Ito En : Corporate Governance Report (August 1, 2022)

Corporate Governance Report

Last Update: August 1, 2022

ITO EN, LTD.

Daisuke Honjo, President

Contact: Administration Headquarters

(https://www.itoen.co.jp/form_global/)

Securities Code: 2593 https://www.itoen-global.com/

The corporate governance of ITO EN, LTD. (the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other

Basic Information

1. Basic Views [Updated]

The management principle of the ITO EN Group (the "Group") is "Always Putting the Customer First." The Group states in the ITO EN Group Founding Charter that its management priority is to exist for all its workers and their families and for society as a whole, and to fulfill its corporate social responsibility by cooperating with the government, local communities, consumers, shareholders, retailers, suppliers, financial institutions and other stakeholders.

This group management principle is a basic concept in the Group's business ethics and the unwavering truth that supports corporate governance. Every officer and employee of the Group is active in making concerted efforts to achieve a sustainable society in line with the interests of all stakeholders and strives to repay their trust.

Under this management principle, the Group aims to be a "Health Creation Company" and fulfil our long- term vision of becoming a "Global Tea Company". Further, the Group aims to translate its contribution to the health of customers around the world into sustainable growth and medium-to-long-term improvement in its corporate value and is committed to further strengthening corporate governance.

ITO EN, LTD. (the "Company") is a company with an audit & supervisory board. Its Audit & Supervisory Board Members shall conduct audits by seeking confirmation with Representative Directors, Directors, Executive Officers or employees regarding the status of business operations, decision-making processes and other matters to achieve appropriate corporate governance.

Audit & Supervisory Board Members attend every meeting of the Board of Directors, offering fair and impartial advice and audit opinions on overall corporate affairs and each item of business, and audit business execution by the Directors in accordance with the audit policy stipulated by the Audit & Supervisory Board.

[Reasons not to implement each Principle of the Corporate Governance Code] [Updated]

The reason is presented based on the Code revised in June 2021.

Supplementary Principle 2-4 (1) Ensuring Diversity in the Promotion of Core Human Resources, etc. Voluntary and measurable goals for ensuring diversity in the promotion to core human resources

(1) Appointment of women employees to managerial positions

Since its foundation, the Group has aimed to achieve unparalleled greatness as set out in the ITO EN Group Founding Charter. The Company understands that promoting women's active participation and advancement in the workplace is an important management issue from the perspective of ensuring diversity and has set itself the FY2023 goals of having 150% or more of its managers be women (2.3% in FY2020) and 130% or more of its section managers or equivalent (next-generation management candidates) be

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women (5.0% in FY2020) compared to FY2020 levels, respectively. It is working towards the achievement of these goals to improve the female employee retention rate, to increase support for female employees balancing their family and work lives and to train female managers.

(2) Appointment of mid-career hires to managerial positions

Of the total employees, 23.4% were hired mid-career, and the percentage of managers that were hired mid- career is 19%. By assigning and developing human resources with diverse experience and knowledge to be managers based on their merits, the Company has developed an environment in which diverse human resources can thrive. It will continue to assign mid-career hires to positions in a fair and impartial manner and aim to achieve a percentage of managers that were hired mid-career that is the same or higher than percentage of employees that were hired mid-career.

(3) Appointment of foreign nationals to managerial positions

When promoting mid-career hires to managerial positions, employees are promoted according to their merits at group companies around the world, regardless of nationality. On a consolidated group basis, 9.71% (795 persons) of employees are foreign nationals. The Company currently employs 14 foreign nationals with diverse backgrounds and they are playing active roles in the company. As a company that aims to become a global tea company, the company is currently in a phase where it is advancing the promotion of personnel based on their merits across the Group as whole and it has not set any targets for the appointment of foreign nationals as managers.

The Company will examine objectives regarding appointment of foreign managers in line with future business development.

[Disclosure Based on the Principles of the Corporate Governance Code] [Updated]

Disclosure Based on the Principles of the Corporate Governance Code

The Company has established the ITO EN, LTD. Corporate Governance Guidelines (the "ITO EN Guidelines") based on the resolution of the Board of Directors as an indication of the Company's basic views and guidelines on corporate governance. Refer to the ITO EN Guidelines on the Company's corporate website.

https://www.itoen-global.com/management/csr_csv/governance.php

Principle 1-4Cross-Shareholdings

The Company maintains the policy of not conducting cross-shareholding, in principle. Provided, however, the Company conducts cross-shareholding in cases where it can be judged that cross-shareholding would facilitate transactions, procurement or financing. In addition, the Company maintains the policy of reducing cross-shareholding by stages in cases where cross-shareholding is not judged to contribute to the enhancement of the Group's corporate value over the medium- to long-term.

With regard to listed shares held by the Company in accordance with the proviso above ("shares held in cross holding"), the Company validates at the Board of Directors' meetings every year that the return on invested capital exceeds capital cost for each stock. In addition, from the perspective of maintaining and strengthening relationships with the issuers over the medium to long term, the Company has confirmed at the Board of Directors' meeting that the significance of cross shareholdings shall be reviewed and that any stock with reduced economic rationality and reduced significance of cross holding shall be subject to sale or reduction in holding following dialogue with the issuing entity.

Regarding the exercise of voting rights of shares held in cross holding, the Company shall appropriately address the matter by closely examining each agenda and comprehensively judging if the proposed matter will contribute to the enhancement of corporate value of the Company and the issuer.

(Article 14 Policy on cross-shareholding of the ITO EN Guidelines)

Principle 1-7 Related Party Transactions

When the Company conducts a transaction with its officers, major shareholders and others, it shall submit the matter to the Board of Directors in advance and obtain the board's approval in order to ensure that the transaction will not adversely affect the common interests of the Company and shareholders, excluding

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cases in which the terms and conditions of the transaction are clearly the same as those for general transactions.

(Article 13 Management system for transactions among related parties of the ITO EN Guidelines)

Supplementary Principle 2-4 (1) Ensuring Diversity in the Promotion of Core Human Resources, etc. Policies for ensuring diversity in promotion to core human resources, etc.

Since its foundation, the Group has aimed to achieve unparalleled greatness as set out in the ITO EN Group Founding Charter. Given this aim, the Group's basic principle for promoting human resources is to promote based on merit, in other worlds, to promote truly competent individuals regardless of mere seniority, academic background or other characteristics. Based on this principle, the Group aims to develop an environment in which diverse human resources can thrive according to their individual abilities and aptitudes, without characteristics such as their gender, nationality or age or whether they are mid-career hires or persons with disabilities negatively affect their career opportunities. By fostering a corporate culture based on this policy of promotion based on merit, the Group aims to realize its vision of becoming a "Global Tea Company".

(Article 18 Policy on diversity of the ITO EN Guidelines)

Policies for human resource development and internal environment development to ensure diversity, as well as the status of their implementation

(1) Policy for human resource development

The Company is focusing on human resource development in line with a basic policy that career advancement should be based on merit, every single employee should have equal opportunities, and evaluations should be fair. With the management principle of "Always Putting the Customer First" at the root of all its business operations, the Company is committed to implementing health management so that every single employee is healthy and can work energetically, including developing human resources and implementing workstyle reforms.

(i) Compliance training

In accordance with the ITO EN Group Compliance Code of Conduct, the Company provides all employees with training to prevent discrimination because of gender, age, ethnicity, race, nationality, religion, beliefs, social status, family origin, disability or other characteristic and to ensure respect for human rights and fair treatment according to the aptitudes and abilities of individuals.

1. Management training
   The Company provides training to managers to deepen their understanding of the importance of ensuring diversity as well as training on the purposes and details of systems which have been developed to enable active participation by diverse human resources.
2. Training to promote the advancement of women in the workplace

The Company provides female employees with opportunities to reach their full potential and to reconsider and shape their career/life plan to advance further in the workplace. The Company is translating the provision of rank-based training for women into improvement in the motivation and the retention rate of female employees, stronger support to help them maintain a work-life balance, and increased management training.

(iv) Overseas human resource development

The Company provides training to develop human resources who will support overseas business in the future, with emphasis on understanding different cultures and facilitating communication. More specifically, the Company puts out calls for employees wanting to work overseas in the near future and provides them with career development support and seeks to increase their understanding of different cultures through a pre-entry program of training prior to overseas assignment and an overseas trainee program undertaken later after actually being assigned overseas.

(2) Policy for internal environment development

The Company promotes a work-life balance and develops a comfortable workplace environment for everyone by ensuring that diverse human resources can flexibly choose work styles according to their specific circumstances.

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(i) ITO EN Family Support System

The Company has developed the ITO EN Family Support System to provide comprehensive support for ITO EN employees and their families during major life events (getting married, giving birth, raising a child, providing long-term nursing care, etc.).

1. Workplace Environment Improvement Promotion Committee
   The Company has established the Workplace Environment Improvement Promotion Committee (convened twice a year, in principle) to comprehensively consider workplace environment issues and improvement measures and create a more positive workplace environment. District committees made up of representatives of each office have been established under the Committee to exchange opinions on issues such as working hours, workplace safety and hygiene management and review future work styles. In FY2021, information regarding health and measures for the Business Continuity Plan (BCP) was shared, and relevant learning opportunities were provided at workplaces in 28 areas in Japan.
2. Support for persons with disabilities

HR departments regularly visit employees with disabilities working at each workplace, hold meetings with the employees and their families and liaise with public support groups to ensure that employees with disabilities can play an active role and continue working long term.

(iv) Voice System (internal proposal system)

The Company has an employee voice scheme (Voice System for internal proposals), in which all employees regardless of the type of job they do can suggest new products, sales promotions and other ideas. This System keeps the spirit of "Still Now", i.e. finding things that customers are still dissatisfied with, in the forefront of all employees' minds and also helps improve employee motivation as internal awards are presented for excellent suggestions.

For further details of human resource development and development of the internal environment, refer to the Company's corporate website. https://www.itoen.co.jp/sustainability/human_resources/(Japanese only)

Principle 2-6 Roles of Corporate Pension Funds as Asset Owners

The Company does not have a corporate pension fund plan.

Principle 3-1 Full Disclosure

(1) Basic views and guidelines on management principle and corporate governance

Refer to "1. Basic Views" above and Article 1 (Basic concept underlying the management principle and corporate governance) of the ITO EN Guidelines.

1. Management strategy and business results
   Refer to the Company's corporate website.
   Management strategy:https://www.itoen-global.com/about_us/message.php
   Most recent business results:https://www.itoen-global.com/ir/financial/financial_highlights.php
2. Board policies and procedures in determining the remuneration of the senior management and Directors Remuneration, etc. of Directors is deliberated by the Nomination & Remuneration Committee, which consists of a majority of Independent Outside Directors, to ensure objectivity and transparency in accordance with the Company's basic views on corporate governance and basic views on remuneration.
   The Board of Directors determines the remuneration, etc. of directors, giving due respect to the report by the Nomination & Remuneration Committee.
   The Nomination & Remuneration Committee deliberates the individual remuneration, etc. of Directors, including whether it is consistent with the policy for determining remuneration and whether it has been evaluated based on the remuneration standards, and the Board of Directors determines the individual remuneration, etc. of Directors giving due respect to the report by the Nomination & Remuneration Committee.
   For details, refer to "Disclosure of policies for determining the amount of remuneration and methods
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for its calculation" in this report.

(Article 9 Policy and procedures for determining Directors' remuneration of the ITO EN Guidelines) The remuneration of Audit & Supervisory Board Members is deliberated by the Nomination & Remuneration Committee and determined by the Board of Directors. The amount of remuneration shall be within the total amount of remuneration approved by resolution of the general shareholders meeting and shall only be monthly fixed remuneration. The individual remuneration of Audit & Supervisory Board Members shall be determined upon discussions with each Audit & Supervisory Board Member at a meeting of the Audit & Supervisory Board.

(Article 10 Policy and procedures for determining Audit & Supervisory Board Members' remuneration of the ITO EN Guidelines)

1. Board policies and procedures in the appointment/dismissal of the senior management and the nomination of directors and Audit & Supervisory Board candidates
   Refer to Article 7 (Policy on nomination and procedures for nomination and removal of Directors) and Article 8 (Policy and procedures for nomination of Audit & Supervisory Board Members) of the
   ITO EN Guidelines
2. For explanations with respect to the individual appointments/dismissals and nominations based on (4) above, refer to "Notice of Annual General Meeting of Shareholders" published on the Company's corporate website.
   https://www.itoen-global.com/ir/pdf/2022/notice/20220628.pdf

Supplementary Principle 3-1 (3) Initiatives for sustainability, etc. Initiatives for sustainability

Based on the management principle, "Always Putting the Customer First," the Group formulated the ITO EN Group Basic Sustainability Policy with the goal of solving environmental and social issues and increasing corporate value in a compatible manner (the creation of shared value (CSV)) through the promotion and implementation of sustainability management. To this end, the Group set the seven core subjects of the ISO 26000 international standard as material issues in April 2012, and has been promoting CSR (Corporate Social Responsibility) and CSV management. In line with the changes in the external environment and the formulation of a new medium- to long-term management plan, it identified seven material sustainability issues that need to be addressed. Based on the ITO EN Group Basic Sustainability Policy, these seven material issues (contribution to dietary habits and health, contribution to sustainable domestic agriculture, the environment, deepening ties with local communities and society, contribution to a sustainable supply chain, promotion of diverse human resources and active participation by all, and corporate governance) are incorporated in its management strategies, and the Group will advance its initiatives by interlocking these seven material issues with the medium and long-term management plan.

In accordance with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), the Group conducted a scenario analysis of the impact of climate change-related risks and opportunities on business activities in relation to green tea, a raw material for its main products, in FY2020.

In FY2021, the scope of the scenario analysis was expanded to the entire value chain of the Company' s business, and risks and opportunities were analyzed under the 1.5, 2 and 4 °C scenarios in order to evaluate the impact on the Company's business and examine countermeasures. In April 2022, the Company expressed its support for the TCFD recommendations. For more information, please see the Company's integrated report and corporate website.

https://www.itoen-global.com/management/esg.phphttps://www.itoen-global.com/management/report.php

Initiatives for human capital

The Company aims to develop employees who are always ready to take on new challenges, based on the view that "people" are its most important assets. By accounting for employees as "human assets" and shifting from human resource expenditure (= management) to human capital investment (= value creation), the Company will realize initiatives for human capital linked to management strategies.

(1) Internal training programs ITO EN Business College & ITO EN Graduate School

The Company offers ITO EN Business College & ITO EN Graduate School internal training programs

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