ITOCHU : CORPOEATE GOVERNANCE REPORT

[Translation for Reference and Convenience Purposes Only]

ITOCHU Corporation

CORPORATE GOVERNANCE

Please note that the following is an unofficial English translation of the Japanese original text of the Corporate Governance Report of ITOCHU Corporation, which has been reported to the Tokyo Stock Exchange. ITOCHU Corporation provides this translation for reference and convenience purposes only and without any warranty as to its accuracy or otherwise. In the event of any discrepancy between this translation and the Japanese original, the latter shall prevail.

Latest Revision:	1 October, 2021
Company:	ITOCHU Corporation
Representative:	Keita Ishii, Representative
	Director and President and
	Chief Operating Officer
Inquiries:	Suguru Amano,
	General Manager
	Investor Relations Division
Phone:	[phone]
Securities Code:	8001

URL: https://www.itochu.co.jp/en

The following is an overview of corporate governance at ITOCHU Corporation.

1. Basic Policy, Capital Structure, Corporate Attributes and Other Basic Information

1. Basic Policy

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

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

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

In order to separate execution by and monitoring over management, we reduced several executive Directors and the percentage of outside Directors in our Board of Directors was increased to one-third or more from April 2017. We keep this percentage of outside Directors also in FYE 2021 and onwards.

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ITOCHU Corporation

CORPORATE GOVERNANCE

Additionally, ITOCHU has established, as voluntary advisory committees to the Board, the Governance and Remuneration Committee and the Nomination Committee which are chaired by outside Directors and are comprised of a majority of the members as outside Directors and Audit & Supervisory Board Members, and the Women's Advancement Committee which is chaired by an outside Director and is comprised of more than half of the members as outside Directors and Audit & Supervisory Board Members.

In appointing outside Directors and Audit & Supervisory Board Members, ITOCHU places great importance on their independence, and in this connection, ITOCHU has adopted its own independence criteria, augmenting the independence criteria established by the Tokyo Stock Exchange.

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

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

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

[Reasons for Not Implementing Principles of Corporate Governance Code]

ITOCHU complies with all principles set forth in the Corporate Governance Code.

[Disclosure Based on Principles of Corporate Governance Code]

(Principle 1.4)

• Policy on Acquiring and Holding Listed Stocks

ITOCHU classifies investments other than for pure investment purposes and to consolidated companies as "Investments to Non-Affiliated Companies," and the "Cross-Shareholdings" as set forth in Corporate Governance Code is included in this classification. ITOCHU engages in investments to non-affiliated companies in order to create business relationships. In principle, it is the Company's policy to limit investments to non-affiliated companies to those that have a high likelihood of generating investment returns, and those with a high strategic significance including affiliation in future. This policy remains the same, regardless of whether investments are in or outside Japan, or listed or unlisted.

In order to manage our investment, we set our internal rule. Through annual review of all investments to non-affiliated companies including the Cross-Shareholdings, we examine economic (quantitative) rationale based on returns on our investment, and review strategic objectives to hold such investments taking into consideration the likelihood that our investment purpose is realized in the future. Investments that do not generate economic added value over two-years or investments that lack strategic objective based on such annual review will be, in principle, sold. Results of such annual review with respect to Cross-Shareholdings are subject to further scrutiny at our Board of Directors from the perspective of economic rationale and strategic objective.

ITOCHU places great importance on communication with each investee with the view to building, strengthening and maintaining business relationship as well as to improving corporate value of both ITOCHU and each investee. In May 2015, ITOCHU adopted the following internal voting guideline with respect to Cross-Shareholdings to ensure that ITOCHU's voting rights on all of such investments are exercised in a timely and adequate manner.

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ITOCHU Corporation

CORPORATE GOVERNANCE

[Voting Guideline]

1. In principle, not to abstain from voting or to grant full authority to exercise voting rights on our behalf.
2. To decide for or against a proposal taking into consideration our investment purpose and holding policy.

ITOCHU's final position on voting is determined through internal decision making process based on an initial plan prepared by a department in question through which an investment is made.

(Principle 1.7)

• Transactions between Related Parties

Based on our Rules of the Board of Directors, ITOCHU requires a resolution of the Board of Directors concerning transactions involving conflict of interests of Directors or transactions by Director which may compete with ITOCHU, and through such requirement, ITOCHU believes such transactions are adequately supervised by the Board of Directors.

(Principle 2.6)

• Functional Performance of Corporate Pension as an Asset Owner

In ITOCHU, our finance division dispatches several persons with high expertise in asset management to our corporate pension fund, and such persons, one of who is positioned as the executive Director of the pension fund, are in charge of asset management thereof. Appropriate placement of such persons is arranged by sufficient training as well as planned and regular rotation. In addition, ITOCHU respects the intention of the pension fund regarding its investment portfolio and the stewardship activities of the investment management institutions. Furthermore, operating the pension fund in the interest of the third parties is strictly prohibited pursuant to the internal regulation of the pension funds, and the potential conflict of interest is regularly announced and well-known to the Directors of the pension fund. Thus, we appropriately manage conflicts of interest that may arise between the beneficiaries of the corporate pension and ITOCHU. On 6 June, 2019, the corporation pension fund has accepted and announced the Japan's Stewardship Code as an Asset Owner. The corporation pension fund as an asset owner will fulfill its stewardship responsibilities through the actions of the asset managers, to which they outsource their asset management activities.

(Principle 3.1(i))

• Corporate Mission

ITOCHU's corporate mission and guideline of conduct are available at our homepage. Please refer to the following URL:

https://www.itochu.co.jp/en/about/mission/

• Management Plan

Our current medium-term management plan for and in relation to the period of FYE 2022 to FYE 2024 was disclosed on 10 May, 2021. Please refer to the following URL to find the management plan: https://www.itochu.co.jp/en/ir/financial_statements/2021/__icsFiles/afieldfile/2021/05/10/21_ended_02_e

.pdf

(Principle 3.1(ii))

• Basic Policy on Corporate Governance

Please see Paragraph I-1 (Basic Policy) above in this report.

(Principle 3.1(iii))

• Policy and Process for Setting Compensation

Our current remuneration plan for Directors is designed to be an incentive to grow business performance. The variable remuneration (performance-linked bonuses, share price-linked bonuses, and performance- linked stock remuneration) accounts for a high proportion of total remuneration. Also, this remuneration plan, including the calculation method, has been previously disclosed publicly, making it highly transparent. In order to increase awareness of contribution to raising business performance and enlarging corporate value over the medium to long term, we are including stock remuneration (non-monetary compensation) as part of the remuneration plan.

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[Translation for Reference and Convenience Purposes Only]

ITOCHU Corporation

CORPORATE GOVERNANCE

Given our current performance up until today, the purpose of this remuneration plan is sufficiently achieved. In order to continue the expansion in business performance, we are keen to maintain this remuneration plan for Directors.

In accordance with the above policy for determining the remuneration of Directors, our remuneration plan for Directors which includes the formula and calculation method for the individual payment amount for each director, is resolved at the Board of Directors with consideration of the annual financial plan of each year following the deliberation at the Governance and Remuneration Committee under the Board of Directors as voluntary advisory committees.

Remuneration Plan for Directors consists of monthly remuneration and performance-linked remunerations (performance-linked bonuses, share price-linked bonuses, and performance-linked stock remuneration (non-monetary compensation)) and is deliberated by the Governance and Compensation Committee and approved by the Board of Directors unanimously. Performance-linked bonuses reflects short-term performance and share price-linked bonuses and performance-linked stock remuneration reflect the increase of corporate value in the medium to long term.

The Board of Directors has deemed that the remuneration for FYE 2021 is appropriate based on the fact that it adheres to the decision policy for the details of remuneration, as individual remuneration for Directors was decided using the calculation process and procedures in line with deliberations by the Governance and Remuneration Committee and the resolution of the Board of Directors.

With respect to compensation paid to Directors for FYE 2022, please refer to "Disclosed Details of Policy for Determining Amount and Calculation Method of Compensation" in the section II-1 of this report. Only monthly remuneration is paid to the outside Directors and bonuses and stock remuneration are not paid thereto. Monthly remuneration paid to Audit & Supervisory Board Members is determined by consultation among Audit & Supervisory Board Members and bonuses and stock remuneration are not paid thereto.

(Principle 3.1(iv))

• Policy and Process for Appointing Directors and Audit & Supervisory Board Members

With respect to policy and process for appointing executive officers and candidates for Directors and Audit & Supervisory Board Members, please refer to "Policy and Process for Appointing Executive Officers and Candidates for Directors and Audit & Supervisory Board Members" in II-2 below in this report.

(Principle 3.1(v))

• Explanations on the Individual Appointments and Nominations

Company has disclosed reasons for appointment of each candidate for Directors and Audit & Supervisory Board Members in our notice of general meeting of shareholders. Please refer to the following URL with respect to the disclosure made in FYE 2022: https://www.itochu.co.jp/en/files/97_shoshu_eng.pdf

(please refer to pages 8-15 for candidates for Directors, and pages 18-19 for candidates for Audit & Supervisory Board Members)

(Supplementary Principle 4.1.1)

• Scope of the Matters Delegated to the Managements

As a corporation with the Audit & Supervisory Board (kansayaku secchi kaisha), ITOCHU has gradually shifted to a governance model where decisions of the day to day business are delegated to the managements to the extent permitted under applicable laws. ITOCHU's Board of Directors assumes the role to supervise the business execution by the managements, as well as to decide corporate governance related matters and certain business matters which are highly important either qualitatively or quantitatively. Matters to be resolved at the Board of Directors are set forth in our Rules of Board of Directors.

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ITOCHU Corporation

CORPORATE GOVERNANCE

(Principle 4.9)

• Independence Criteria

ITOCHU's Board of Directors has adopted its own independence criteria (augmenting the independence criterial established by the Tokyo Stock Exchange) following discussion at our Nomination Committee, which is disclosed at our homepage. Please refer to the following URL: https://www.itochu.co.jp/en/about/governance_compliance/governance/pdf/independence_criteria.pdf

(Supplementary Principle 4.11.1)

• Composition of the Board of Directors

For ITOCHU's stance on the composition of the Board of Directors as well as policy and process for appointing executive officers and candidates for Directors and Audit & Supervisory Board Members, please refer to "Policy and Process for Appointing Executive Officers and Candidates for Directors and Audit & Supervisory Board Members" and "Ensuring Diversity of Officers" in II-2 below in this report.

(Supplementary Principle 4.11.2)

• Directors' and Audit & Supervisory Board Members' Concurrent Positions Held at Other Companies With the view to monitoring concurrent positions held by our Directors and Audit & Supervisory Board Members at other companies, ITOCHU's Board requires, by the Rules of Board of Directors, each Director and Audit & Supervisory Board Member to seek approval of or report to the Board prior to holding a position at other entities. In addition, important concurrent positions of our Directors and Audit & Supervisory Board Members have been disclosed in our notice of general meeting of shareholders. Please refer to the following URL with respect to disclosure made in FYE 2022:https://www.itochu.co.jp/en/files/97_shoshu_eng.pdf
  (please refer to page 48)

(Supplementary Principle 4.11.3)

• Evaluation as to the Effectiveness of the Board of Directors

ITOCHU Corporation conducted the evaluation as to the effectiveness of the Board of Directors targeting directors and Audit & Supervisory Board Members in FYE 2021.

As a result of this evaluation, in terms of the structure of the Board of Directors and its advisory committees as well as the roles and duties, operation status, information provision to directors and Audit

• Supervisory Board Members, and training, the Board of Directors of ITOCHU Corporation confirmed that the effectiveness of the Board of Directors was secured.
  According to an external consultant, in FYE 2021, the Board of Directors held sufficient discussions on matters that are highly consistent with ITOCHU Corporation's mid- to long-term management strategy and that contribute to the implementation thereof, confirming that the Board of Directors is fulfilling its functions. Among other factors, the evaluation stated that the Board of Directors played an appropriate role in enhancing the involvement of Outside Directors in the management selection process and the commitment to the SDGs in the next mid-term management plan, as manifestations of the effectiveness of the Board of Directors.
  In regard to the issues identified in the previous evaluation ((1) further diversity, (2) the further enhancement of mid-tolong-term discussions, and (3) the strengthening of provision of information to Outside Directors and outside Audit & Supervisory Board Members), steady improvement and progress were observed.
  At the same time, the findings also noted that promoting enhanced supervision of business execution and discussions that contribute to further improving corporate value, not in form, but in substance, so that the Board of Directors can further fulfill its role, is an issue to be dealt with going forward.
  Based on the above effectiveness evaluation results, ITOCHU Corporation intends to actively work on enhancing discussion and strengthening supervision in order to maintain the effectiveness of the Board of Directors and further improve its functionality.

For your reference, please see the result in our homepage at: https://www.itochu.co.jp/en/files/board_evaluation_2020e.pdf

(Supplementary Principle 4.14.2)

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