal controls regarding financial reporting. (m) Basic Policy and Status of Basic Policy on the Exclusion of Anti-Social Forces 13 コーポレートガバナンス CORPORATE GOVERNANCE i. The Company’s basic policy is to have absolutely no ties with anti-social forces and to refuse all unjust demands. This policy is made clear to all people within the Company. If a business partner of the Company is discovered to be an individual, company, association, etc. that is involved with an anti-social force, the Company will cease transacting with that business partner. ii. The department in charge of compliance is responsible for policies on the exclusion of anti-social forces and manages and stores all information on anti-social forces. Furthermore, the Corporate Division develops systems to prevent the Company from suffering damage as a result of an anti-social force and provides education and training to officers and employees to ensure that they comply with the Company’s basic policy. iii. If an anti-social force makes an unjust demand of the Company, the Company collaborates with external specialist institutions including the police and attorneys, and develops cooperative systems in the event of an incident. 2. Exclusion of Anti-Social Forces – Basic Policy and Implementation Status a. Basic Policy on the Exclusion of Anti-Social Forces The Company declares a resolute stance against anti-social forces, and the Company’s policy of ensuring no ties with organized criminal organizations and all other forms of anti-social forces is stipulated in the Company’s Code of Ethics. b. Status of the Company’s Basic Policy on the Exclusion of Anti-Social Forces (a) Status of Internal Regulations Based on the above declaration, the Company has established ‘Regulations on the Exclusion of Anti-Social Forces’ and ‘Subsidiary Rules on Dealing with Anti-Social Forces’, and prohibits all forms of contact with anti-social forces. The Company does not have and has never had any relation with anti-social forces. (b) Supervisory Department for Dealing with Anti-Social Forces The Company positions the department in charge of compliance as its supervisory department for eliminating anti-social forces, and provides a system for immediate reporting/consultation regarding the unfair demands of anti-social forces, organized crime, and criminal activity. (c) Methods Used in Excluding Anti-Social Forces The Company uses Dow Jones, internet searches, and other databases to investigate whether or not there is any information to suggest stockholders, directors, or new business partners have any connections to anti-social forces before relationships are formed. Furthermore, if the Company discovers or suspects that existing business partners have connections to anti-social forces, the Company has structures in place to ensure the prompt cut-off of all business ties with them. No measures in place V. Other 1. Anti-takeover Measures Anti-takeover Measures Supplementary Explanation － － Structure 2. Other Items Related to Corporate Governance Systems, etc. 14 コーポレートガバナンス CORPORATE GOVERNANCE 15 コーポレートガバナンス CORPORATE GOVERNANCE Timely Disclosure System 16 コーポレートガバナンス CORPORATE GOVERNANCE Basic Corporate Governance Policy Enacted: December 16, 2021 Revised: April 28, 2022 17 コーポレートガバナンス CORPORATE GOVERNANCE Contents 1. General Provisions  (1) Basic Approach to Governance and Purpose of this Policy 3.1(i) (ii), 4.1] [2.1, 2.2, 2.2.1, 2. Ensuring Shareholder Rights and Fairness  (1) Ensuring Shareholder Rights   (2) Dialogue with Shareholders  5.1.3]  (3) Shareholder Meeting  1.2.4, 1.2.5, 3.1.2]  (4) Capital Structure   (5) Dividend Policy   (6) Cross-Shareholdings   (7) Transactions Between Relevant Parties  [1.3, 1.6, 5.2] [1.3] [1.4] [1.7, 4.3] [1, 1.1, 1.1.3] [1.2.1, 3, 3.1.1, 5, 5.1, 5.1.1, 5.1.2, [1.1.1, 1.1.3, 1.2, 1.2.2, 1.2.3, 3. Corporate Governance Structure  (1) Organizational Design  (2) Role of the Board of Directors 4.3, 4.5, 5.2.1]  (3) Composition of the Board of Directors   (4) Board Evaluation  (5) Role of the Audit and Supervisory Board  (6) Nomination and Remuneration Advisory Committee 4.3.2, 4.10, 4.10.1, 4.11.1]  (7) Directors  4.13.1]  (8) Audit and Supervisory Board Members  (9) Support Structure   (10) Determination of Candidates for Director Positions  4.11.1]  (11) Dismissal of Directors   (12) Director Remuneration   (13) Director Training   (14) Risk Management Structure  [4.10, 4.10.1] [3.1.3, 3.2.2, 4, 4.1, 4.1.1, 4.2.2, [4.6, 4.8, 4.11, 4.11.1] [4.11, 4.11.3] [3.2, 3.2.1, 3.2.2, 4.4, 4.4.1] [3.1(iii) (iv), 4.1.3, 4.3, 4.3.1, [4.4.1, 4.5, 4.7, 4.8.1, 4.8.2, 4.11.2, 4.12, [4.4, 4.5, 4.11.2, 4.13.1] [4.12.1, 4.13.1, 4.13.2, 4.13.3] [3.1(iv) (v), 4.3.1, 4.9, [3.1(v), 4.3.1, 4.3.3] [3.1(iii), 4.2, 4.2.1] [4.14, 4.14.1, 4.14.2] [4.3, 4.3.4] 4. Proper Collaboration with Non-Shareholder Stakeholders  (1) Initiatives Towards Sustainability  (2) Ensuring Internal Diversity   (3) Internal Whistleblowing System  [2, 2.3, 2.3.1, 3.1.3, 4, 4.2.2] [2.4, 2.4.1] [2.5, 2.5.1] *The applicable corporate governance code(s) are shown inside the brackets: [ ] 18 コーポレートガバナンス CORPORATE GOVERNANCE 1. General Provisions 3.1(i) (ii), 4.1] ● (1) Basic Approach to Governance and Purpose of this Policy [2.1, 2.2, 2.2.1, To achieve our mission of “create value in a global marketplace where anyone can buy & sell,” Mercari (the “Company”) and Mercari Group (the “Group”) aim to contribute to society by creating a circular economy based on our values of Go Bold, All for One, and Be a Pro. We believe that in order to acquire the trust of stakeholders and sustainably enhance our corporate value, it is essential to improve the fairness and transparency of management and promote sound risk-taking by continuously enhancing our corporate governance structure. We have established a basic corporate governance policy with the goals of comprehensively stipulating corporate governance measures, continuously discussing and improving them, and enhancing their effectiveness. 2. Ensuring Shareholder Rights and Fairness (1) Ensuring Shareholder Rights [1, 1.1, 1.1.3] ● The Group strives to ensure fair treatment for all shareholders (including minority shareholders and foreign shareholders) as appropriate to the holdings of each shareholder, as well as ensure shareholders’ rights, including their right to vote at the Shareholder Meeting. ● ● ● (2) Dialogue with Shareholders [1.2.1, 3, 3.1.1, 5, 5.1, 5.1.1, 5.1.2, 5.1.3] The Group conducts timely and fair information disclosure, and by having constructive dialogue with shareholders, also strives to improve corporate value over the mid- to long-term. In holding dialogues with shareholders, the Group’s basic policy is to uphold all laws and related regulations and avoid sharing insider information. Information to be shared at dialogues is cleared with our own legal department as well as external experts as necessary. IR shall be the point of contact for shareholders. IR will field inquiries from shareholders within reason and with consideration to requests from shareholders and the objective of the inquiry. Furthermore, in promoting constructive dialogue with shareholders, IR and other related departments/teams work closely together, including periodically holding opinion and information sharing sessions. As part of the shareholder dialogue initiative, IR strives for improvement through consideration of the shareholder opinions and concerns revealed during the dialogues, as well as providing related feedback to directors and vice presidents. The Group operates within the IT industry, a business area characterized by rapid changes in technology and environment. As such, we believe that setting specific and concrete mid- to long-term ● ● 19 コーポレートガバナンス CORPORATE GOVERNANCE strategies is not best practice for our company. Instead, through IR activities, we explain our mid- to long-term business strategy to shareholders and investors, and earn their understanding in that way. (3) Shareholder Meeting [1.1.1, 1.1.3, 1.2, 1.2.2, 1.2.3, 1.2.4, 1.2.5, 3.1.2] The Shareholder Meeting is the Company’s highest decision-making body, and we strive to ensure that business decisions made at the event reflect shareholders’ wishes to the greatest extent possible. We make sure that the schedule for the Shareholder Meeting and related events allows shareholders to properly exercise their voting rights. In order for shareholders to have sufficient time to consider agenda items, we send out a Notification of Shareholder Meeting as soon as possible upon ensuring the appropriateness of the information to be sent. We also release this information publicly before sending out the Notification. In order to ensure that all shareholders can properly exercise their voting rights, we strive to improve convenience for shareholders through such measures as translating the Notification of Shareholder Meeting into English, and enabling voting to be done electronically. In cases where institutional investors hold shares in the name of a trust bank or other institution and wish to exercise their right to vote or other shareholder rights at the Shareholder Meeting, we will coordinate with the trust bank or other institution in advance. With regard to voting rights at the Shareholder Meeting, if an item is met with overwhelming votes against, we will analyze the reason and consider whether a response is necessary at the next Board of Directors meeting. ● ● ● ● ● ● (4) Capital Structure [1.3, 1.6, 5.2] As the Group is currently still growing, we prioritize capital investments in our mid- to long-term growth. On the other hand, we are also striving to realize both returns for our shareholders and ample retained earnings in the long term. Additionally, in cases where the implementation of a capital policy will shift control or greatly dilute shares, the necessity and rationality of the policy will be discussed in depth by the Board of Directors, after which we will follow the Companies Act, the Financial Instrument and Exchange Act, and Tokyo Stock Exchange regulations, and upon thorough explanation to shareholders, we will proceed in a legal and fair manner. (5) Dividend Policy [1.3] ● The Group considers the simultaneous pursuit of shareholder returns, the strengthening of our financial structure, and the securing of our competitiveness to be key management issues. At present, the Group is still growing. As such, we seek to accumulate substantial retained earnings that can be channeled into investment, thereby expanding and 20 コーポレートガバナンス CORPORATE GOVERNANCE further optimizing our business. In the future, we will consider how we can return this profit to investors while giving due consideration to the fiscal year results of each business. (6) Cross-Shareholdings [1.4] As a general rule, the Group does not retain cross-shareholdings. If we do retain another listed company’s shares, we will hold the minimum amount necessary; in addition to forging synergies between their company and ours, we will carefully consider our reason for retaining those shares, including the company’s growth potential, associated risks, and returns such as dividends. The Board of Directors will make a decision on whether to retain the shares based on these factors. Periodically, the Board of Directors will re-examine the rationality of retaining cross-shareholdings. If there are shares that no longer make sense for us to hold, we will make the decision to divest with due consideration for the given company’s situation. When exercising our voting rights at a company in which we retain shares, we will cast our vote, for or against, based on whether or not each item satisfies our position as a shareholder; we will not cast our vote based on our business relationship with the company. Transactions that pose a conflict of interest between directors/the Company and transactions by directors in competition with the Company require resolution by the Board of Directors. Directors who have a vested interest in that resolution are prohibited from participating in the resolution process. In addition, the Company confirms the necessity of any transaction by related parties beforehand, as well as the conditions and the propriety of the method for deciding to conduct such transaction. For any transactions that are determined particularly important, the Board will adequately deliberate regarding their necessity and appropriateness before approving. (7) Related Party Transactions [1.7, 4.3] ● ● ● ● ● ● ● 3.Corporate Governance Structure (1) Organizational Design [4.10, 4.10.1] The Company adopts the “Company with the Audit and Supervisory Board” structure as defined in the Companies Act. The Company aims to enrich its corporate governance and contribute to enhancing its corporate value in the mid-to-long term with a system that incorporates a board of directors, made up of directors who have thorough knowledge of the Company’s business and outside directors who provide objective perspectives. The board makes decisions regarding basic management policies and execution of essential business operations, while 21 コーポレートガバナンス CORPORATE GOVERNANCE 5.2.1] ● separating supervision and execution and promoting the transfer of business execution authority to the executive division centered around senior vice presidents. The Company also has an Audit and Supervisory Board, which independently oversees the directors’ execution of duties. Furthermore, by establishing a Nomination and Remuneration Advisory Committee, of which outside directors make up the majority of members, the Company ensures fairness, transparency, and objectivity in procedures regarding such decisions as nomination and remuneration of directors and senior vice presidents. (2) Role of the Board of Directors [3.1.3, 3.2.2, 4, 4.1, 4.1.1, 4.2.2, 4.3, 4.5, ○ The Board of Directors carries out the following three responsibilities. Achieving our mission of “Create value in a global marketplace where anyone can buy & sell” Achieving efficient and effective corporate governance in order to maximize profits for our shareholders and all stakeholders Achieving sustainable growth for the Company ○ ○ ● ● ● To fulfill these responsibilities, the Board of Directors strategically guides the Company, demonstrates supervision of all management matters, ensures fairness and transparency of management, and makes important business execution decisions. Also, through internal regulations, the Board of Directors clearly defines the matters within its scope of decision-making. Furthermore, in order to render speedy decisions with regard to business execution, the Senior Executive Committee and the individual senior vice presidents are afforded decision-m