丸紅（8002） – Corporate Governance Report

[Translation] *This document is an English translation of materials originally prepared in Japanese. The Japanese original shall be considered the primary version. Corporate Governance Report Contact: Planning Section, Corporate Planning & Strategy Department Last Update: April 4, 2022 Marubeni Corporation President and CEO Masumi Kakinoki +81 3-3282-4666 Securities Code: 8002 https://www.marubeni.com/en/ The corporate governance of Marubeni Corporation (the “Corporation”) is described below. I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information 1. Basic Views The officers and employees of the Marubeni Group shall comply with laws, regulations and internal rules in accordance with the spirit grounded in the Corporation’s Company Creed “Fairness, Innovation, and Harmony” as well as the Marubeni Corporate Principles and engage in corporate activities conforming to business ethics and the Marubeni Management Philosophy and endeavor to enhance corporate governance. Further, the Corporation’s Board of Directors resolved on the Basic Internal Control Policy regarding the system, etc. for ensuring that the execution of duty by the Directors to comply with laws, regulations and the articles of incorporation. Its overview is described in IV.1 Basic Views on Internal Control System and the Progress of System Development in this report. 1- Company Creed and Marubeni Management Philosophy Company Creed: Fairness (To be fair and bright) Innovation (To be active and innovative) Harmony (To respect each other and cooperate) Marubeni Management Philosophy: upright corporate activities.” 2- Marubeni Corporate Principles “In accordance with the spirit grounded in “Fairness, Innovation and Harmony,” the Marubeni Group is proudly committed to social and economic development and safeguarding the global environment by conducting fair and The Corporation, as a business enterprise, will actively pursue its business interests through the exercise of fair and lawful competition. As a company, the Corporation will also continue to play its part in the growth of the global economy, while always striving to enrich the society within which it operates. In order to achieve these goals, the Corporation is committed to the following six basic principles of business: Maintain sound relationship with the politics and administration in Japan and abroad and ensure sales activities in (a) Conduct Fair and Open Business Activities Comply with laws and promote fair transactions. free competition. Take a firm stand against antisocial activities and forces. (b) Develop a Globally Connected Company Respect the culture of all countries and regions and contribute to the prosperity of local economies through business Aim for development that is in harmony with the local communities through a management system that is accepted activities. globally. (c) Create New Value Through Business Vision In addition to responding to changes in markets and industries, create changes ourselves and offer new products and services to markets and customers. Always take on new challenges without being constrained by existing practices or frameworks. (d) Respect and Encourage Individuality and Originality Foster a free and vibrant corporate culture that respects the individuality of each person and allows them to fully demonstrate their originality. Act proactively, under self-management, to achieve goals. (e) Promote Good Corporate Governance Proactively disclose information to the shareholders and society and improve the transparency of management. Respect proposals related to improvement, etc. of management and aim for a management that is open to the shareholders and society. (f) Safeguard Ecological and Cultural Diversity Recognize the responsibility as a corporate citizen in international society and engage positively in social Pay attention to environmental problems to pass on a sound global environment to the future generations. contribution activities. 3- Stakeholders The Marubeni Group conducts business with the support of various stakeholders throughout the world. The Marubeni Group recognizes the importance of diligently listening to the opinions of stakeholders, and working together to move forward, based on an understanding of stakeholder interests and concerns, as well as the impact of the Marubeni Group’s activities on society and the environment. The Marubeni Group’s concept of each stakeholder The Marubeni Group aims to become a company that can be trusted and relied upon by its customers and business is as follows: (a) Customers and business partners partners. The Marubeni Group will develop and offer socially useful products and services, by giving full consideration to safety and striving at all times to improve the satisfaction and earn the trust of its customers and business partners through conducting sincere and honorable business practices. (b) Shareholders and Investors The Marubeni Group is dedicated to meeting shareholders’ expectations. The Marubeni Group strives thus to enhance its corporate value by responding to changes in the business environment and maintaining stable profitability. In addition, the Marubeni Group works to boost corporate value from social and environmental perspectives, and also disclose pertinent information in a fair and timely manner. (c) Local Community The Marubeni Group aims to become a valued member of the local communities where it do business, and to contribute to the creation of robust local districts through improvement of living standards, creation of job opportunities for the local community, including youths, and offering employment with diversity and inclusion, being aware of gender and disabilities. Overseas, the Marubeni Group respects local laws, cultures and customs, and strives to operate its businesses in a way that contributes to local development. Furthermore, the Marubeni Group is firmly opposed to antisocial forces and groups that threaten the order and safety of society. (d) Employees The Marubeni Group shall respect the individual values and life goals of each and every employee. The Marubeni Group also works to eliminate all forms of discrimination and foster an atmosphere that is pleasant for all. [Reasons for Non-compliance with the Principles of the Corporate Governance Code] The Corporation is implementing all the principles of the Corporate Governance Code dated June 11, 2021, including principles for the Prime Market, based on the above-mentioned basic concepts. [Disclosure Based on the Principles of the Corporate Governance Code] Please refer to the Corporation’s status of initiatives and policies related to all the 83 principles that are consist of Basic Principles, Principles, and Supplementary Principles and include disclosure items based on the principles of the Corporate Governance Code dated June 11, 2021, including principles for the Prime Market. This information is attached to this report and is posted on the Corporation’s webpage. (https://www.marubeni.com/en/company/governance/) 2. Capital Structure Foreign Shareholding Ratio More than 30% [Status of Major Shareholders] Name / Company Name Number of Shares Owned Percentage (%) TREATY The Master Trust Bank of Japan, Ltd. (Trust account) Custody Bank of Japan, Ltd. (Trust account) BNYM AS AGT/CLTS NON JASDEC Meiji Yasuda Life Insurance Company Mizuho Bank, Ltd. Sompo Japan Insurance Inc. Custody Bank of Japan, Ltd. (Trust account 5) Custody Bank of Japan, Ltd. (Trust account 6) STATE STREET BANK WEST CLIENT – TREATY 505234 The Dai-ichi Life Insurance Company, Limited Controlling Shareholder (except for Parent Company) Parent Company ― None Supplementary Explanation Nothing particular to be mentioned. 165,540,400 123,732,900 98,570,158 41,818,718 30,000,000 30,000,000 29,781,700 26,399,100 25,448,103 24,859,500 9.53 7.12 5.68 2.41 1.73 1.73 1.71 1.52 1.47 1.43 Listed Stock Market and Market Section Tokyo Stock Exchange Prime Market 3. Corporate Attributes Fiscal Year-End Type of Business March Wholesale Trade More than 1000 More than ¥1 trillion Number of Employees (consolidated) as of the End of the Previous Fiscal Year Sales (consolidated) as of the End of the Previous Fiscal Year Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year More than 300 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder ―― 5. Other Special Circumstances which may have Material Impact on Corporate Governance The Corporation has many group companies that span a wide variety of businesses all across the globe. As such, the Corporation respects the autonomy of these group companies, while also remaining responsible for the business management and monitoring of them as shareholder and business owner, and striving for the improvement and optimization of corporate value for the entire Marubeni Group. Furthermore, the group companies are also responsible for executing management, based on the policies, strategies and goals of the Marubeni Group, that will contribute to improving and optimizing corporate value. The Corporation (i) shares and disseminates Marubeni Group management policy, (ii) builds and strengthens group governance through the clarification of the abovementioned responsibilities, and (iii) maintains and plans the codification of necessary systems, policies and rules. As such, the Corporation established and adopted the “Marubeni Group Governance Policy” in April, 2017 for group companies, and is advancing the dissemination and credentials of group governance. Arteria Networks Corporation , a listed subsidiary of the Corporation, uses its own high-capacity optical fiber networks to provide cutting edge services to domestic corporations and condominiums in Japan. Arteria Networks Corporation, as a listed company, maintains a strong and transparent governance system. Meanwhile, the Corporation guarantees Arteria Networks Corporation’s ability to execute flexible decision making, and also believes that synergy creation between access to the Corporation’s customers and partners and the Arteria Networks Corporation’s network assets and cutting-edge services, and collaboration across a diversity of industries, including those in which the Corporation’s subsidiaries operate, are all connected to raising and optimizing corporate value for the entire Marubeni Group. As consideration is given to Arteria Networks Corporation’s independence as a listed subsidiary, the “Marubeni Group Governance Policy” does not apply to them. However, avoiding a conflict of interest with Arteria Networks Corporation’s general stockholders, the Corporation gives appropriate guidance and advice as the parent company, propagates the appropriate level of governance as the Marubeni Group, and plans for the improvement and optimization of corporate value for the entire Marubeni Group. Furthermore, in order to ensure effective governance policy building and execution, a written agreement was concluded between the Corporation and Arteria Networks Corporation. By virtue of this agreement, important information for internal controls is reported by Arteria Networks Corporation to the Corporation, and Arteria Networks Corporation receives opinions on these items from the Corporation in advance of decision making. Additionally, the Corporation provides Arteria Networks Corporation with support and guidance necessary for Arteria Networks Corporation’s internal controls system maintenance. It should be noted that advice and opinions by the Corporation to Arteria Networks Corporation as per the aforementioned agreement is not meant to be restrictive, but to be used as reference in Arteria Networks Corporation’s own final decision-making process, thereby guaranteeing autonomy. Arteria Networks Corporation maintains a governance policy that protects the interests of minority shareholders from unfair treatment through such measures as appointing independent outside directors and voluntarily establishing a Nomination and Remuneration Committee of which the majority of members are independent outside directors. II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management 1. Organizational Composition and Operation Organization Form Company with auditors Maximum Number of Directors Stipulated in No upper limit has been set forth. Term of Office Stipulated in Articles of One year [Directors] Articles of Incorporation Incorporation Chairperson of the Board Number of Directors Chairperson (except when also serving as President) Appointment of Outside Directors Appointed Number of Outside Directors Number of Independent Directors 13 6 6 Outside Directors’ Relationship with the Company (1) Relationship with the Company* Name Attribute Takao Kitabata Kyohei Takahashi Yuri Okina Takashi Hatchoji Masato Kitera Shigeki Ishizuka Other From another company From another company From another company Other From another company a Categories for “Relationship with the company” “○” when the director presently falls or has recently fallen under the category; “△” when the director fell under the category in the past “●” when a close relative of the director presently falls or has recently fallen under the category; “▲” when a close relative of the director fell under the category in the past g h △ △ ○ b d c e f i j * * * k a. Executive of the company or its subsidiaries b. Non-executive director or executive of a parent company of the company c. Executive of a fellow subsidiary company of the company d. A party whose major client or supplier is the company or an executive thereof e. Major client or supplier of the listed company or an executive thereof f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the company besides compensation as a director/Audit & Supervisory Board Members g. Major shareholder of the company (or an executive of the said major shareholder if the shareholder is a h. Executive of a client or supplier company of the company (which does not correspond to any of d, e, or f) legal entity) (the director himself/herself only) i. Executive of a company, between which and the company outside directors/ Audit & Supervisory Board Members are mutually appointed (the director himself/herself only) j. Executive of a company or organization that receives a donation from the company (the director himself/herself only) k. Others Outside Directors’ Relationship with the Company (2) Name Reasons of Appointment Designation as Independent Director Supplementary Explanation of the Relationship Mr. Kitabata served in key positions in the government and has profound insight about economic trends in Japan and overseas. He vigorously stated opinions at meetings of the Board of Directors from an objective, specialist viewpoint. As the Chief Outside Director of the Corporation, he has been providing advice to management and appropriately supervising business execution. He is also well-versed in corporate governance. As the chairperson of the Nomination Committee, he vigorously stated opinions in order to enhance soundness, transparency, and efficiency of the Corporation’s management. Because he is expected to continue to fulfill the role stated above and in view of the report by the Nomination Committee, the Board of Directors decided to reappoint him as a candidate for Outside Director, and then he was appointed as an Outside Director by resolution of the General Meeting of Shareholders. No personal, capital or transaction relationships between Mr. Kitabata and the Corporation existed in the past or exist currently, and he satisfies the requirements in the “Standards and Policies for the Independence of Outside Directors/ Audit & Supervisory Board Members of the Corporation” (as set forth on II.3). Hence, the Corporation has appointed him as an Independent Director stipulated by the financial instruments exchanges and notified the financial instruments exchanges of such appointment. Kitabata Yes Takao Mr. Kitabata concurrently serves as President, KAISHI PROFESSIONAL UNIVERSITY, Niigata Sogo Gakuin Academic Corporation, with which the Corporation has no transactions. Mr. Takahashi was an executive of Showa Denko K.K. There is a continuous transaction relationship between Showa Denko and the Corporation, in which the Corporation sells raw materials to Showa Denko and the Corporation purchases Showa Denko’s products and so on. Net sales of the Corporation to Showa Denko for the three business years from FY 2017 to FY 2019 account for 0.01% of the consolidated revenue of the Corporation during said three-year period, whereas net sales of Showa Denko to the Corporation account for 0.08% of the consolidated revenue of the Corporation during said three-year period; both of these percentages are insignificant. Mr. Takahashi has profound insight cultivated through involvement in corporate management at an international company. He vigorously stated opinions at meetings of the Board of Directors from a practical viewpoint. As an Outside Director of the Corporation, he has been providing advice to management and appropriately supervising business execution. He is also well-versed in corporate governance. As the chairperson of the Governance and Remuneration Committee, he vigorously stated opinions in order to enhance soundness, transparency, and efficiency of the Corporation’s management. Because he is expected to continue to fulfill the role stated above and in view of the report by the Nomination Committee, the Board of Directors decided to reappoint him as a candidate for Outside Director, and then he was appointed as an Outside Director by resolution of the General Meeting of Shareholders. No personal, capital or transaction relationships between Mr. Takahashi and the Corporation result in conflicts of interest that could harm the interests of the general shareholders, and he satisfies the requirements in the “Standards and Policies for the Independence of Outside Directors/ Audit & Supervisory Board Members of the Corporation” (as set forth on II.3). Hence, the Corporation has appointed him as an Independent Director stipulated by the financial instruments exchanges and notified the financial instruments exchanges of such appointment. Ms. Okina has profound insight about economic and financial matters cultivated through her many years of research at a research institute. She also has experience as an outside officer at various companies, and experience based on extensive activities as a member of government committees, Kyohei Takahashi Yes Yuri Okina Yes Not applicable such as the Industrial Structure Council, the Financial System Council and the Tax Commission. She vigorously stated opinions at meetings of the Board of Directors from a specialist and multifaceted viewpoint. As an Outside Director of the Corporation, she has been providing advice to management and appropriately supervising business execution. Additionally, she has been proactively expressing her opinions as a Nomination Committee member in order to enhance soundness, transparency, and efficiency of the Corporation’s management and as an advisor to the Sustainability Management Committee to reinforce the sustainability promotion structure. Because she is expected to continue to fulfill the role stated above and in view of the report by the Nomination Committee, the Board of Directors decided to reappoint her as a candidate for Outside Director, and then she was appointed as an Outside Director by resolution of the General Meeting of Shareholders. No personal, capital or transaction relationships between Ms. Okina and the Corporation existed in the past or exist currently, and she satisfies the requirements in the “Standards and Policies for the Independence of Outside Directors/ Audit & Supervisory Board Members of the Corporation” (as set forth on II.3). Hence, the Corporation has appointed her as an Independent Director stipulated by the financial instruments exchanges and notified the financial instruments exchanges of such appointment. Mr. Hatchoji was an executive of Hitachi, Ltd. There is a continuous transaction relationship between Hitachi Ltd. and the Corporation in diverse areas, such as sales and purchases of products Mr. Hatchoji has profound insight cultivated through his involvement in corporate management at an international company and has a wealth of experience in providing advice for and supervising business execution, serving as an outside officer of other companies. He was an Outside Audit & Takashi Hatchoji Yes and construction contracts. Net sales of the Corporation to Hitachi, Ltd. for the three business years from FY 2017 to FY 2019 account for 0.02% of the consolidated revenue of the Corporation during said three-year period, whereas net sales of Hitachi, Ltd. to the Corporation account for 0.01% of the consolidated revenue of the Corporation during said three-year period; both of these percentages are insignificant. Supervisory Board Member of the Corporation from June 2017 to June 2020 and has a good knowledge of the Corporation’s business. He vigorously stated opinions at meetings of the Board of Directors from objective and specialist perspectives with an emphasis on practicality. As an Outside Director of the Corporation, he has been providing advice to management and appropriately supervising business execution. Additionally, he has been proactively expressing his opinions as a Nomination Committee member in order to enhance soundness, transparency, and efficiency of the Corporation’s management and as an advisor to the Sustainability Management Committee to reinforce the sustainability promotion structure. Because he is expected to continue to fulfill the role stated above and in view of the report by the Nomination Committee, the Board of Directors decided to reappoint him as a candidate for Outside Director, and then he was appointed as an Outside Director by resolution of the General Meeting of Shareholders. No personal, capital or transaction relationships between Mr. Hatchoji and the Corporation result in conflicts of interest that could harm the interests of the general shareholders, and he satisfies the requirements in the “Standards and Policies for the Independence of Outside Directors/ Audit & Supervisory Board Members of the Corporation” (as set forth on II.3). Hence, the Corporation has appointed him as an Independent Director stipulated by the financial instruments exchanges and notified the financial instruments exchanges of such appointment. Mr. Kitera served in key positions in the government, mainly in the Ministry of Foreign Affairs. He has a wealth of international experience and profound insight concerning international affairs Masato Kitera Yes Not applicable cultivated through his involvement in diplomacy. He also has in-depth understanding and experience related to diversity, which is indispensable in management of the Corporation. He vigorously stated opinions at meetings of the Board of Directors from objective and specialist perspectives in light of the rapidly changing world situation. As an Outside Director of the Corporation, he has been providing advice to management and appropriately supervising business execution. Additionally, he has been proactively expressing his opinions as a Governance and Remuneration Committee member in order to enhance soundness, transparency, and efficiency of the Corporation’s management. Because he is expected to continue to fulfill the role stated above and in view of the report by the Nomination Committee, the Board of Directors decided to reappoint him as a candidate for Outside Director, and then he was appointed as an Outside Director by resolution of the General Meeting of Shareholders. No personal, capital or transaction relationships between Mr. Kitera and the Corporation existed in the past or exist currently, and he satisfies the requirements in the “Standards and Policies for the Independence of Outside Directors/ Audit & Supervisory Board Members of the Corporation” (as set forth on II.3). Hence, the Corporation has appointed him as an Independent Director stipulated by the financial instruments exchanges and notified the financial instruments exchanges of such appointment. Mr. Ishizuka has profound insight cultivated through his involvement in corporate management at an international company. As he has a background as a technology and development engineer, he has in-depth understanding and experience in the digital and IT fields, which are indispensable in management of the Corporation. The Corporation is an Ishizuka Mr. of Sony executive Corporation Group Sony (former There Corporation). were no transactions between former Sony Corporation and the Corporation during the three business years from FY 2017 to FY Shigeki Ishizuka Yes 2019. He was also an executive of former Sony Imaging Products & Solutions Inc. and Sony former Electronics Corporation (both companies were integrated with current Corporation). Sony no There were transactions between two companies these and the Corporation three the during business years from FY 2017 to FY 2019. expects him to provide advice to management and appropriately supervise business execution from objective and specialist perspectives in light of the rapidly changing world situation in order to enhance soundness, transparency, and efficiency of the Corporation’s management. In view of the above and the report by the Nomination Committee, the Board of Directors decided to appoint him as a new candidate for Outside Director, and then he was appointed as an Outside Director by resolution of the General Meeting of Shareholders. No personal, capital or transaction relationships between Mr. Ishizuka and the Corporation result in conflicts of interest that could harm the interests of the general shareholders, and he satisfies the requirements in the “Standards and Policies for the Independence of Outside Directors/ Audit & Supervisory Board Members of the Corporation” (as set forth on II.3). Hence, the Corporation has appointed him as an Independent Director stipulated by the financial instruments exchanges and notified the financial instruments exchanges of such appointment. Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee Established Committee’s Name, Composition, and Attributes of Chairperson Corresponding to Committee Nomination Committee Nomination Committee to Committee Corresponding Remuneration Committee Governance Committee 6 and Remuneration Committee’s Name All Committee Members Full-time Members Internal Directors Outside Directors Outside Experts 4 1 1 3 0 2 2 2 0 Other Chairperson 0 2 Outside Director Outside Director Supplementary Explanation ● A voluntary committee equivalent to the Nomination Committee ・ Nomination Committee (to be convened as necessary): The memberships of the committee are composed so as to ensure independence, as Independent Outside Directors/Audit & Supervisory Board Members constitutes the majority of the members and the committee is chaired by an Independent Outside Director as well. The Nomination Committee mainly deliberates on proposals regarding the selection of candidates of Director and Audit & Supervisory Board Member, proposals regarding the selection of the President for the next term, and successor plans formulated and operated by the President (including plans related to necessary qualities and requirements, successor candidate groups, and training), and reports to the Board of Directors. In FY 2021, two Committee meetings were held for deliberations regarding candidates of Director and Audit & Supervisory Board Member and successor plans, and all the Committee members attended all the meetings. ・ Composition of Committee Chairperson Yuri Okina Outside Director Members Masumi Kakinoki President and CEO, Member of the Board Takashi Hatchoji Outside Director Shigeki Ishizuka Outside Director ● A voluntary committee equivalent to the Remuneration Committee ・ Governance and Remuneration Committee (to be held as necessary): The memberships of the committee are composed so as to ensure independence, as Independent Outside Directors/Audit & Supervisory Board Members constitutes the majority of the members and the committee is chaired by an Independent Outside Director as well. The Governance and Remuneration Committee deliberates on the policy for determining remuneration for Directors and Executive Officers as well as appropriateness of the level of remuneration, and reports to the Board of Directors. In FY2021, five Committee meetings were held for deliberations regarding remuneration for Directors and Executive Officers, review of stock-based compensation plans, evaluation of the effectiveness of the Board of Directors, and disclosure of information on Directors/Audit & Supervisory Board Members. All Committee members attended all of the meetings. ・ Composition of Committee Chairperson Kyohei Takahashi Outside Director Members Masumi Kakinoki President and CEO, Member of the Board Mutsumi Ishizuki Senior Managing Executive Officer, Member of the Board Masato Kitera Outside Director Tsuyoshi Yoneda Outside Audit & Supervisory Board Member Yoichi Kikuchi Outside Audit & Supervisory Board Member ・ Committee members falling under “Other” in the committee composition are Outside Audit & Supervisory Board Members. [Audit & Supervisory Board Members] Establishment of Audit & Supervisory Board Established Maximum Number of Audit & Supervisory Board Members Stipulated in Articles of No upper limit has been set forth. Incorporation Number of Audit & Supervisory Board Members 5 Cooperation among Audit & Supervisory Board Members, Accounting Auditors and Internal Audit Departments The Audit & Supervisory Board Members and the Accounting Auditor are striving to grasp the audit status of each other through measures such as exchanging information at monthly meetings. The Corporation’s Accounting Auditor for the FY through March 31, 2022 is Ernst & Young ShinNihon LLC. The Audit & Supervisory Board and the Audit Department, a department which performs internal audits, exchange opinions at monthly meetings and implement audit operations through close cooperation. In the FY ended March 31, 2022, the Audit & Supervisory Board met 16 times, and all Audit & Supervisory Board Members were present at all meetings of the Audit & Supervisory Board during their terms of office, excluding Mr. Kida, who was absent for 1 meeting. Appointment of Outside Members of Audit & Supervisory Board Appointed Number of Outside Members of Audit & Supervisory Board Number of Outside Members of Audit & Supervisory Board who are designated as an 3 3 Independent Audit & Supervisory Board Members Audit & Supervisory Board Members’ Relationship with the Company (1) Name Attribute Tsuyoshi Yoneda Other Yoichi Kikuchi Shigeru Nishiyama Lawyer Professor Relationship with the Company* a b c d e f g h i j k l m * * * Categories for “Relationship with the company” “○” when the director presently falls or has recently fallen under the category; “△” when the director fell under the category in the past “●” when a close relative of the director presently falls or has recently fallen under the category; “▲” when a close relative of the director fell under the category in the past a. Executive of the company or its subsidiaries b. Non-executive director or accounting advisor of the company or its subsidiaries c. Non-executive director or executive of a parent company of the company d. Audit & Supervisory Board Members of a parent company of the company e. Executive of a fellow subsidiary company of the company f. A party whose major client or supplier is the company or an executive thereof g. Major client or supplier of the listed company or an executive thereof h. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the company besides compensation as a director/Audit & Supervisory Board Members i. Major shareholder of the company (or an executive of the said major shareholder if the shareholder is a legal j. Executive of a client or supplier company of the company (which does not correspond to any of f, g or h) entity) (the director himself/herself only) k. Executive of a company, between which and the company outside directors/Audit & Supervisory Board Members are mutually appointed (the director himself/herself only) l. Executive of a company or organization that receives a donation from the company (the director himself/herself only) m. Others Audit & Supervisory Board Members’ Relationship with the Company (2) as Name Designation Independent Director Supplementary Explanation of the Relationship Reasons of Appointment Mr. Yoneda has a wealth of experience serving in key positions in the government from which he gained profound insight. He also has experience of serving as an outside officer of another company. As an Outside Audit & Supervisory Board Member of the Corporation, he has been appropriately supervising management from objective and specialist perspectives in light of the rapidly changing world situation in order to enhance soundness, transparency, and efficiency of the Corporation’s management. Additionally, he vigorously stated opinions as a Governance and Remuneration Committee member. In view of the above and the report by the Nomination Committee, the Board of Directors decided to reappoint him as a candidate for Outside Audit & Supervisory Board Member, and then he was appointed as an Outside Director by resolution of the General Meeting of Shareholders. Tsuyoshi Yoneda Yes Not applicable Further, no personal, capital or transaction-related relationships existed between Mr. Yoneda and the Corporation in the past or exist currently, he satisfies the requirements in the “Standards and Policies for the Independence of Outside Directors/ Audit & Supervisory Board Members of the Corporation” (as set forth on II.3). Hence, the Corporation appointed him as an Independent Auditor stipulated by the financial instruments exchanges and notified the financial instruments exchanges of such appointment. Mr. Kikuchi has a wealth of experience in legal circles and excellent expertise and profound insight cultivated through his experience. The Corporation believes that he will appropriately fulfill duties as an Outside Audit & Supervisory Board Member from a specialist, objective and neutral viewpoint in order to enhance soundness, transparency and efficiency in the Corporation’s management, by monitoring and supervising management, contributing to improvement of corporate governance and the enrichment of audits by the Audit & Supervisory Board. In view of the above and the report by the decided to appoint Mr. Kikuchi as a candidate for Outside Audit & Supervisory Board Member, and then he was appointed as an Outside Audit & Supervisory Board Member by resolution of the General Meeting of Shareholders. No personal, capital or transaction relationships between Mr. Kikuchi and the Corporation existed in the past or exist currently, and he satisfies the requirements in the “Standards and Policies for the Independence of Outside Directors/ Audit & Supervisory Board Members of the Corporation” (as set forth on II.3). Hence, the Corporation appointed him as an Independent Auditor Yoichi Kikuchi Yes Not applicable Nomination Committee, the Board of Directors Shigeru ma NishiyaYes Not applicable Nomination Committee, the Board of Directors stipulated by the financial instruments exchanges and notified the financial instruments exchanges of such appointment. Mr. Nishiyama has a high degree of expertise and a wealth of experience in accounting and finance and profound insight cultivated through such experience, as well as abundant experience as outside director/auditor of various companies. The Corporation believes that he will appropriately fulfill duties as an Outside Audit & Supervisory Board Member from a specialist, objective and neutral viewpoint in order to enhance soundness, transparency and efficiency in the Corporation’s management in monitoring and supervision of management and contribute to improvement of corporate governance of the Corporation and enrichment of audits by the Audit & Supervisory Board. In view of the above and the report by the decided to appoint Mr. Nishiyama as a candidate for Outside Audit & Supervisory Board Member, and then he was appointed as an Outside Audit & Supervisory Board Member by resolution of the General Meeting of Shareholders. Further, no personal, capital or transaction-related relationships existed between Mr. Nishiyama and the Corporation in the past or exist currently, and he satisfies the requirements in the “Standards and Policies for the Independence of Outside Directors/ Audit & Supervisory Board Members of the Corporation” (as set forth onII.3). Hence, the Corporation has appointed him as an Independent Director stipulated by the financial instruments exchanges and notified the financial instruments exchanges of such appointment. [Independent Directors/Audit & Supervisory Board Members] Number of Independent Directors/Audit & Supervisory Board Members Matters relating to Independent Directors/Audit & Supervisory Board Members The Corporation appoints all Outside Directors/Audit & Supervisory Board Members who satisfy the requirements for Independent Directors/Audit & Supervisory Board Members as Independent Directors/Audit & Supervisory Board Members. Incentive Policies for Directors Performance-linked Remuneration / Other [Incentives] Supplementary Explanation As described in “Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods” the remuneration of Directors other than Outside Directors (“Eligible Directors”) consists of basic remuneration, which is a fixed amount that is in accordance with the roles of the Eligible Directors, performance-linked remuneration, which is linked to consolidated business results in the previous fiscal year, additional pay and personal evaluation pay, and shares with restriction on transfer subject to market-capitalization-based exercisability conditions (“Performance Share Units”). Form of payment consists of cash, shares with restriction on transfer (“Restricted Stock”) and Performance Share Units. Performance based compensation: If the “sum of 50% of consolidated net income (profit attributable to the owners of the parent) and 50% of core operating cash flow in the previous business year” is below 100 billion yen, performance-linked remuneration is made 0, and if it is 100 billion yen or more, it is made an amount calculated by multiplying the amount of base annual compensation by a multiplication factor that proportionally increases (an increase of approximately 2% per increase of 5 billion yen). In order to achieve a balanced format for compensation that is linked with the Corporation’s performance, up to FY2018, only consolidated net income (profit attributable to owners of the parent) for the previous business year was used as an indicator. From FY2019 the “sum of 50% of consolidated net income (profit attributable to owners of the parent) and 50% of core operating cash flow in the previous business year” is used an indicator, and the aim of this is to further strengthen alignment between the compensation system and the management targets of the previous Medium-Term Management Strategy “GC2021.” As for consolidated net income (profit attributable to owners of the parent) and core operating cash flow in FY2020, which were used for the calculation of performance-linked remuneration in FY2021, the target value of each at the beginning of the year (announced on May 6, 2020) was 100 billion yen and 240 billion yen. The actual value was △225.3 billion yen and 369.6 billion yen. Stock-Based Compensation: Beginning in FY2021, the Corporation has introduced Restricted Stock and Performance Share Units (the “Plan”) to Eligible Directors. The purpose of the Plan is to give the Eligible Directors an incentive to work to sustainably enhance the corporate value of the Corporation in the medium to long term, thereby enhancing future market value, and promoting greater value sharing with shareholders. 9 1. Restricted Stock 20% of the base annual remuneration and performance-based compensation is granted as Restricted Stock to the Eligible Directors with a certain no transfer period. An Eligible Director may not transfer, create security interest over, or otherwise dispose of the Corporation’s common shares which were allotted to them under the Allotment Agreement during the period from the day the shares were allotted to them under the Allotment Agreement until immediately after the time the Eligible Director resigns or retires from their position as Director, Executive Officer, or other officer or employee of the Corporation or the Corporation’s subsidiary that the Corporation’s Board of Directors designates. The purpose of the no transfer period is to promote greater value sharing with shareholders in the medium to long term. 2. Performance Share Units Up to 1.5 times an amount equivalent to 10% of base annual compensation is allotted as Performance Share Units on top of the bas compensation. Performance Share Units refers to the Corporation’s common shares that the Corporation will issue to Eligible Directors (or dispose of) in accordance with the achievement of targets linked to market value growth rate and other performance indicators predetermined by the Corporation’s Board of Directors. Subject to introduction of the Plan, the Corporation abolishes the authorization resolved by the above shareholders meeting regarding the amount of remuneration for allotting subscription rights to shares as stock options to Directors (excluding Outside Directors), and will not issue subscription rights to shares as stock options in the future based on the said authorization, except for those that have already been granted. Recipients of Stock Options Other Supplementary Explanation By resolution of the 97th Ordinary General Meeting of Shareholders held on June 24, 2021, the Corporation abolishes the authorization resolved by the above shareholders meeting regarding the amount of remuneration for allotting subscription rights to shares as stock options to Directors (excluding Outside Directors), and will not issue subscription rights to shares as stock options in the future based on the said authorization, except for those that have already been granted. As an exception, the Corporation will issue subscription rights to shares as stock options to Executive Officers who are working overseas and non-residents of Japan, to the extent such subscription rights were reserved. [Director Remuneration] Disclosure of Individual Directors’ Selected Directors Remuneration Supplementary Explanation FY ended March 31, 2021 are as follows: (a) The total of remuneration and other payments for Directors and Audit & Supervisory Board Members in the Note 1. The amounts less than 1 million yen are rounded off. Note 2. By resolution of the General Meeting of Shareholders, the maximum annual amount of remuneration for Directors has been set at “1,100 million yen (including 120 million yen for Outside Directors)” (by resolution of the 96th Ordinary General Meeting of Shareholders held on June 19, 2020, with 11 Directors related to the decision [including five Outside Directors]), the maximum monthly remuneration for Audit & Supervisory Board Members has been set at “12 million yen” (by resolution of the 88th Ordinary General Meeting of Shareholders held on June 22, 2012, with 5 Directors related to the decision), and the maximum annual amount of compensation concerning stock compensation-type stock options for Directors (excluding Outside Directors) has been set at 220 million yen (by resolution of the 92nd Ordinary General Meeting of Shareholders held on June 24, 2016, with 6 Directors related to the decision). Note 3. The Corporation introduced the Restricted Stock and Performance Share Unites in FY2021. The total amount of remuneration and other payments used for Restricted Stock and Performance Share Units will be within the above amount specified for remuneration and other payments for Directors, with the amount for Restricted Stock capped at a maximum of 180 million yen per year, and Performance Share Units capped at a maximum of 120 million yen per year. Note 4. The Corporation abolished the retirement remuneration plan at the close of the 83rd Ordinary General Meeting of Shareholders held on June 22, 2007, and resolved on making a final payment of retirement remuneration accompanying the abolishment of the retirement remuneration plan. In accordance with the resolution, the Corporation decided to pay retirement remuneration to each Director who is eligible to receive the final payment either at the time of retirement as Director or at the time of retirement as Executive Officer, whichever is later, and to each Audit & Supervisory Board Member who is eligible to receive the final payment at the time of retirement as Audit & Supervisory Board Member. In the FY ended March 31, 2020, retirement remuneration which paid to Directors/Audit & Supervisory Board Members who are eligible to receive a final payment in relation to the abolition of the Retirement Remuneration plan was 0. (b) No individuals to whom the total amount of compensation paid exceeded 100 million yen in the FY ended March 31, 2021: Policy on Determining Remuneration Amounts Established and Calculation Methods Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods The maximum total remuneration shall be determined for all Directors by resolution at a General Meeting of Shareholders. The Governance and Remuneration Committee chaired by an Outside Director/Audit & Supervisory Board Member, with the majority of its members consisting of Outside Directors/Audit & Supervisory Board Members, deliberates on the policies for compensation decisions and the appropriateness of the compensation levels, and provides reports to the Board of Directors. The remuneration amount is determined by resolution of the Board of Directors. The remuneration of Directors other than Outside Directors consists of basic remuneration, which is a fixed amount that is in accordance with the roles of the Directors, performance-linked remuneration, which is linked to consolidated business results in the previous fiscal year, additional pay, and personal evaluation pay, Performance Share Units. Additional Pay consists of director bonuses and representative director bonuses, and personal evaluation pay consists of an organization performance evaluation and a qualitative evaluation. For the organization performance evaluation, the evaluation item is whether the consolidated net income target is achieved or not. The amount in which the organization performance evaluation is reflected is calculated by multiplying base annual compensation by the ratio determined by the Board of Directors corresponding to the achievement/non achievement of the target. Qualitative evaluation takes into consideration business results in the fiscal year, medium- to long-term contributions (such as efforts and initiatives for new value creation toward the future) and other such measures. The amount in which qualitative evaluation is reflected is calculated by multiplying base annual compensation by a ratio which has been determined by the Board of Directors to reflect the qualitative evaluation. Concerning the individuals’ evaluation-based compensation, the President who is the chief executive officer is judged to be most suitable for conducting qualitative evaluation and the Board of Directors has given President & CEO Masumi Kakinoki the authority for the said evaluation (hereinafter referred to as the “qualitative evaluation by the President”). In order to ensure appropriate exercise of this authority, the ratio to reflect the qualitative evaluation by the President is within the range determined by the Board of Directors. The performance-based compensation is described in the above Incentive Policies for Directors, all of whom are independent from business execution, consists entirely of base annual compensation, and does not include performance-linked remuneration. [Supporting System for Outside Directors and/or Independent Audit & Supervisory Board Members] System for supporting Outside Directors: The General Managers of Corporate Planning & Strategy Department and Legal Department explain all the agenda items for the Board of Directors Meeting in advance, and secretaries are assigned to support in daily communication, etc. with Outside Directors as in the case with other Directors. System for supporting Outside Audit & Supervisory Board Members: The General Managers of Corporate Planning & Strategy Department and Legal Department explain all the agenda items for the Board of Directors Meeting in advance, and the Audit & Supervisory Board Member’s Office supports in daily communication, etc. with the Outside Audit & Supervisory Board Members as in the case with other Audit & Supervisory Board Members. [Status of Those Who Retired as President and CEO, etc.] Name, etc. of Advisors, Counselors, etc. Who Are Former President and CEO, etc. Name Duties Working form, conditions Title Date of retirement as Term (Full-time, part-time, President, etc. compensation, etc.) Toru Tsuji Honorable None Part-time, no compensation March 2008 Not set Corporate Advisor Katsumata Corporate Advisor Nobuo Honorable None Part-time, no compensation March 2013 Not set Teruo Asada Honorable External Part-time, compensation March 2019 March 2023 Corporate activities Advisor Number of Advisors, Counselors, etc. Who Are Former Presidents and CEOs, etc. Matters relating to Former Presidents and CEOs, etc. 3 ・The Corporation abolished the advisor system on April 1, 2019. (It has been decided by the meeting of Board of Directors on June 22, 2018.) ・The Corporation may appoint a Corporate Advisor, who would not engage in business execution but will engage in activities in the business community and activities with high social significance. ・The President appoints those who retired as officers of the Corporation as Corporate Advisors. When those who have retired from the posts of Chairman or President of the Corporation are appointed to the post of Corporate Advisor, they are called Honorable Corporate Advisors. (Retirement as Chairman of the Board) (Retirement as Chairman of the Board) (Retirement as Chairman of the Board) 2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration The details of the organizations of the Corporation are as follows: (a) Board of Directors The Board of Directors comprises 13 Directors (including six Outside Directors; 12 males and one female), and makes decisions regarding management policy and other important matters and supervises the execution of duties by Directors. To clearly segregate management and execution, in principle, the Chairman of the Board, who does not have representative rights or the authority for business execution, serves as the chair of Board of Directors Meetings. (b) Audit & Supervisory Board The Audit & Supervisory Board comprises five Audit & Supervisory Board Members (including three Outside Audit & Supervisory Board Members). The Corporation adopts a corporate audit governance system and each of Audit & Supervisory Board Members is responsible for overseeing Directors in the execution of their duties by attending important meetings, such as the Board of Directors Meetings, and by monitoring business activities and financial conditions in accordance with the auditing policies and plans set by the Audit & Supervisory Board. (c) Corporate Management Committee The Corporate Management Committee has been established as an advisory committee for the President, and consists of five Representative Directors including the President, one Senior Managing Executive Officer, two Managing Executive Officers, and one Executive Officer. It deliberates management-related policies and company-wide important matters. (d) Committee of Chief Operating Officers The members of the Committee of Chief Operating Officers are the President, the Representative Directors, Chief Operating Officers, and Regional CEOs and COOs appointed by the President. They discuss matters pertaining to budgeting, account settlement and financial planning as well as other issues related to the execution of business. (e) Committee of Executive Officers The Committee of Executive Officers consists of 39 Executive Officers (five of whom also serve as Director), and it communicates management policies issued by the President and other information, and gives reports on matters that affect business execution such as financial performance and the results of internal audits. Further, the Corporation has established various committees for strengthening of corporate governance. Main committees and their roles are as follows: ・ Investment and Credit Committee (once a week as a rule, 22 times in FY 2021) The committee discusses projects subject to the internal approval (“Ringi”). Chairman of Investment and Credit Committee makes decisions on proposals to be submitted to the Corporate Management Committee through discussions in Investment and Credit Committee. ・ Compliance Committee (four times a year, as a rule, and whenever necessary, 4 times in FY 2021) The committee provides support and guidance with regard to practicing compliance as well as establishment, maintenance and management of the compliance system of the Marubeni Group. ・ Sustainability Management Committee (once a year, as a rule, and whenever necessary, 4 times in FY 2021) The committee deals with the identification and periodic review of “Materiality” which takes into account the ESG (environmental value, social value and governance) point of view as it pertains to business fields as a whole and also deliberates matters related to sustainability, including ESG support and report it to the Board of Directors. ・Internal Control Committee (held as necessary, 3 times in FY 2021) The committee confirms and reviews status of formulation and operation of basic internal control policy in accordance with the Companies Act, drafts their revision proposals, develops and operates system and evaluates effectiveness regarding financial reporting in accordance with the Financial Instruments and Exchange Act and prepares internal control report drafts. ・ Disclosure Committee (held as necessary, 13 times in FY 2021) The committee formulates principles and basic policy drafts regarding disclosure, establishes and improves the internal system regarding statutory disclosure and timely disclosure and judges the significance and appropriateness regarding statutory disclosure and timely disclosure. Moreover, the status of holding the Corporation’s organization and committee meetings in the FY ended March 31, 2022 is as follows: in the said FY, the Board of Directors met 17 times to make decisions regarding execution of duties by the Corporation and all members of the Board of Directors were present at all meetings during their terms of office. At the same time, the Board of Directors received reports regularly from Directors to supervise their execution of duties. In FY2021, the Board of Directors mainly deliberated as below: – The Medium-Term Management Strategy “GC2024” (Business Environment, Green Strategy, Improving Profitability, Marubeni Group HR Strategy, Capital Allocation Policy, Shareholder Returns Policy, etc.) – Investment and financing projects (share transfer of subsidiary, which owns oil and gas fields in the UK North Sea; development of a floating offshore wind farm in Scotland; and the reorganization of Gavilon and transfer of Gavilon’s shares) Supervisory Board Members – Financial results and other finance related matters (share repurchases, etc.), remuneration for Directors/Audit & – Evaluation of the effectiveness of the Board of Directors, internal control related matters, and how to enhance the corporate governance system (to respond to revisions to Japan’s Corporate Governance Code, etc.). The Audit & Supervisory Board met 16 times to formulate audit policy and plan and report audit results. In accordance with the auditing policies and plans, each Audit & Supervisory Board member audited Directors’ execution of duties by attending the Board of Directors Meetings and other important meetings and investigating the status of operation and assets. The Corporate Management Committee met 35 times and discussed and made decisions regarding management-related policies and company-wide important matters. In addition, the Committee of Chief Operating Officers met 3 times, and the Committee of Executive Officers met 2 times. The status of measures related to enhancement of the functions of the Audit & Supervisory Board Members (1) Human resources and system supporting the Audit & Supervisory Board Members The Corporation has in place the Audit & Supervisory Board Member’s Office (4 dedicated staff members) to support the Audit & Supervisory Board Members, which work together with the Audit Department (87 people) directly under the President and the Accounting Auditor, ensuring the human resources and systems for supporting the audits by the Audit & Supervisory Board Members. (2) Knowledge regarding finance and accounting and accounting as described below: (Audit & Supervisory Board Member Mr. Hikaru Minami) The following Audit & Supervisory Board Members are judged to have considerable knowledge regarding finance Mr. Minami served as Managing Executive Officer, Member of the Board; CAO; Senior Operating Officer, Audit Dept. Hence, he has considerable knowledge about finance and accounting. (Audit & Supervisory Board Member Mr. Shigeru Nishiyama) Mr. Nishiyama is a certified public accountant and a professor of Waseda Business School (Graduate School of Business and Finance). Hence, he has considerable knowledge about finance and accounting. In order to enable each of the Outside Directors, namely Messrs. Takao Kitabata, Kyohei Takahashi, Ms. Yuri Okina, Messrs. Takashi Hatchoji, Masato Kitera, Shigeki Ishizuka and each of Outside Audit & Supervisory Board Members, who are Messrs. Tsuyoshi Yoneda, Yoichi Kikuchi and Shigeru Nishiyama to fully perform his or her duty as Outside Director or Outside Audit & Supervisory Board Member, the Corporation has entered into an agreement with each of them in which the liability for damages provided for in Article 423, Paragraph 1 of the Companies Act is limited to the sum of the amounts specified in each item of Article 425, Paragraph 1 of the Companies Act, if he or she has acted in good faith and without gross negligence in performing his or her duties. 3. Reasons for Adoption of Current Corporate Governance System The Corporation conducts a diverse range of business globally. Accordingly, the Corporation has established a corporate governance model of a company with auditors in which the Board of Directors consisting of Internal Directors and Outside Directors in order to ensure rapid and efficient decision-making and appropriate supervisory functions in management. The Corporation has determined that this governance model is functioning effectively as set forth in items (a) and (b) below. Therefore, the Corporation will retain the current governance structure. (a) Rapid and efficient decision-making The Corporation ensures rapid and efficient decision-making by appointing Directors who serve concurrently as Executive Officers and are well-versed in the Corporation’s diverse business activities. (b) Appropriate supervisory functions The Corporation ensures appropriate supervisory functions by implementing various measures. These include appointing Outside Directors that account for a third or more of candidates for the Board of Directors; establishing the Audit & Supervisory Board Member’s Office; fostering collaboration among the Audit & Supervisory Board Members, the Audit Department, and the Accounting Auditor; and carrying out advance briefings, on the same occasion, on matters referred to the Board of Directors for both Outside Directors and Outside Audit & Supervisory Board Members. The Corporation sets forth the roles and functions of Outside Directors and Outside Audit & Supervis