Ito En : Corporate Governance Report (August 2, 2021)

Corporate Governance Report

Last Update: August 2, 2021

ITO EN, LTD.

Daisuke Honjo, President

Contact: Administration Headquarters

( https://www.itoen.co.jp/inquiry_form_global/form.html )

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

The management principle of the ITO EN Group is "Always Putting the Customer First." The Group states in the ITO EN Group Funding Charter that its management priority is to fulfill its corporate social responsibility by cooperating with the government, local communities, consumers, shareholders, retailers, suppliers, financial institutions and other stakeholders, aiming for sustained corporate growth and development and the enhancement of corporate value.

This management principle is a basic concept in the Group's business ethics and the unwavering truth that supports corporate governance. Based on this principle, all officers and employees of the Group shall strive to actively enhance corporate management by maintaining the trust of all stakeholders, aiming to achieve a sustainable society.

As a company with an audit & supervisory board, the Audit & Supervisory Board Members of ITO EN, LTD. (the "Company") shall conduct audits by confirming with Representative Directors of each group company or Directors, Executive Officers or employees in charge of each group company regarding the status of business operations, decision-making processes and so forth 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]

Supplementary Principle 4-11 (1) Views on the Balance, Diversity and Size of the Board of Directors The number of members of the Board of Directors shall be no more than that specified in the Articles of Incorporation of the Company. The basic principle for the composition of the Board of Directors shall be to ensure a necessary and appropriate number of members for effective decision-making and substantive discussions. While there is no female Director as of the date of submission of this report, the Company will make efforts to appoint female Directors with due consideration toward gender, internationality and other characteristics, such as diversity and levels of professionalism.

(Article 6 Composition of the Board of Directors of the ITO EN, LTD. Corporate Governance Guidelines)

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

Disclosure Based on 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 website.

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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 its clients 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 issuer company.

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 common interests of the Company and shareholders, except where 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)

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 website below. Medium and Long-Term Management Plan:
   https://www.itoen-global.com/ir/management_plan.php Financial Information:
   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, excluding Outside Directors, shall comprise monthly fixed remuneration and performance-linked remuneration. Remuneration of Outside Directors shall only be monthly fixed remuneration. Monthly fixed remuneration shall be determined within the total amount of remuneration approved by resolution of the general shareholders meeting, according to respective job positions, by taking into account business results for the preceding fiscal year and the degree of achievement of the annual business plan for the current fiscal year and so forth, and by respecting deliberations at the Nomination & Remuneration Committee. With regard to performance-linked remuneration, stock options to be granted to each officer shall be determined by closely evaluating their performance according to a performance-linked stock option scheme. Individual remuneration, etc. of each Director shall be determined according to remuneration standards adopted by resolution of the Board of Directors meeting.
   (Article 9 Policy and procedures for determining Directors' remuneration of the ITO EN Guidelines)
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Remuneration of Audit & Supervisory Board Members shall be within the total amount of remuneration approved by resolution of the general shareholders meeting and shall only be monthly fixed remuneration. 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. Explanations with respect to the individual appointments/dismissals and nominations based on (4) above
   Refer to the "Notice of Annual General Meeting of Shareholders" posted on the Company website.

Supplementary Principle 4-1 (1) Board's Decisions and Scope of the Matters Delegated to the Management The Company's Board of Directors has the role of overseeing management to secure the fairness and transparency of management and to make prompt and resolute decisions on the execution of important operations and other matters as required by laws and regulations to facilitate sustained growth and the enhancement of corporate value over the medium- to long-term and to improve earning capacity, capital efficiency and so forth.

The execution of operations, other than important operations stipulated above, and relevant decision making shall be delegated to the Executive Board and other lower-level meetings, officers in charge of the operations, Executive Officers and others. The Board of Directors shall supervise the status of the meetings and the execution of duties of the officers and others.

(Article 5 Role of the Board of Directors of the ITO EN Guidelines)

Supplementary Principle 4-1 (3) Succession Plan for the CEO and Other Top Executives

The Company is working on human resources development programs including the cultivation of business managers, including the president. The Company has established the Nomination & Remuneration Committee, which is an advisory body to the Board of Directors.

Principle 4-9 Independence Standards for Independent Audit & Supervisory Board Members

Refer to the Annex, "Standards for the independence of independent Outside Directors and Outside Audit & Supervisory Board Members of the Company," in the ITO EN Guidelines.

Supplementary Principle 4-11 (2) Status of Concurrent Serving of Directors and Audit & Supervisory Board Members as Directors, Audit & Supervisory Board Members or the Management at Other Companies

Refer to annual securities reports posted on the Company website.

Supplementary Principle 4-11 (3) Evaluation of Effectiveness of the Board of Directors

The Company has been analyzing and evaluating the effectiveness of the Board of Directors since fiscal 2015, in an effort to improve its functioning.

In particular, the Company examines Directors and Audit & Supervisory Board Members regarding overall matters related to the Board of Directors, such as the structure, roles, responsibilities, operation status and deliberation methods of the Board of Directors, and then the Board of Directors evaluates the results of the analysis.

The Company has decided that the effectiveness of the Board of Directors is fully ensured based on the results of the evaluation. As a future issue, the necessity of further discussions about the medium- to long-term management plan has been recognized. In addition, matters such as the strengthening of the information support system and the full enforcement of regular reports on its execution status as well as the improvement of accuracy of information sharing have also been cited as issues.

The Company will continue to make efforts for further improvement by enhancing the functions of the Board of Directors through the resolution of issues.

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Principle 4-14 Director and Audit & Supervisory Board Member Training

The Company shall support the execution of duties of the Directors and Audit & Supervisory Board Members by collecting and providing information necessary for them to perform their roles and functions. It shall also provide necessary training and so forth.

In order to perform their roles and functions, Outside Directors and Outside Audit & Supervisory Board Members of the Company shall endeavor to obtain a sufficient understanding of the Group's management strategies and plans, the status of each business, management issues and so forth by such means as receiving explanations from respective divisions in charge of each business at the time of assuming office and on other appropriate occasions after assuming office.

(Article 11 Policy on training for Directors and Audit & Supervisory Board Members of the ITO EN Guidelines)

Principle 5-1 Policy for Constructive Dialogue with Shareholders

The Company shall accurately understand its capital cost, listen to the comments of shareholders through constructive dialogues between its management team and shareholders and pay due attention to shareholders' interests and concerns. In addition, it shall provide clear and simple explanations about the review of its business portfolio and its management policy, including capital expenditure and investment in research and development and human resources, in an effort to obtain shareholders' understanding. (Article 16 Policy on constructive dialogue with shareholders of the ITO EN Guidelines)

For details, refer to "IR Activities" in this report.

2. Capital Structure

		Foreign Shareholding Ratio		From 20% to less than 30%
[Status of Major Shareholders]
		Name / Company Name			Number of Shares			Percentage (%)
				Owned
	Green Core Co., Ltd.		17,403,400		19.50
	State Street Bank and Trust Company 505223		6,480,587		7.26
	Honjo International Scholarship Foundation		5,200,000		5.82
	The Master Trust Bank of Japan, Ltd. (Trust account)	4,630,000	5.18
	Hachiro Honjo		2,446,230		2.74
	Toyo Seikan Group Holdings, Ltd.		1,955,200		2.19
	ITO EN Employees' Shareholding Association		1,941,515		2.17
	Resona Bank, Limited		1,933,100		2.16
	Custody Bank of Japan, Ltd. (Trust account)		1,652,200		1.85
	The Bank of New York Mellon (International) Limited 131800	1,586,000		1.77
		Controlling Shareholder (except for Parent		―――
		Company)
		Parent Company		None

Supplementary Explanation

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3. Corporate Attributes

Listed Stock Market and Market Section	Tokyo Stock Exchange
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			First Section
	Fiscal Year-End		April
	Type of Business		Foods
	Number of Employees (consolidated) as of		More than 1000
	the End of the Previous Fiscal Year
	Sales (consolidated) as of the End of the		From ¥100 billion to less than ¥1 trillion
	Previous Fiscal Year
	Number of Consolidated Subsidiaries as of		From 10 to less than 50
	the End of the Previous Fiscal Year

1. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder
   ―――
2. Other Special Circumstances which may have Material Impact on Corporate Governance

Not applicable.

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