Itochu Enex : Corporate Governance Report

[Translation for Reference and Convenience Purposes Only]

(Delayed) Corporate Governance Report

Please note that the following is an unofficial English translation of the Japanese original text of the

Corporate Governance Report of ITOCHU ENEX Co., Ltd., which has been reported to the Tokyo Stock

Exchange. ITOCHU ENEX Co., Ltd. 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.

Last Updated: December 23, 2021

ITOCHU ENEX Co., Ltd.

Representative: Kenji Okada, Representative Director,President and CEO

Contact: Yukari Imaizumi Manager, Investor Relations Office,

Finance & General Accounting Department

Tel: +81-3-4233-8025

Stock Code: 8133

https://www.itcenex.com/en/

The corporate governance of ITOCHU ENEX Co., Ltd. (the Company) is described below.

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

Basic Information

1. Basic Views Updated

In accordance with the Corporate Philosophy, the Employee Code of Conduct (Be Ethical: Reliability and sincerity, creativity and ingenuity, transparency and integrity) and the Declaration of the Group Code of Conduct, the Company is continuously strengthening corporate governance in response to the changing business environment by always concentrating on persistently pursuing compliance as people in the business world, focusing on shareholders returns, ensuring managerial transparency and making decisions more quickly.

Specifically, as a company with Audit & Supervisory Board Members (or an Audit & Supervisory Board), the Company ensures that its Audit & Supervisory Board Members will fully implement managerial monitoring to enhance their monitoring and oversight function and transparency in decision-making.

The Company publishes its Corporate Philosophy, the Employee Code of Conduct, and the Declaration of the Group Code of Conduct on its website. Please refer to: https://www.itcenex.com/en/corporate/mission/

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] Updated

This report is based on the revised version of Japan's Corporate Governance Code effective in June 2021. (This includes principles for companies listed on the Prime Market applicable from April 4, 2022 but excludes principles for companies listed on the Prime Market described in Supplementary Principle 3-1(3)).

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

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

(Principle 1.4)

- Cross-shareholdings

〈Policy on cross-shareholdings〉

The Company has a policy of holding shares of any customer or business partner solely on the condition that holding such shares is deemed to have commercial potential in the future and is strategic. The policy is limited to holdings in which the chances of achieving an investment return are high and the holdings contribute to increasing the Company's corporate value.

With regard to such shares we already hold, the Board of Directors examines the reasonability of the holding of individual shares every year and the continuation or reduction of cross-shareholdings will be properly determined from the perspective of the chances of achieving the expected investment purpose or whether or not they are creating economic added-value that may lead to enhancing the Company's corporate value.

Examination results as of the Board of Directors held on June 9, 2021 are as follows:

The Company specifically examined the cross-holding shares the Company holds (all 6 issues), to determine whether or not the purpose of the crossholding is appropriate on an individual issue basis, and whether or not benefits or risks associated with the cross-shareholdings are commensurate with the Company's capital cost. As a result, while it was confirmed that there were issues the holdings of which are appropriate, it was also confirmed that there were some issues the Company is to consider in reducing the holding after examining the significance of the holding them going forward.

〈Standard for exercising voting rights as to cross-shareholdings〉

In exercising voting rights concerning the cross-shareholdings, the Company makes it a rule not to abstain from voting, so as not to give another party carte blanche in principle. Moreover, the Company makes a decision for and against each proposal tabled after examining individual proposals, not using uniform standards such as short-term operating results/share prices, but taking the perspective of whether or not it will help increase the medium- or long-term corporate value of the Company and the companies in which shares are held, in view of non-financial information such as the business policies, strategies and suchlike of the company in which shares are held.

(Principle 1.7)

- Related party transactions

When the Company engages in transactions involving conflict of interest as defined in the Companies Act with any of its Directors, the Company is required to obtain a resolution of the Board of Directors approving the transaction in accordance with the Companies Act and the Board of Directors Regulations.

In addition, the Company ensures the appropriateness of transactions through deliberation and examination of material transactions or actions with a controlling shareholder and material transactions or actions with a related party which is not a controlling shareholder by a Special Committee comprising independent persons including Independent Outside Directors and by the Governance Committee which consists of a majority of Independent Outside Directors respectively prior to approval by resolution at a Board of Directors' meeting attended by Outside Directors and Outside Audit & Supervisory Board Members.

(Supplementary principle 2.4(1)) - Ensuring diversity

The Company recognizes that respecting the individuality and the diversity and values of employees and harnessing these as strengths is important for achieving sustainable growth.

The Company will, therefore, implement initiatives such as the following.

① Seek to enhance methods used to hire new graduates, and attract and retain diverse human resources, including mid-career hires.

②Incorporate work styles according to specific life plans, and develop respective systems and the internal environment.

③Ensure diversity in promotion to core human resources who will drive the Company's growth, including promoting women, foreign nationals and midcareer hires, and focus on developing human resources from a medium-to-long-term perspective.

By implementing these initiatives, the Company will encourage diversity, especially the active participation of female employees, and will work to foster a corporate climate in which all employees can play an active part.

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[Targets] Percentage of female managers and supervisors 2021: 3%

2030: 10％

2035: 30％

In regard to foreign nationals and mid-career hires, the Company will hire and promote individuals in light of the job description and their skills regardless of whether they are new graduate or midcareer hires.

- Policies for human resource development and internal environment development to ensure diversity

Since its foundation in 1961, the Company has considered people to be its most important asset, believing that it is human resources who are central to value creation within the Group and drive sustainable corporate growth and enhancement of corporate value.

The Company publishes its policies for human resource development and internal environment development in its Medium-Term Business Plan and Integrated Report and on its website. Please refer to:

Medium-Term Business Plan, SHIFT! 2022 https://www.itcenex.com/en/ir/policy/plan/ Integrated Report (ENEX REPORT) https://www.itcenex.com/en/ir/doc/annual_report/ Sustainability Initiatives https://www.itcenex.com/en/csr/

(Principle 2.6)

- Fulfill function as a Corporate Pension Asset Owner

Although the Company does not participate in a specific corporate pension fund, it has introduced a defined contribution pension plan to enable employees to build assets. The Company regularly confirms investment products with the cooperation of the asset management institution. In addition, the Company has been continuously providing employees with opportunities to understand the status of their investments and receive education on asset management from the time they join the Company.

(Principle 3.1 (i))

- Corporate philosophy, business strategies and business plans

The Company publishes its corporate philosophy on its website. Please refer to: https://www.itcenex.com/en/corporate/mission/

In addition, on April 30, 2021, the Group announced Shift! 2022, its medium-term business plan for FY2021 and FY2022. In its previous medium-term business plan, the Group established the theme, Moving, and worked to develop new business areas and drastically change the ways it conventionally did business.

Following up on Moving, the Group will Shift! into a higher gear to further accelerate the development of its business. For the details, please refer to:

https://www.itcenex.com/en/ir/policy/plan/

(Principle 3.1 (ii))

- Basic views and guidelines on corporate governance

For the Company's basic views on corporate governance, refer to I-1.Basic Views above.

In accordance with these basic views mentioned above, the Company adopts a basic policy on corporate governance as stated below.

1. Ensuring shareholders' rights and equality

The Company will take the appropriate action to effectively ensure shareholders' voting rights at the General Meetings of Shareholders and other rights.

2. Appropriate collaboration with non-shareholding stakeholders

In accordance with the Corporate Philosophy, the Employee Code of Conduct and the Declaration of the Group Code of Conduct, the Company will aim to develop itself constantly for a long time and to continuously boost its corporate value as a company that is attractive to customers, business partners, employees, national and other public authorities, local communities and all other stakeholders that the Company regards as important.

3. Appropriate information disclosure and ensuring transparency

In addition to proper disclosure in accordance with the statute, the Company will proactively undertake information disclosure as required in the principles of the Corporate Governance Code for the purposes of ensuring the transparency and fairness of the Company's decision-making and of achieving effective corporate governance.

4. Duties of the Board of Directors and other bodies

The Board of Directors has the duties of determining the basic management policy and supervising the management. It also makes decisions on business execution of great quantitative and qualitative significance

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in addition to prerogatives as specified in laws and ordinances. Meanwhile, in view of the importance of prompt decision-making, the authority to make decisions on ordinary business execution is increasingly delegated to Directors and Executive Officers, and the board will supervise their execution status. As personnel elected by shareholders to undertake business management, Directors have the obligation of loyalty and diligence in fulfilling their duties to contribute to the Company's continuous growth and to medium- and long-term increases in corporate value.

5. Dialogues with shareholders

The Company endeavors to facilitate dialogues with a view to building good relationships with investors, including shareholders, in accordance with its IR Basic Policy. Taking the requests and interests of shareholders into consideration, to the extent reasonable, the senior management, Directors, including Outside Directors, and Audit & Supervisory Board Members endeavor to engage in dialogue (management meetings) with shareholders.

IR Basic Policyhttps://www.itcenex.com/en/ir/policy/basicpolicy/

(Principle 3.1 (iii))

- Policies and procedures in determining remuneration

For details about policies and procedures for determining the remuneration of Directors, please refer to Director Remuneration in II-1. of this report.

(Principle 3.1 (iv))

• Policies and procedures in the nomination of Director and Audit & Supervisory Board Member candidates For details about policies and procedures in the nomination of Director and Audit & Supervisory Board Member candidates, please refer to Policies and Procedures in the Nomination of Director and Audit & Supervisory Board Member Candidates in II-2 of this report.

(Principle 3.1 (v))

• Explanations with respect to individual appointments and nominations of Director and Audit & Supervisory Board Member candidates
  The Company discloses reasons for individual nominations with respect to all Director candidates and Audit & Supervisory Board Member candidates in the Notice of the Ordinary General Meeting of Shareholders. Please refer to the following URL for the disclosure for the current fiscal year.
  https://www.itcenex.com/en/ir/stockholder/general_meeting

(Supplementary Principle 3.1(3)) - Sustainability Initiatives

The Company publishes its approach to the implementation of sustainability management in its Integrated Report and on its website.

For details, please refer to: Integrated Report (ENEX REPORT) https://www.itcenex.com/en/ir/doc/annual_report/Sustainability Initiatives https://www.itcenex.com/en/csr/

(Supplementary Principle 4.1(1))

- Scope of matters delegated to the management

The Company is pressing ahead with the delegation of decision-making on ordinary business execution to the management (Executive Directors and Executive Officers) to the extent permitted by laws and ordinances. The Board of Directors not only supervises business execution by the management and makes decisions on corporate governance, but also makes decisions on the business execution of major quantitative and qualitative significance. The Company's Board of Directors Regulations specify the matters to be referred to the board.

(Principle 4.9)

- Criteria for determining the independence of Outside Directors

In regard to criteria for determining the independence of Outside Directors, the Company determines such independence after confirming the absence of conditions (1) through (6) below in accordance with the Companies Act and the requirements for independence set forth by the Tokyo Stock Exchange, Inc. and other financial exchanges in Japan.

(1)Is currently, or has ever been within the past ten (10) years, an Executive* of the Company or of a subsidiary of the Company (for Outside Audit & Supervisory Board Members, this includes Directors who are not

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Executives). However, for those who were Directors or Audit & Supervisory Board Members who did not execute business operations, the fact that they were Executives of the Company or its subsidiaries during the 10 years prior to assuming office shall be included.

(2)Is currently, or has been within the past ten (10) years, an Executive or Non-executive Director (including Audit & Supervisory Board Member for Outside Audit & Supervisory Board Member) of the parent company of the Company or an Executive of another company owned by the Company's parent company.

(3)Is currently, or has been within the past year, a major shareholder owning a stake of 10% or more, either directly or indirectly, of the Company's shares, or an Executive of such shareholder.

(4)In the most recent financial reporting period, has been a major customer or an Executive of a major customer that accounted for more than 2% of the total transaction volume (sales or purchases) with the Company.

(5)Within the past year, has served as a consultant, accounting specialist, legal profession, or tax practitioner receiving annual compensation of 10 million yen or more from the Company in addition to Director's compensation (if the person receiving such compensation is an organization, such as a corporation or association, a person who belongs to such organization).

(6)A person who was a spouse or a relative within the second degree of kinship of a person stated in either of the following (a) or (b) (excluding immaterial persons)

(a)Currently or in the past year, a person who is an Executive of the Company or a subsidiary of the Company (including a Director who does not execute business for an Outside Audit & Supervisory Board Member). However, this includes Directors who are not Executives of the Company.

(b)Any person who falls under (2) through (5) above.

* "Executive" refers to Directors, Executive Officers, and other such employees.

(Supplementary Principle 4.10(1))

• Establishment of Governance Committee

The Company has established a Governance Committee which consists of a majority of Independent Outside Directors.

The Governance Committee deliberates and examines matters related to the nomination and remuneration of Directors and Executive Officers and gives advice and recommendations to the Board of Directors as a voluntary consultative body of the Board of Directors.

(Supplementary Principle 4.11(1))

- Constitution of the Board of Directors

The Company considers that the appropriate range of the number of Directors for effective deliberations of the Board of Directors is roughly eight to twelve. It nominates inside and outside human resources with distinguished character and knowledge as Director candidates. Particularly with regard to Outside Directors and Outside Audit & Supervisory Board Members, the Company nominates those with knowledge in specialized areas such as business administration, law and accounting. The Company aspires to have them involved in the supervision of its management and business execution from different perspectives so that it will result in the enhancement of the Company's corporate value.

For a skills matrix showing the knowledge, experience, skills and other qualities of each director, please refer to the last page (Reference Material 2) of this report. As stated in Directors in II-1 of this report, the Company's Independent Outside Directors include persons with management experience in other companies.

(Supplementary Principle 4.11(2))

• Directors and Audit & Supervisory Board Members serving as Directors, Audit & Supervisory Board Members or management at other companies
  Important concurrent positions of its Directors and Audit & Supervisory Board Members have been disclosed in the Notice of the Ordinary General Meeting of Shareholders. For the disclosure for the current fiscal year, please refer to: https://www.itcenex.com/en/ir/stockholder/general_meeting/

(Supplementary Principle 4.11(3))

- Evaluation as to the effectiveness of the Board of Directors

The Company asked all Directors and Audit & Supervisory Board Members to give their opinions based on their own evaluation of the effectiveness of the Board of Directors as a whole in FY2020, including the composition, operation status and support structure of the board. By referring to these opinions as well as evaluation and analysis by third-party evaluation organizations and after deliberation and examination by the Governance Committee, the Board of Directors conducted the analysis and evaluation regarding the effectiveness of the Board of Directors.

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