ITOCHU Corporation ("the Company") and ITOCHU TEXTILE (CHINA) CO., LTD. ("ITS") have signed an official agreement to acquire shares in Dalian Yawen Innerwear Co., Ltd. ("Yawen"), a leading group of ladies' underwear companies in China. As a result of this acquisition, Yawen will become an equity method affiliate of ITOCHU (28% stake).

Yawen is a group of companies operating in the ladies' underwear industry in China. Member companies include Dalian Sunlaura Industry Co., Ltd., China's fifth largest ladies' underwear apparel company; Dalian Basiyadai apparel Co., Ltd., a ladies' underwear SPA; and Dalian Xindiya Co., Ltd., a sewn product manufacturer.

The Company began trading with Yawen after relocating OEM production from Japan in 1998, later supplying underwear material for domestic sale in China while assisting Yawen with its business expansion. With domestic demand increasing and a corresponding rise in personal income, partly boosted by economic policies, China's market is likely to continue to achieve stable growth. The ladies' underwear market is also forecast to expand, growing from its current size of 1.4 trillion yen to 2.5 trillion yen in 2011. At the same time, with the global economic downturn resulting from the financial crisis and the diversification of consumption that accompanies economic growth, China's domestic market is expected to experience even more intense competition. As such, the establishment of structures through cooperation with trustworthy partners will become increasingly important.

Based on the business partnership cultivated as a result of market trends and our results to date, the Company has decided to invest in Yawen and make it an equity method affiliate to allow it to participate directly in the management of Yawen and accelerate its strategic development.

Specific Initiatives

• 1) Developing a body-shaping underwear business in China through an alliance with an affiliated company, MARUKO Co., Ltd.
  Flagship stores will open in China's main cities in fiscal year 2009 on the theme of "beauty and health," seeking to boost salon sales to affluent or high-income white-collar customers.
• 2) Expansion of the brand business
  ITOCHU will develop its brand business by harnessing Yawen's sales network.
• 3) Using the domestic production infrastructure of the ITOCHU Group in China, such as the provision of materials and goods by ITS, sewn product manufacturing, and processing, we will propose plans and strengthen our initiatives not only for ladies' underwear but for house wear, socks, and panty stockings too.

By establishing a group management system in collaboration with Yawen, the Company will call on its management and brand know-how, state-of-the-art technology, and network in the Chinese market to differentiate Yawen and make further contributions to improving its corporate value.

Company Profile of Yawen