MANAGEMENT SYSTEMS

Corporate Governance and Internal
Control/Compliance
ITOCHU Corporation will heighten the transparency of decision making in orderto ensure equitable, efficient operational implementation. At the same time
ITOCHU Corporation will build a corporate governance system that appropriately
incorporates monitoring and oversight functions and conduct corporate
management based on the trust of shareholders and other stakeholders.
ITOCHU Corporation will tirelessly revise its internal control system to improve it
continuously and build an even more equitable and efficient system.

Corporate governance
ITOCHU Corporation has a Board ofCorporate Auditors. To make sure that
our corporate auditors conduct adequateaudits, we developed an organizationthat enables corporate auditors to collectinformation inside the company, forexample, by attending important internal
meetings or through the collaboration
with the Audit Division and the Independent External Auditor. In addition, aCorporate Auditors Office consisting ofspecialized staff is supporting theauditing work.
Our executive organization has
adapted a Division Company system
where seven Division Companies divide
their business areas for autonomous
management catering to the needs ofthe market and customers under theoverall management of the Headquarters.
Further, we have established theHeadquarters Management Committee
as a body that assists the president bydeliberating corporate-wide manage-ment policy and important issues. Also,
ITOCHU Corporation has a variety ofinternal committees that help the decision-making of the president and theBoard of Directors by carefully investigating and deliberating management issues
within their areas of responsibility.

Internal control
ITOCHU Corporation operates effective
internal control through the Disclosure
Committee, the DNA Project Committee,
the ALM Committee, and the Compliance Committee, which are respectivelytasked with 1) reliability of financial
reporting, 2) effectiveness and efficiencyof business operations, 3) safeguardingof assets, and 4) compliance withapplicable laws and regulations. Further,
the Internal Control Committee deliberates corporate-wide internal control
issues and remedial measures and isresponsible for overall internal control.

Corporate governance and internal control systems■ Submission of internal
control reportElection and dismissal

Board of Corporate Auditors

Board of Directors
14 Directors
Appointment and supervision

Monitoringandauditing

5 Corporate Auditors
including 3 outside Corporate Auditors

President & C.E.O.

Electionanddismissal

Monitoringandauditing

Headquarters Management Committee
Internal committees(Internal Control Committee, ALM Committee, Disclosure Committee,
DNA Project Committee, Compliance Committee, CSR Committee)

Division Companies

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ITOCHU Corporation CSR Report 2009

To improve the reliability of its consolidated financial reports even more, ITOCHU
Corporation built an internal control
environment for the major ITOCHU groupcompanies inside and outside of Japan
with a “Disclosure Committee” as thesteering committee.
We further established an InternalControl Audit Section as an independentorganization to assess internal control,building a system for evaluating whether
the internal control system is appropriately developed and operated.
Subject to the evaluation are 1)
corporate-wide internal control (thorough information of the management
philosophy, appropriate development
and operation, etc. of internal rules), 2)
internal control in business processes, and
3) IT-related control (management of thedevelopment, maintenance and operationof information systems ensuring the effective functioning of business processes,
securing of safety, management ofcontracts with external parties, etc.). The
evaluations check whether these controls
are effectively functioning, and theresults of the internal control evaluation
are reported to the management.

As of June 30, 2009

General Meeting of Stockholders
Election and dismissal■ Response to the system forinternal control reports

Independent
External Auditor
Financialaudit

With the development of an internal
control environment, the management
assessed that the internal control systemat the ITOCHU Group was effective, created an internal control report for fiscal
2008, which is the first fiscal year of ourreport system concerning internal control,and submitted the report to the Kanto
Local Finance Bureau after obtaining aclean opinion from a corporate auditor.
We believe that in the future, it will
be necessary to take the internal control
system from the development and construction phase into the actual work ofeach single employee of our group, as abasic operation and with a natural stance.
We will continue to work on strengthening
our internal control system even more.

■ Education and training

PDCA cycle of internal control<Act>
Give instruction
to remediate
deficiencies

Report on
support provision

PresidentInternal control
reports
Internal control
auditsInstruction toDisclosure Committee
provide support
Instruction toimplement
Implement
Implement
support provisionassessment / assessment<Plan>Developguidelines

Project Management Office,
CFO Office
Company Internal
Control Team, etc.

Sharingassessment
reportInstruction forimprovement

Backupdeclaration

Auditing
firm

Report onassessment
implementation<Check>Independent assessment
organization
Assess internalInternal Control Audit Section
control

Each Division
Provide support

PDCA at headquarters
PDCA at companies
PDCA at group companies

Implement assessment<Do>
Design,operation,improvement■ Business process reengineering
project involving all employees
ITOCHU Corporation is promoting
a corporate-wide business process
reengineering project called “ITOCHUDNA Project – Designing New Age.” Theproject focuses on strengthening thecapabilities of each organization andemployee, in other words, the “on-sitecapabilities,” and on the viewpoint ofoptimization on a corporate-wide basis.
Also considering the response to theinternal control system, we visualized
all current business processes andestablished corporate-wide standard
operations that will lead to more efficient
operations and better quality. In thefuture, we will gradually make thetransition towards a phase of building anorganization that fits the standardized
business processes and building systemsthat support these processes.
The corporate-wide business process
reengineering project will help to win
credit and trust from all stakeholders inour business operations, and contributeto a good working environment where allemployees – who are the main actors –feel affluence through their work.

Compliance■ Measures to reinforce
management in response to an
incident occurred in fiscal 2008
In fiscal 2008, delays in a part of thecollection of receivables related tooff-shore trading of heavy machineryand material for Mongolia occurred.
Investigations of the content of the tradingat this occasion revealed that financial
support dealings that do not bring about
physical distribution were included indealings that were processed as sales.
As measures to prevent reoccurrence,
our Board of Directors decided, amongothers, to 1) reinforce control of dealings,
2) thoroughly implement the rotationof personnel, and 3) conduct thorougheducation on compliance, and executed
these measures.

■ Organization for promotionin the group
The ITOCHU Group has complianceofficers in each organization within
Headquarters and at all group companies
in Japan and overseas. These complianceofficers are strengthening compliance bycreating systems, conducting educationand training, responding to individual
cases, and any other necessary measures
based on directives and support from
Headquarters and respective Division
Companies as well as consideration of
local laws and businesses’ characteristics
and operational formats. In addition,
we conduct simultaneous companywide
Monitor & Review surveys every six
months. While checking the progressin implementing compliance measuresat all organizations in ITOCHU Groupthrough these surveys and various othermethods, the ITOCHU Group is making a
concerted effort to enhance and upgrade
its compliance advancement systems.

We are focusing to foster an awarenessof the need for rigorous compliance ineach employee and to conduct employee
education and training about pertinent
laws and statutory regulations as oneof the critical and essential matters forcompliance advancement.
In fiscal 2009, ITOCHU conductededucation and training covering a wide
range of topics and purposes. We held
in-house seminars about laws, statutory regulations, and internal systems
that employees must know about
when conducting business. Also, we
provided training about employees’ roles
in compliance advancement tailored todifferent positions and kinds of work,
such as department managers, section
managers, and clerical employees. We
also urged employees in frontline operations to recheck that they were strictly
following basic operational steps.

■ Global security risk
management
To help prevent the proliferation ofweapons of mass destruction and conventional weapons, Japan maintains strict
trade-security measures under the Foreign
Exchange and Foreign Trade Act. In thisconnection, we have implemented aninternal trade-security control program.
Moreover, to ensure that we comply meticulously with existing government laws
and regulations, ITOCHU has establishedinternal procedures to safeguard ourstakeholders’ and corporate reputation
with respect to business transactions withcountries of concern.
The potential intersection of corporate
operations with global terrorism or
the development and proliferation ofweapons of mass destruction can giverise to reputational and financial risks for
ITOCHU and other companies with extensive international business operations.
As a responsible member of society
and the global business community,
ITOCHU recognizes the need to carefully
manage the potential risks associated withbusiness operations in certain locations.
Accordingly, ITOCHU has implemented
a comprehensive global security risk
management program that involves theperformance of rigorous, security-minded
due diligence with respect to projects
and transactions in which international
security concerns could be present.

ITOCHU Corporation CSR Report 200942