Itochu : Governance

169

Top Commitment

Sustainability at the ITOCHU Group

Environment

Society

Governance

SDGs Bond (Sustainability Bond)

Evaluation by Society

Independent Assurance Report

Governance

Governance

170

Top Commitment

Sustainability at the ITOCHU Group

Environment

Society

Governance

SDGs Bond (Sustainability Bond)

Evaluation by Society

Independent Assurance Report

Corporate Governance

Risk Management

Compliance

Corporate Governance

Basic Policy

ITOCHU Group adopts the spirit of "Sampo-yoshi" as our corporate mission. In Japanese, "yoshi" means "good," "sampo" means three sides consisting of (1) the seller ("urite"), (2) the buyer ("kaite") and (3) society ("seken"). "Sampo-yoshi" is therefore "urite-yoshi" (meaning "good for the seller"), "kaite-yoshi" (meaning "good for the buyer") and "seken-yoshi" (meaning "good for society"). This spirit originates from the message of our founder Chubei Itoh I (the merchant based in the former Ohmi Province of Japan (present-day Shiga Prefecture). We sincerely wish to contribute to solving social issues by not purely seeking to maximize our profts but also considering and responding to the expectations and trust of all of our surrounding stakeholders, including our customers, our shareholders and our employees. "Sampo-yoshi" is the business spirit by which we aim to bring a positive effect into the world and to contribute to realizing a sustainable society for all. Furthermore, we adopt "I am One with Infnite Missions" as our guideline of conduct. These words mean that each individual employee should consider his or her business conduct on his or her own initiative in order to complete our infnite missions aim for better business operations which are good for the seller, good for the buyer, and good for society as well as for a better future.

It is our fundamental management policy to build a fair and good relationship with various stakeholders based on our corporate mission and our guideline of conduct and thus improve our corporate value from a long-term perspective. In accordance with this policy, with the intention to ensure proper and efficient execution by management, we will enhance the transparency of decision-making and establish a corporate governance system in which monitoring and supervision functions are appropriately incorporated.

A strong leadership and a transparent decision-making system are pillars of good corporate governance. ITOCHU adopts an organizational structure with the presence of Audit & Supervisory Board (kansayaku secchi kaisha). In recent years, ITOCHU has gradually shifted to a governance model where executive officers decide and carry out the day to day business under the direction and supervision of the Board of Directors, along with implementing measures to strengthen monitoring.

In order to separate execution by and monitoring over management, we reduced the number of executive Directors and the increased percentage of Outside Directors on our Board of Directors to one-third or more from April 2017. We will also maintain this percentage of Outside Directors also in FYE 2021 and onwards. Additionally, ITOCHU has established, as voluntary advisory committees to the Board, a Governance and Remuneration Committee and a Nomination Committee, both of which are chaired by an Outside Director and comprised of a majority of Outside Directors and Audit & Supervisory Board Members (collectively "Outside Officers") and a Women's Advancement Committee as another voluntary advisory committee which is chaired by an Outside Director, with at least half of its members comprised of Outside Officers, and has continued to monitor management through the eyes of Outside Officers. As of June 23, 2023, in order to facilitate a more comprehensive and organic linkage between governance, remuneration, and nomination, the Governance and Remuneration Committee" and the Nomination Committee" have been restructured as the "Governance, Nomination, and Remuneration Committee." The committee will be chaired by an Outside Director and will consist of a majority of Outside Directors among its members. ITOCHU continues to maintain oversight of management by Outside Officers.

In appointing Outside Officers, ITOCHU places great importance on their independence, and in this connection, ITOCHU has adopted its own independence criteria, augmenting the independence criteria established by the Tokyo Stock Exchange.

This highly independent Board of Directors monitors execution by management as well as deliberates the execution of business that is of high quantitative or qualitative importance. The Company believes this arrangement facilitates not only appropriate monitoring over execution by management but also the consideration of important business execution from an external perspective.

It is also vital that ITOCHU disclose its fnancial and non-fnancial information to stakeholders as part of good governance. For this purpose, ITOCHU adopts a "Basic IR Policy" to further promote multi-party stakeholder dialogue, and makes best efforts to disclose such information both timely and adequately. Through communication with its stakeholders, ITOCHU aims to enhance its corporate value on a long-term basis.

We believe that our current corporate governance structure accords with good and effective corporate governance called for by the Tokyo Stock Exchange, in its Corporate Governance Code. ITOCHU will continue to evaluate and improve its corporate governance structure so that it always best suits ITOCHU in any given moment and time in its corporate history.

Targets and Action Plan

Risks

Opportunities

●

Occurrence of business continuity risk or unexpected loss resulting from the malfunction of corporate governance or internal control.

●

Improvement of transparency in decision-making, appropriate response to changes and establishment of a stable basis of growth enabled by the

establishment of a frm governance system.

Materiality

SDGs

Impact

Issues to

Business area

Commitment

Specific approach

Performance indicators

Degree of Progress

Targets

Classification

address

We will implement highly effective

● Appoint several outside Directors, who have a high

Continue to

(1) We have maintained the diversity of the Board of Directors (through appointing always one third or higher percentage of

Maintaining

supervision over the management

level of independence that fulflls our independence

outside Directors- four outside Directors out of 10 Directors, two female Directors out of 10 Directors, a female Audit &

from an independent and objective

criteria and are expected to contribute to the

implement measures

Supervisory Board Member, and an outside Director and an outside Audit & Supervisory Board Member who had wide

Maintain

and reinforcing

Corporate

standpoint and ensure the appropriate

company management with a high level of knowledge

to strengthen the

range of sufficient experiences in corporate management).

Rigorous

Governance

a governance

and efficient execution of business

in their respective felds.

supervising function of

(2) We have maintained the chair of the Governance and Remuneration Committee and the Nomination Committee being the

Governance

system for

governance

operations by improving the

● Maintain a highly transparent and objective Directors'

the Board of Directors,

outside Director, and a majority of the members of the Governance and Remuneration Committee and the Nomination

Structures

achieving

transparency of our decision-making,

and officers' remuneration system, which can increase

through an annual

Committee being the outside Directors and the outside Audit & Supervisory Board Members (four out of 7 members).

sustainable

aiming to our sustainable growth as

their motivation to contribute to our medium- and

evaluation of the

(3) We have maintained the chair of the Women's Advancement Committee being the female outside Director, and a half of

growth

well as the medium- and long-term

long-term improvement of our company's performance

Board of Directors.

the Women's Advancement Committee being the outside Directors and the female members (3 out of 6 members

improvement of our corporate value.

and the improvement of our corporate value.

respectively).

171

Top Commitment

Sustainability at the ITOCHU Group

Environment

Society

Governance

SDGs Bond (Sustainability Bond)

Evaluation by Society

Independent Assurance Report

Corporate Governance

Risk Management

Compliance

Corporate Governance

Compliance with Corporate Governance Code

As of June 2023, ITOCHU complies with all principles set forth in Corporate Governance Code.For details, please refer to Corporate Governance Report (https://www.itochu.co.jp/en/fles/CG_e.pdf) PDF

Reason for Adopting the Current System

The Company, as a company with Audit & Supervisory Board Members, endeavors to strengthen the monitoring/supervising function and ensure the transparency of decision making by having the Audit & Supervisory Board Members (including outside Audit & Supervisory Board Members) fully monitor corporate management. In addition to its corporate governance system primarily based on the monitoring of corporate management by Audit & Supervisory Board Members, the Company appointed Outside Directors to comprise a percentage of one-third or more of the total number of Directors since FYE 2018, and will also maintain this percentage of Outside Directors in FYE 2024 and onwards. And, the Company has already appointed independent Outside Directors and established, as voluntary advisory committees to the Board, the Governance, Nomination and Remuneration Committee, which is chaired by Outside Directors and which comprise a majority of Outside Directors, and Women's Advancement Committee which is chaired by an Outside Director, with at least half of its members comprised of Outside Officers, for the purpose of further increasing the effectiveness of the supervision of management by the Board of Directors and strengthening and improving the transparency of decision making. In the process of appointing the Outside Officers, the Company focuses securing independency of the Outside Officers, and in addition to the independence criteria established by the Tokyo Stock Exchange ITOCHU has adopted its own independence criteria. The Company believes that its current corporate governance system-which is based on independent Outside Directors comprising one-third or more of the Board of Directors, the said voluntary advisory committees to the Board and the Audit & Supervisory Board, majority of whom are outside Audit & Supervisory Board Members-accords with ITOCHU's "Basic Policy" stated in the Corporate Governance Report.

Structures and Systems

Corporate Governance

1. As the decision-making body, the Board of Directors, consisting of Directors and Outside Directors, is to decide important matters in accordance with laws and regulations, the Articles of Incorporation, the "Board of Directors Regulations," and other internal regulations, and as the supervisory body, the Board of Directors is to supervise the performance of the directors.
2. Each director is to carry out such director's functions and duties as designated by the Board of Directors in accordance with laws and regulations, the Articles of Incorporation, resolutions by the Board of Directors, and internal regulations.
3. ITOCHU is to adopt the Executive Officer System to strengthen the decision-making function and supervisory function of the Board of Directors, and to streamline executive decision-making. Based on the approval of the Board of Directors, executive officers implement their designated duties based on delegation from the Board of Directors and representative directors.
4. The corporate auditors are to oversee the performance of the directors based on the "Board of Corporate Auditors Regulations" and "Auditors' Auditing Standards."

Overview of ITOCHU's Corporate Governance and Internal Control System (As of June 23, 2023)

General Meeting of Shareholders

Election and dismissal

Audit &

Board of Directors

Monitoring and auditing

Election and dismissal

Supervisory Board

Audit & Supervisory

Election and

Directors

Monitoring and auditing

Board

Members

dismissal

Appointment

Consultation

Governance, Nomination and

Audit &

Supervisory

and

Remuneration Committee

Board Members Office

supervision

Women's

Independent Auditor

Advancement Committee

Financial

audit

Chairman & CEO

President

& COO

HMC

Internal Control Committee

CSO

Disclosure Committee

CAO

ALM Committee

CFO

Compliance Committee

Sustainability Committee

CDO・CIO

Internal Audit

Division

Investment Consultative Committee

Group

New Headquarters Project Committee

CEO Office

Textile

Machinery

Metals &

Minerals

Energy& Chemicals

Food

General Products

ICT &

Financial

The �th

Company

Company

Company

Company

Company

& Realty Company

Business Company

Company

*

1 CEO=Chief Executive Officer COO=Chief Operating Officer CSO=Chief Strategy Officer

CAO=Chief Administrative Officer CFO=Chief Financial Officer

CDO・CIO=Chief Digital & Information Officer

HMC=Headquarters Management Committee ALM=Asset Liability Management

2 CAO is the chief officer for compliance. Also, each Division Company has a Division Company president.

*3 Internal control systems and mechanisms have been implemented at every level of ITOCHU. Only the main internal control organization and committees

*

are described herein.

172

Top Commitment

Sustainability at the ITOCHU Group

Environment

Society

Governance

SDGs Bond (Sustainability Bond)

Evaluation by Society

Independent Assurance Report

Corporate Governance

Risk Management

Compliance

Corporate Governance

Board of Directors

Corporate Governance System (As of June 23, 2023)

Overview

● The Company is a company with the Board of Directors and Audit & Supervisory Board Member (the

Audit & Supervisory Board).

● As from April 1, 2018, the Chairman of the Company is the Chief Executive Officer, and the President of

the Company is the Chief Operating Officer.

● The Board of Directors, comprising 10 Directors including 4 Outside Directors, is chaired by the Chief

Executive Officer. The Board of Directors meets, in principle, at least once a month, and it makes

decisions on important matters in accordance with laws and regulations, the Articles of Incorporation,

the "Board of Directors Regulations," and supervises the performance of the Directors.

● Two of the Outside Directors are female, and the average term our internal Directors have been on

overseas assignments will be 5.6 years (as of June 23, 2023).

● In FYE 2023 the Board of Directors held a total of 15 meetings, which were attended by all Directors and

all Audit & Supervisory Board Members, except for one-time absence of Ms. Muraki, the Outside Director.

In addition, there was a proposal for a single board resolution by paper circulation, and all directors

expressed their consent, while all auditors did not raise any objections. Therefore, the board resolution

was deemed to have been adopted.

● In FYE 2023, a total of 75 agenda items were submitted to the Board of Directors (excluding the

aforementioned matters resolved by paper circulation). The main agenda items were as follows:

● Financial Results, Dividends, Financing, Treasury Share Acquisitions

● FYE2023 Management Plan, Overview of Results of the Evaluation as to the Effectiveness of the Board

of Directors

● Report with respect to encountering cyber security incidents

● Report with respect to the activity of the Women's Advancement Committee

Type of system Number of Directors

(Of which, number of outside Directors)

Number of Audit & Supervisory Board Members (Of which, number of outside Audit & Supervisory Board Members) Term of office for Directors Adoption of an Executive Officer System Organization to support CEO decision-making

Advisory committees to the Board of Directors

Director Remuneration System

Details of Corporate Officer

Remuneration System (P174)

Independent external auditor

Company with the Board of Directors and the Audit & Supervisory Board 10 (4)

* 2 of the Outside Directors are female, and the average term our internal Directors have been on overseas assignments is 5.6 years.

5(3)

1 year (the same for Outside Directors) Yes

Headquarters Management Committee (HMC) deliberates on companywide management policy and important issues

Governance, Nomination and Remuneration Committee, Women's Advancement Committee

(1) Monthly remuneration (Fixed)

Determined according to factors that include degree of contribution to ITOCHU, including addressing climate change, ESG and SDGs, based on a standard amount for each position

(2) Performance-linked bonuses (Variable(Single Year))

Total amount is determined based on consolidated net proft, and individual amount is determined in relation to the position points for the Director, etc.

(3) Share price-linked bonuses (Variable(Medium- to Long-term))

Calculated by adding the evaluation of the relative growth rate of ITOCHU's share price compared to Tokyo Stock Price Index (TOPIX) to the amount of increase of ITOCHU's share price for two consecutive fscal years

(4) Performance-linked stock remuneration (Variable(Medium- to Long-term)) Total amount is determined based on consolidated net proft, and individual amount is determined in relation to the position points for the Director used in calculating the individual performance-linked bonus

* Outside Directors paid monthly remuneration only Deloitte Touche Tohmatsu LLC

● Report with respect to the sustainability development

● Important Investment Projects

● Investment in AMMC Iron Ore Project in Canada

● Divestment of the Shares in CONEXIO Corporation

Meetings of Management Bodies in FYE 2021-2023

Financial			Board	Nomination	Governance and	Women's	Audit &
		Remuneration	Advancement	Supervisory
Year	Number of Meetings	Meetings	Committee	Committee	Committee	Board Meeting
	15	3	2	2	14
FYE2023	Attendance	Outside Directors	98%	100%	100%	100%	―
Outside Audit & Supervisory
	Rate	100%	100%	100%	100%	100%
	Board Members
	Number of Meetings	15	1	3	3	14
FYE2022	Attendance	Outside Directors	100%	100%	100%	100%	―
Outside Audit & Supervisory
	Rate	98%	100%	100%	67%	98%
	Board Members
	Number of Meetings	12	4	1	―	14
FYE2021	Attendance	Outside Directors	100%	100%	100%	―	―
Outside Audit & Supervisory
	Rate	100%	100%	100%	―	100%
	Board Members

• "Number of Meetings" does not include meetings by paper circulations.

Top Commitment

Sustainability at the ITOCHU Group

Environment

Society

Corporate Governance

Risk Management

Compliance

Corporate Governance

Members of the Board

◎Chair

○Member

Position and responsibility in ITOCHU

Number of

Number

Governance,

Women's

Name

Attendance at

Nomination and

Corporation

Meetings of the

of years

Remuneration

Advancement

Board of Directors

in office

Committee

Committee

Governance						173
SDGs Bond (Sustainability Bond)	Evaluation by Society	Independent Assurance Report

Policy and Process for Appointing Candidates for Directors

In order to effectively supervise management and decide important business matters as the Board of Directors of a general trading company with broad range of business, ITOCHU's Board of Directors consists of, in principle, the Chairman & CEO, President & COO, officers responsible for overseeing each administrative functions, one

Masahiro Okafuji
Reelection
Keita Ishii
Reelection
Fumihiko Kobayashi
Reelection
Tsuyoshi Hachimura
Reelection
Hiroyuki Tsubai
Reelection
Hiroyuki Naka
Reelection
Masatoshi Kawana	Reelection
Outside
	Independent
Makiko Nakamori	Reelection
Outside
	Independent
Kunio Ishizuka	Reelection
Outside
	Independent
Akiko Ito	New election
Outside
	Independent

Member of the Board, Chairman &	15/15	19	〇	―
Chief Executive Officer	(100%)	years
Member of the Board, President &	15/15	2	〇	―
Chief Operating Officer	(100%)	year
Member of the Board, Executive Vice	15/15	8	〇	〇
President Chief Administrative
Officer	(100%)	years
Member of the Board, Executive Vice	15/15	8	―	―
President Chief Financial Officer	(100%)	years
Member of the Board, Executive Vice	11/11 (100%)	1	―	―
President President, Machinery	(since
Company	election)	year
Member of the Board, Executive Officer	11/11 (100%)	1	―	―
Chief Strategy Officer; General	(since
Manager, Group CEO Office	election)	year
Member of the Board	15/15	5	〇	―
(100%)	years
Member of the Board	15/15	4	〇	◎
(100%)	years
Member of the Board	15/15	2	◎	―
(100%)	years
Member of the Board	―	―	〇	―

appropriate Division Company president as an (internal) director, and several Outside Directors so that the percentage of Outside Directors in the Board of Directors is one-third or more to improve the supervisory function of the Board of Directors. When nominating Outside Director candidates, ITOCHU prioritizes candidates with higher independence, based on the criteria for "independent directors" prescribed by the Tokyo Stock Exchange, Inc. and ITOCHU's "Independence Criteria for Outside Directors and Outside Audit & Supervisory Board Members," who with his or her experience and knowledge in the relevant category, are expected to contribute to the management of ITOCHU. The proposal for candidates for directors is created by the Chairman & CEO by taking into consideration diversity such as knowledge, experience, gender and international experience, and submitted to the Governance, Nomination and Remuneration Committee for further deliberation before the Board of Directors fnally nominates the candidates for election at the General Meeting of Shareholders.

• Reason for Appointment as Outside Directors

Name	Reason for appointment
Masatoshi Kawana	Mr. Kawana is appointed as an Outside Director in the anticipation that, based on his experience as a doctor at
Tokyo Women's Medical University Hospital for many years and in important posts such as the Deputy Director
appointed in June 2018	of the same hospital as well as his high level of medical knowledge, he will monitor and supervise the corporate
[Attendance at Meetings	management of ITOCHU from an independent perspective. According to the criteria for the independence of
of the Board of	directors / auditors prescribed by the Tokyo Stock Exchange, as well as our own independence criteria, Mr.
Directors]	Kawana qualifes as an independent Director. Accordingly, ITOCHU believes that he is unlikely to have conflicts
FYE 2023 : 15/15 (100%)	of interest with general investors, and he has been designated as an independent Director.
Makiko Nakamori	Ms. Nakamori is appointed as an Outside Director in the anticipation that, based on her high level expertise
regarding fnance and accounting as a certifed public accountant as well as her extensive experience as a
appointed in June 2019	corporate executive, she will monitor and supervise the corporate management of ITOCHU from an
[Attendance at Meetings	independent perspective. According to the criteria for the independence of directors / auditors prescribed by
of the Board of	the Tokyo Stock Exchange, as well as our own independence criteria, Ms. Nakamori qualifes as an
Directors]	independent Director. Accordingly, ITOCHU believes that she is unlikely to have conflicts of interest with
FYE 2023 : 15/15 (100%)	general investors, and she has been designated as an independent Director.
Kunio Ishizuka	Mr. Ishizuka is appointed as an Outside Director in the anticipation that, by utilizing his extensive knowledge of
corporate management and the retail industry that was earned through his experience as President and Chairman
appointed in June 2021	of Isetan Mitsukoshi Holdings Ltd. and as a Vice Chair of Nippon Keidanren (Japan Business Federation), he will

	Directors*	Outside Directors	Ratio of Female Directors	Ratio of Outside Directors
	6		4	20%	40%
CEO	COO CAO CFO	Male	Female
P	CSO			(2 Female Directors)	(4 Outside Directors)

• P: President, Machinery Company

[Attendance at Meetings	monitor and supervise the corporate management of ITOCHU from an independent perspective. According to the
of the Board of	criteria for the independence of directors / auditors prescribed by the Tokyo Stock Exchange, as well as our own
Directors]	independence criteria, Mr. Ishizuka qualifes as an independent Director. Accordingly, ITOCHU believes that he is
FYE 2023 : 15/15 ( 100%)	unlikely to have conflicts of interest with general investors, and he has been designated as an independent Director.
	Ms. Ito is appointed as an Outside Director in the anticipation that, based on her extensive and profound insights as a
	government official in charge of consumer-oriented issues, which were earned from her experience such as the
	Deputy Director-General of the Ministry of Land, Infrastructure, Transport and Tourism, the Director-General of the
	Housing Bureau as the frst female director in the Ministry of Land, Infrastructure, Transport and Tourism, and as
Akiko Ito*	Councillor, Cabinet Secretariat, Director General, Secretariat of the Headquarters for Overcoming Population Decline
and Vitalizing Local Economy in Japan, followed by her service as Commissioner of Consumer Affairs Agency, she
appointed in June 2023	will monitor and supervise the corporate management of ITOCHU from an independent perspective. According to
	the criteria for the independence of directors / auditors prescribed by the Tokyo Stock Exchange, as well as our own
	independence criteria, Ms. Ito qualifes as an independent Director. Accordingly, ITOCHU believes that she is unlikely
	to have conflicts of interest with general investors, and she has been designated as an independent Director.
	*Registered name: Akiko Noda